Financial planning and parenthood

This article highlights the importance of financial planning before and during your parenthood journey. The use of a case study helps to detail how an adviser can help review your situation and tailor a plan to suit your needs both present and future. Other key aspects discussed also include savings, superannuation and the gender pay gap.

Becoming a parent is an exciting time of adjustment and upheaval; how could such a little person create so many changes – and sleepless nights?

When Judy and Gary were thinking about starting a family, they were worried about how this could impact their finances. They were also concerned about the negative long-term impact on Judy’s superannuation while on maternity leave. According to the ‘Australia’s National Savings Updated: 2020 and Beyond’ report, Australian women retire with almost 30% less superannuation than men, due to:

  • losing income through maternity and caregiving responsibilities;
  • reduced promotion and higher paying job opportunities, as a consequence of maternity and family caregiving responsibilities.

Judy and Gary decided to seek professional advice. Their financial planner explained the benefits of planning in advance, while Judy was still working, and helped them maximise their savings while they still had two incomes, and manage their expenses once Judy began maternity leave.

Their adviser reviewed their situation, income, and expenses, including plans to expand their family, and their long-term goals. He helped them create a budget that focussed on minimising debt and unnecessary spending and structured a savings plan. Additionally, they recommended the couple consider:

  • updating their health and life insurances
  • their entitlement to government support, e.g., Family Tax Benefit, Childcare subsidies etc.
  • the government’s co-contribution scheme, where the government makes a one-off contribution to Judy’s complying fund if she meets certain criteria
  • consolidating any small super funds so they each maintain only one fund. This can help reduce fees and help manage their retirement savings
  • undertaking regular portfolio reviews, with assistance from their adviser, to ensure their strategy continues to meet their needs

Judy was well prepared when she was able to announce her pregnancy to her work colleagues. Whilst she was planning on taking six months maternity leave, Judy also spoke with Michelle, her boss, about part-time work. Michelle thought it was a terrific idea and suggested when she was up to it, Judy could work from home a couple of days a week. This would help to pave the way for Judy’s transition back to full-time work.

Through tailored personal advice, Judy and Gary were better prepared for the changes in their lifestyle, while taking steps to protect future wealth. Through discussions with her boss, Judy could care for the newest family member, while contributing to household income, and her super.

In recent years, the spotlight has been turned on gender pay and superannuation gaps, resulting in greater awareness of women’s financial issues. Financial advisers work closely with women and young families. These are often people who mistakenly believe that financial advice is only for the wealthy, or that it’s not possible to build wealth when you’re younger, on a lower wage, and with other priorities.

Fact is, the earlier a savings strategy is implemented the better. And that strategy will need to be reviewed and altered from time to time as your lifestyle and priorities shift.

Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.

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