Q: We’re really feeling the pinch of increasing mortgage payments and monthly bills, but we want to start a family in the next couple of years. How can we manage this when we have less and less money to save each month?

It’s no secret that raising children requires deep pockets, and you’re most definitely not alone in this dilemma. Increased demands on household income can make it more and more difficult to save. But rest assured it can be done, with the right mindset and a few smart strategies. Here are a few ideas to get you started:

1. Decide what trade offs you’re willing to make

One of the first (and most important) things to do is get realistic about your current capacity to save, and the compromises you may need to make in order to achieve your dream of starting a family.

If your monthly budget allows little room for saving, it’s time to decide what trade-offs you’re willing to make in order to save more. What non-essential spending would you be prepared to give up? Could you make do with eating out just once a month? Would you be prepared to skip a holiday this year? It all comes down to priorities and what is most important to you.

2. Tackle your ‘top 5’ expenses

Once you’ve looked at your non-essentials, turn your attention to your biggest monthly outgoings. Before you worry about a small monthly subscription, focus on the expenses that will give you the biggest ‘bang for buck’ if you reduce them. Let’s say your biggest monthly expenses are your mortgage, food, transport, utility bills and insurance, as an example. One by one, see what you can do to shop around and / or reduce each of these.

3. Road test one income to supercharge your savings

Depending on your timeline and how quickly you want to build up your savings, you could try setting aside all or part of one income for savings, and living off the other. Going down to one income sooner rather than later could hugely accelerate your savings efforts. It also gives you an opportunity to stress-test your finances when your household income is reduced for a period of time.

4. Set your expectations

Becoming a parent for the first time can be an exciting journey, and you may be tempted to splash out on the biggest and best brands. But do you really need to? Think about your family and friendship circle and whether you know anyone who might sell or pass down expensive baby items, such as a pram, cot or car seat. Take a look at sites such as Facebook marketplace too.

5. Investigate your entitlements

Get clear on how much maternity and paternity leave you can take before returning to work. This may ultimately come down to what arrangements your employer can provide. Provided you meet the eligibility requirements, you could also benefit from the Government’s Parental Leave Pay, which is proposed to increase by two additional weeks a year from 1 July 2023, until it reaches 26 weeks by 2026¹.

It may be worth exploring your eligibility for the Family Tax Benefit, which could help make up for any reduced income. The Government also provides a child care subsidy to help cover the cost of child care, and the rate is expected to increase from 10 July 2023².

6. Plan ahead for education

It may seem a long way off, but using some of your savings to invest in an education bond might be an option to consider. Education bonds can be a tax-effective way to help cover the cost of courses, textbooks, tutors, uniforms, accommodation, equipment, and travel.

7. Pay down ‘bad’ debts

Good debts generally involve the purchase of an asset that can help you get ahead in life, achieve your goals, and help you build wealth. Bad debts, on the other hand, tend to take you away from your long term goals and usually involve buying things that decrease in value the moment you own them, for example new clothes, a car or TV. Bad debts, such as credit cards and personal loans often attract a higher rate of interest, so reducing this debt could save you money.

8. Enlist the help of behavioural science to accelerate your savings

Behavioural science may sound a bit abstract, but it’s grounded in research and evidence into how humans think and behave. Simple tricks such as writing down your savings goals, adding or removing ‘friction’ from your spending, and saving frequently and consistently to form a new habit can go a long way in helping you save more.
As the famous saying goes, anything worth doing isn’t easy. These are just a few ideas to try on for size. Give them a go and find out what’s going to work for you.

Sources:
1 https://www.servicesaustralia.gov.au/changes-if-you-get-family-payments?context=22191
2 https://www.servicesaustralia.gov.au/changes-if-you-get-family-payments?context=22191