Why new parents should consider a separate savings account
A few decades ago (before you could open multiple savings accounts at the touch of a button), parents had a pretty cool way of putting money away for their kids’ future. It was called… a piggy bank.
‘Kid cash’ was kept aside from family finances by stuffing it into a physical ceramic jar – not to be touched by child nor adult until it was needed.
Old school? Sure. But new research shows that nearly half (46%) of Aussie parents wish they had saved more for their new bub, and could have done so. So we’ll take whatever solutions we can get.
Luckily, technology has come a long way, and expecting parents can just open up a separate savings account for their child’s expenses. Here’s why that might be worth considering instead of a piggy bank…
75% of parents underestimate the cost of having a baby
We surveyed 1,000 Aussie parents over 18 years-old to find out whether or not they felt confident in affording their baby’s early years. The majority felt like they didn’t know what hit them, but many learnt strategies worth sharing.
One of those was opening a new savings account dedicated to baby expenses. A fifth of parents surveyed said that having separate savings helped them keep track of the money they had available, and better manage their finances in general.
This was most popular among the younger parent cohort, with 45% of those aged 25-34 saying they’ve opened a baby account, and 32% claiming that this helps them reach their savings goals.
Here’s how that extra baby bucket can benefit some people:
1. More visibility = less stress
We all know you don’t need extra stress when you’re doing your accounting on 4 hours’ sleep. Tracking your progress is a lot easier when your baby savings figure is laid out in front of you, not tied up in general savings.
Without a separate account, your total savings figure could easily deceive you into thinking you’re prepped for pregnancy, when in reality half of that is earmarked for car repairs, or an upcoming holiday.
2. Less likely to sneak into your savings
The more money you’ve got pooled in one place, the more likely you are to dip your toes in. A dedicated account stops you from misspending any money that should go directly to the little ones, and keeps your balances in check.
3. Car seat vs Childcare
Most parents said you could spend up to $10,000 on expenses in your baby’s first 12 months. But that figure is made up of more complex amounts to do with education, childcare, daily toiletries, loss of income due to parental leave, furniture, prams, clothes and more – all of which require varying funds at varying times.
Separating out these individual costs into their own accounts could help you reach your goals even quicker and ensure you’re feeling prepared for when that money is needed. Just like with children, more really is more.
Want to find out how much you actually need to save for a baby? Click here to download our baby budget calculator.