How to financially prepare for your children’s future
Baby on the way? Congrats! This is an exciting and also somewhat overwhelming time. Being pregnant in a foreign country, with different customs when it comes to child birth and raising children, information and assistance in another language. Yes indeed, becoming parents takes a lot of preparing, both emotionally, practically as well as financially. Beacon Financial Education talks you through the most important financial changes and gives you a checklist to get you started.
With a little bundle of joy on the way you might decide to work less; one or both of you. The Netherlands know unpaid parental leave: it allows employees of Dutch companies to take care of your children for a certain period of time. However, this could have some serious financial consequences, for your pension for example. Also, you won’t build up holidays nor holiday allowance during the time you take off to take care of your child.
Make a list of your wishes and the financial consequences. Perhaps dad wants to work four days instead of five, and mom decides to work three instead of four or five days. For the remaining 2 days you decide to bring your child to daycare. Or: dad remains working and mom stops working all together. In either case, it is good to assess your situation upfront and ask your employer about the financial consequences (ask for a pro forma pay slip).
Keep in mind that your employer cannot refuse parental leave but can object in certain cases. If your company has a cao (collective labour agreement) check that for additional information.
> Children’s Allowance & Child Benefit
The Dutch government will help you with the costs of bringing up and caring for your child(ren). The money you receive from them is called “kinderbijslag (children’s allowance)”. This is a fixed amount which every parent in the Netherlands receive until the child reaches the age of 18. Check out the website of the Social Security Bank to find out if you – as an expat living in The Netherlands – are able to apply for Children’s Allowance.
Then there is also Child Benefit (kindgebonden budget) which is for expenses like food and clothing. If and how much Child Benefit you could receive depends on a few conditions:
- You have one or more kids under the age of 18.
- You receive the children’s allowance (kinderbijslag) from the Sociale Verzekeringsbank (SVB).
- You have a valid residence permit.
- You earn below a certain level (the income restrictions are dependent upon the number of children you have).
- You do not have too much money (capital).
Check with the Dutch tax office or at www.toeslagen.nl for the latest conditions and requirements.
> Other Benefits
Having a fall in income may entitle you to one or more allowances: childcare allowance, healthcare or rental allowance. Check the website www.toeslagen.nl for information, based on your new income situation or call the Tax Information Line (0800-0543) to set up an appointment with the Dutch Tax Authorities (Belastingdienst) to discuss all possible benefits.
> Local Taxes
Where local taxes are concerned you might be eligible for exemptions. Check with your municipality to find out about the possibilities of reducing your local taxes. Chances are however, your (total) income is still considered too high or get reductions or exemptions. But you can never blame someone for trying!
Okay, so now you have a better insight of what your net income will look like after the baby has arrived. But what about what the baby is going to cost you?
> Baby Layette
Becoming a first-time parent, you only want the best for him or her. You will need to decorate a baby room, buy furniture and a bunch of other baby stuff (baby bath, play pen, stroller, car seat, et cetera, et cetera). Your baby needs clothes, diapers, baby wipes, bottles, baby food, baby care products, …
And once you have the baby you might want to take up baby-parent swimming after a couple of months, go to a baby-gym when it is a little bit older, sent your child to ballet or soccer or have it taught the piano.
When you are off to work (again), you want your little one to be taken care of in the best possible way. The Netherlands know the daycare centres (Dutch: kinderdagverblijf, crèche, BSO) and childminders. Depending on the location and the form, daycare costs between approx. € 6 and € 8 an hour. When you select a childminder or agency that is registered – and therefore qualified to take care of children – you can also apply for childcare allowance (see “Benefits”). Keep in mind that the Dutch Belastingdienst will only reimburse a certain maximum, so you might have to pay part of the daycare yourself.
You will also need insurances. Health care insurance for starters. But also have a good look at your other insurances. Do you have ongoing travel insurance, for traveling back and forth to family back home? A liability insurance might not be necessary for a newborn but wait until it’s walking! And check your contents insurance: with all this new furniture and other expenditures, you might want to reconsider the coverage of your insurance.
Last but not least: life insurance. Although this is something no one, no parent, wants to think about, it is possibly the most important insurance. Make sure your loved ones are taken care of in the most unimaginable horrid event of your (and/or your partner’s) untimely death (while you’re at it, think about assigning a legal guardian and put everything down in your last will and testament). Talk to an advisor to discuss the best possible options for your personal situation.
How are You to Pay for All of This?
It must be dawning on you: the list seems never-ending when you start to write things down. And worst case, you will also have to change your car and/or move to a new house.
Nope, a new addition to your family definitely is not cheap, and you will have to start budgeting for your baby and child’s necessities, so you won’t end up living from paycheck to paycheck each month.
> Money Boxes
More and more banks offer nowadays the possibility of make “money boxes” in your digital bank account environment. This way you can budget for certain expenditures. Start a baby money box and already put aside some money in there for the baby arrives. Use this money to pay for the baby’s daily necessities like diapers, wipes, care products, food, clothes, etc.
> Budgeting Tips
A brand-new baby room and clothing sounds great (and to be honest, don’t we all want that?), but keep in mind that they will only use this for a short period of time. You can save a lot of money buy getting a crib, a wardrobe, a play pen or stroller on Marktplaats (Dutch eBay).
When looking at baby care products there can be huge differences in price, for example in diapers or baby food. Also, keep your eye out for good offers. Every couple of weeks, you will be able to buy these products 1+1, 3+2 in different stores. There are various website that have an overview of all current diaper offers for example. You will save a lot of money when planning your baby products stock. Mind you, don’t go buying 10 bags of newborn diapers: they are out of it before you know it! 😉
> Opening a bank account
As soon as your baby’s born you can open up a bank account for him or her. This way you – or the grandparents – can make periodic contributions and start saving up money for later. After all, one day it will go to school and college, and you will want to be able to provide the best education. Attention: the amount in your baby’s/ child’s bank account is added to your income until the age of 18, and therefore might be taxed.
> Saving or investing?
Setting money aside in a bank account for your baby might be safe but is not the most lucrative with today’s low interest rates. Especially, when planning far ahead – for your child’s education or driving lessons – you could consider investing some of this money. A long-term project so to say. There are many options. What is best suitable for your personal situation, and best matches your personality varies from person to person. Best thing is to discuss your possibilities with an independent financial or investment advisor, especially when you are an expat. After all, being an expatriate adds another layer of possible financial challenges to – for some – an already complicated financial, legal or tax situation. Since a few months there are new investment possibilities available for Americans living abroad, so contacting an advisor and find out about these investment products is not such a bad idea. Beacon Financial Education is more than happy to connect you to one of our preferred partners: independent financial advisors who are happy to assess your situation with you.
Enjoy this Time in Your Life
We did not mean to scare you with the above list! With the best of luck, you’re looking forward to a wonderful new era in your life. Having a baby and experiencing life through your baby’s eyes is indescribable. Make sure you prepare and budget as much as possible before the baby’s born, so you can just focus on enjoying your little bundle of joy when it’s finally there. We wish you lots of love, health and happiness!
Beacon Financial Education does not provide financial, tax or legal advice.
None of the information on this site should be considered financial, tax or legal advice. You should consult your financial, tax or legal advisers for information concerning your own specific tax/legal situation.