Financial Planning for Parenthood

The most-asked financial questions about starting a family

Starting a family is one of life’s most joyful and financially significant decisions. From nappies to NCEA, there are many costs to consider, and the choices you make now can shape your family’s future. Whether you're planning ahead or already expecting, having a thoughtful financial plan helps you move forward with clarity, not confusion.

Should you reduce expenses through lifestyle changes? Re-route retirement savings or long-term funds? Ramp up your earnings? Move closer to family for support? While these choices can feel overwhelming, having a solid financial plan ensures you can approach them with confidence — guided by your values and data, not anxiety. This guide will address the most-asked financial questions about starting a family in New Zealand.

1. How Much Does a Child Really Cost, and How Do You Prepare?

Raising a family isn’t done for profit!

The costs of family building are often bigger than expected, but knowing the figures is the first step to managing your finances. Here’s the breakdown:

It currently costs New Zealand parents approximately $280,000 - $300,000 to raise a child until age 18. That works out to be $15,000-17,000 annually.

When planning for parenthood, it’s not just about the immediate costs of raising a child but also the lifestyle you want to create for your family. One important consideration is whether your current lifestyle aligns with your long-term goals, including the environment and opportunities you envision for your children.

For instance, moving out of metro areas could provide:

1. Lower Housing Costs. In metropolitan areas, housing often takes up a significant portion of your budget. By relocating to a smaller town or rural area, you may find more affordable housing options, freeing up money for other priorities like education, family activities, or building a financial safety net.
2. Reduced Cost of Living. Living outside city centres often comes with lower everyday expenses, such as groceries, childcare, and entertainment. This can allow families to enjoy a more relaxed pace of life without the constant financial pressure of urban living.
3. Access to Nature and Space. Suburban or rural areas often provide more space for kids to play and explore, fostering an active and outdoor-oriented lifestyle. Access to nature can also contribute to your overall family well-being, reducing stress and promoting a healthier balance.
4. Community and Support Networks. Smaller communities often foster close-knit relationships. Being part of a supportive neighbourhood or having extended family nearby can provide valuable help, whether it’s through babysitting, school pick-ups, or simply sharing advice.

However, these benefits come with trade-offs. For example:

• Employment Opportunities. If you or your partner need to commute or change jobs, consider how this might impact your income or work-life balance.
• Education Options. Research local schools to ensure they meet your expectations for quality education.
• Social Connections. Moving away from metro areas may mean being farther from friends or cultural amenities you value.
• Pastimes. Depending on where you move to and from, you might also have to give up certain things you enjoy. That could mean you have to trade watching live sports for watching on television, or for outdoor pursuits. It may also limit or change what your child can pursue as pastimes, in years to come.

Finding the Right Balance

The key is to align your financial priorities with your vision for family life. Ask yourself:

• What kind of environment do I want my children to grow up in?
• Am I willing to trade certain conveniences for lower costs and more space?
• How will this move impact my work, relationships, and lifestyle?

2. What Are My Work Rights During Parental Leave?

In New Zealand, employers are required to keep your job open for you if you are taking parental leave. This includes if you are pregnant, or if you are taking care of a child under six. There are some exceptions, such as if your role becomes redundant or is a key position.

A 'key position' generally refers to a role that is critical to the business and cannot reasonably be replaced on a temporary basis, such as a highly specialised technical role or a senior management position where a temporary replacement would significantly disrupt operations. The employer must genuinely believe the role cannot be filled by a temporary employee.

3. Am I Entitled to Parental Leave?

Parental Leave Payments

As the primary carer, you may qualify for 26 weeks of government-funded parental leave payments. These payments are based on your ordinary weekly pay or average weekly income, whichever is higher.

Ordinary weekly pay typically refers to your regular gross earnings before deductions, while average weekly income considers your earnings over a specified period, which might be relevant if your income fluctuates due to commissions, bonuses, or irregular hours.

Primary Carer Leave

You can take up to 26 weeks of leave if you’re pregnant, have given birth, or are the primary carer of a child under six (including adoption and whāngai arrangements). To qualify, you must have worked for the same employer for at least 10 hours a week in the six months leading up to your caregiving role. This leave must be taken in one continuous period.

Beyond Primary Carer Leave, other types of parental leave in New Zealand may include Partner's Leave (for the non-primary carer), Extended Leave (if you've been with your employer for more than 12 months), and Special Leave (for pregnancy-related appointments).

4. How Do I Talk About This With My Employer?

Discussing pregnancy in the workplace can be challenging, but open communication can help. Before your conversation, review your rights and company policies related to parental leave and support for new parents. While there's no set rule, many choose to share the news after the first trimester, or once it feels right for them. When you're ready, consider a face-to-face conversation with your manager. You might start by saying, 'I wanted to let you know that I'm pregnant and plan to take parental leave. I'm keen to discuss how we can best plan for my absence and return.' If you're unsure how your news will be received, or if the conversation feels difficult, involving your HR department can help ensure you're treated fairly and that your entitlements are upheld.

5. What If I’m Self-Employed?

For self-employed individuals, financial preparation is even more critical. Build a strong financial foundation by:

• Establishing a robust emergency fund, ideally covering 6-12 months of living and business expenses, to provide a buffer during reduced income periods.
• Creating a detailed financial plan that specifically accounts for family-building costs, such as childcare and reduced income during parental leave, without derailing your other long-term goals. This might include setting aside a portion of your income specifically for this purpose.
• Investigating income protection insurance policies tailored for self-employed individuals to safeguard against unexpected illness or injury.
• Seeking out community support, whether online or in person, which can offer valuable advice, encouragement, and practical tips from other self-employed parents.

6. How Should I Start Saving to Build a Family?

Start by discussing your goals openly with your partner. In addition to childcare and health expenses, consider lifestyle changes such as upgrading your home or moving closer to family. These conversations can also include caregiving expectations, like balancing work and responsibilities. For example, if one partner hopes to stay home full-time, it’s important to understand each other’s values and find a mutual agreement. Even if your initial views don’t align, open and respectful discussions can help you plan together.

Related material:

• ‍How much does it cost to raise a child in New Zealand?
• Do not give your children an allowance
• How to teach your kids about personal finance

7. Should I Be Investing While Raising a Family?

Before you invest for family-related goals, ensure your financial foundations are solid:

• It can help to assess your spending habits using the 50/30/20 rule: 50% of your income for needs, 30% for wants, 20% for savings and debt repayment
• Protect your income with insurance to safeguard against accidents or illness.
• If you have a long-term goal, investing can be a smart choice. However, it's crucial to consider the time horizon for your family-related goals and your comfort with risk. For shorter-term goals (e.g., within 1-3 years), lower-risk savings accounts or term deposits might be more suitable. For longer-term goals, like a child's education fund (10+ years), investing in growth assets like diversified funds can offer higher potential returns, but comes with greater market fluctuation. Always understand the risks involved with any investment.

Bottom Line: Financial Planning for Parenthood

Planning for parenthood is as much about aligning your finances with your values as it is about crunching the numbers. By creating a thoughtful, well-rounded financial plan, you can reduce the stress and uncertainty that often come with starting or growing a family.

Whether it’s assessing your lifestyle costs, leveraging government parental leave benefits, or deciding how to save and invest for your family’s future, the decisions you make today will set the foundation for the life you want to create.