Assistance in timely planning of purchasing items required for the child, a simpler parent and child benefits system and educating young parents in financial matters would make it easier for many Latvian families to plan their budget after a child is born. This was revealed in a survey of young and would-be parents carried out by the Swedbank Institute of Private Finances in cooperation with the family web portal Cālis.lv. The Institute’s experts believe that these steps could improve the demographic situation in Latvia.
Changes in family’s expenses
Majority of parents (71%) make one-off purchases connected with the birth of a child already prior to birth, whereas only four in ten families do the purchases using a shopping list, the survey has found.
The amounts spent on large purchases depend on the family’s income level – the higher it is the larger amounts will be spent by the parents on items like pram, child bed, child car seat, i.e. things considered by parents as most essential in the first year of child’s life. Usually this amount is equal to the monthly salary of one parent, reaching up to several hundred lats. Only 15% of would-be parents set aside money prior to these purchases.
As to monthly expenses, like hygiene items, food and clothing, they usually do not exceed LVL 100 per month in the first year of child’s life. 35% of the respondents spend up to LVL 50 per month, and 39% spend from LVL 50 to 100 per month.
‘Although the birth of a child means new expenses for families, mothers often find that their personal expenses, like for lunches outside home or transport, decrease in the nursing period. Compared to subsequent years of life, the expenses related to the child in the first year are comparatively low; also, parents seek for cheaper ways to make purchases needed. Consequently, it can be concluded that the decision of having a child depends less on the family’s income in the first year after the child is born but more on the parent’s forecasts about the family’s financial situation thereafter. If the future looks more stable, more parents decide to have a child,’ concluded Ieva Use, Director at the Swedbank Institute of Private Finances.
Fluctuations in family’s income
Almost half of the respondents have noted that their family income in the first year of child’s life, thanks to parent and child benefits, remained unchanged or even increased; however, parents whose income is above the average have noted that the total family’s income decreased, and the reason for that are the benefit limitations introduced in 2010.
At the same time, an absolute majority of the respondents (92%) consider that the existing parent and child benefit system should be changed. Considering proposals for improving the benefit system that would not burden the state’s social budget, more than half of the parents recommend simplifying the procedure for calculating the benefits and to level out the benefit amounts in that way mitigating strong fluctuations in the regularity of family income. Also, the parents are ready to receive lower monthly benefit amounts but for a longer period, for example up to the child’s age of one and a half year.
‘The social insurance and benefit system in Latvia is designed in accordance with the current financial situation and depends on how much people are willing to pay for it. They are aimed at all target groups. Since the emphasis is on support to families with a child of up to one year, I agree that the state support to families with children above that age is not sufficient. At the same time, I would like to stress that benefits is not a solution to all problems,’ said Ināra Baranovska, Head of Benefits Policy Department, Ministry of Welfare.
Support in planning financial matters
Experts of the Swedbank Institute of Private Finances have concluded that it is also important to motivate new parents to plan the family’s income and expenses, as only every fifth mother has said that prior to deciding on having a child the parents had made at least approximate estimates of costs, and potential changes in income had been estimated by a half of the parents-to-be. Just a third of the polled parents have stated that they had seriously analysed the financial side of having a child.
Although every three out of four new couples have a shared family budget, only a third of them plan their expenses at least one month in advance, and only every fourth family keeps a detailed record of expenses and set aside money for savings every month. A half of the respondents have stated that their families often live from salary to salary, and that sometimes they are short of money at the end of the month.
“If benefits were increased, it is unlikely that this would prompt parents to decide in favour of having a child. The first year of a child’s life is just a small piece of the large picture. It is important that parents can be sure that they will be able to provide for their children’s welfare also in five, ten and fifteen years – in terms of education, healthcare and living conditions”, pointed out Ieva Use.
To support would-be and new parents in family budget planning, the Institute offers on its internet portal manasfinanses.lv a parent benefits calculator (in Latvian only), which can be used to calculate the expected changes in the family’s income prior to having a baby and two years after that, and also useful tips regarding the planning of family’s expenses can be found there.
The survey of young mothers was carried out in October 2011 on the Internet among 300 respondents, who were expecting a child or had a child of up to two years of age. The survey was made in cooperation with the family portal Cālis.lv, which for more than 10 years has been bringing together mothers and fathers from the entire country, allowing them to share experiences and discuss various issues related to children, housekeeping, beauty treatment and other daily matters so important to any family.
