Financial Literacy
How to prepare for a baby financially
I think that the effort people expend in planning for weddings is better used to plan for the arrival and the first year of their kids.
There are different schools of thought on how much it costs to birth and take care of little people, especially through their first years. The first child will be more expensive than subsequent kids (all things being equal). I think that the effort people expend in planning for weddings is better used to plan for the arrival and the first year of their kids.
Why do I think you have to save and plan?
- As a man, most people will shame you if you have to ask for help to offset costs during pregnancy and childbirth, especially if complications arise. You will hear things like didn’t you know she was pregnant, why is it just now you are raising funds? What kind of man cannot even pay for the birth of his child? Go to public hospital, must you use private? The reflex action is to say God forbid, but complications have been known to arise. I have a friend who went to deliver, had emergency CS and behold, it was twins. Apparently, one had been hiding (don’t ask me how it happened).
- As a woman, when time comes to cut costs, the unfortunate reality is that anything that affects you or helps you recover fast, etc. will be the first thing to be cut off. There are all these little things that you can buy to make your recovery easy but when you don’t even have money to pay for a proper hospital, how will you be buying pre-made baby formula simply because you want to sleep longer?
How do we go about it?
- Educate yourself on what it takes and costs to go through pregnancy, delivery and the first one year. Do you know what the baby needs? What have other parents bought, what was useful and what was not? What are the options? Talk to people who are in the same circumstances as you and see how they managed. For example, if you are working parents with no family support, talking to someone who had mothers and sisters and maids may give you unrealistic views. Educating yourself gives you an idea of the costs you may incur. Talk to other new parents about their experiences so far and even have a practice run with your partner if possible (Babe, today we are going to pretend we have three-month-old triplets in the house).
- Consider getting medical insurance to help cut down on costs. Most HMOs cover delivery and prenatal care in most of their packages; however, do make sure you read the fine print on what mommy and child post-natal services are covered.
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- Create a baby-fund for miscellaneous baby and mommy expenses. E.g., a mutual fund account where you can save money. Having 100k extra to spend on maternity and infant gears can go a long way. You can decide all the money sprayed at your wedding will be put into a childcare fund (really you shouldn’t be using wedding cash gifts to pay wedding bills). If you can, start saving while single, especially if you are already in a relationship, and please don’t use that money to do wedding o!
- You can save costs by getting people who have had kids to sell or give out what they are not using. Maternity and baby gears are limited duration items. Kids outgrow car seats, even outgrow clothes before wearing them. You will be surprised what loot you can get by just asking.
- Have a plan on childcare for the first year. For a lot of us, the days of Grandma or one sister staying to help have gone. You need to make plans now before baby comes (e.g. visit creches and decide which you will use). Plan because if you must make these decisions under pressure like impending work resumption date, you will most probably make a mistake. Any nanny who will stay at home with your baby should ideally have started staying with you before the baby comes.
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- Write your will: this is for the ladies… NIGERIA has a high maternal mortality rate. And it cuts across all demographics. Rich, middle class or poor, write your will and designate caregivers for your child, keeping in mind the realities of Nigerian society.
- Old but gold advice: Reduce debt and always have a realistic view of where you stand financially. You may need to put off pregnancy for a few months while you save some more. If you are a self-employed woman, you need to recognize that having a baby may reduce your income stream for a few months, and even longer if you are on bed rest. Will your savings be able to cover the additional costs of having a baby?
This list isn’t exhaustive and should be tweaked to align with your own personal realities. Some of us will give birth overseas, while some will opt for general hospitals locally. Also, always remember that surprises happen so you may find that your reality ends up different from what you imagined. However, if you take the time to plan, you’ll be less stressed and more at ease when the baby arrives.
I am looking forward to having a conversation on this.
Written by: Stella Ogbodu
Personal Finance
5C’s of creditworthiness: What lenders, Investors look for in a business plan
Business owners need to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.
Banks usually are not a new venture’s sole source of capital because a bank’s return is limited by the interest rate it negotiates, but its risk could be the entire amount of the loan if the new business fails. Once a business is operational and has an established financial track record, banks become a regular source of financing.
For this reason, the small business owner needs to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.
Will the business that an entrepreneur actually creates look exactly like the company described in the business plan? Of course, not.
The real value in preparing a business plan is not so much in the finished document itself but in the process it goes through – a process in which the entrepreneur learns how to compete successfully in the marketplace. In addition, a solid plan is essential to raising the capital needed to start a business; lenders and investors demand it.
Lenders and investors refer to these criteria as the five C’s of credit.
READ: 5 ways to raise funding for your business
1. Capital: A small business must have a stable income base before any lender is willing to grant a loan. Otherwise, the lender would not be making, in effect, a capital investment in the business. Most banks refuse to make loans that are capital investment because the potential for return on the investment is limited strictly on the interest on the loan, and the potential loss would probably exceed the reward. In addition, the most common reasons that banks give for rejecting small business loan applications are undercapitalization or too much debt. Banks expect a small company to have an equity base investment by the owner(s) that will help support the venture during times of financial strain, which are common during the start-up and growth phases of a business. Lenders and investors see capital as a risk-sharing strategy with entrepreneurs.
2. Capacity: A synonym for capital is cash flow. Lenders and investors must be convinced of the firm’s ability to meet its regular financial obligation and to repay loans, and that takes cash. More small businesses fail from lack of cash than from lack of profit. It is possible for a company to be showing a profit and still have no cash – that is, to be bankrupt. Lenders expect small businesses to pass the test of liquidity, especially for short term loans. Potential lenders and investors examine closely a small company’s cash flow position to decide whether it has the capacity necessary to survive until it can sustain itself.
READ: How to scale as a small business on a budget
3. Collateral: Collateral includes any asset an entrepreneur pledges to a lender as security for repayment of a loan. If the company defaults on a loan, the lender has the right to sell the collateral and use the proceeds to satisfy the loan. Typically, banks make much unsecured loans (those not backed up by collateral) to business start-ups. Bankers view the entrepreneurs’ willingness to pledge collateral (personal or business assets) as an indication of their dedication to making the venture a success. A sound business plan can improve a banker’s attitude towards venture.
4. Character: Before extending a loan or making an investment in a small business, lenders and investors must be satisfied with an entrepreneur’s character. The evaluation of character frequently is based on intangible factors such as honesty, integrity, competence, polish, determination, intelligence, and ability. Although the qualities judged are abstract, this evaluation plays a critical role in the decision to put money into a business or not.
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5. Conditions: The conditions surrounding a funding request also affects an entrepreneur’s chances of receiving financing. Lenders and investors consider factors relating to a business’ operation such as potential growth in the market, competition, location, strength, weakness, opportunities and threats. Another important condition influencing the banks is the shape of the overall economy, including interest rate levels, inflation rate, and demand for money. Although these factors are beyond an entrepreneur’s control, they still are an important component in a banker’s decision.
The higher a smaller business scores on the five C’s, the greater its chances of receiving a loan.
Written by Chukwuma Aguwa
Personal Finance
Don’t be fooled by COVID-related scams
Always consult the institution in charge of health-related matters to confirm any fishy information you come across.
The nature of and the manifestation of the Covid-19 disease is such that there’s only a little time available to remedy the situation before it gets chronic. Although the infection begins by exhibiting mild symptoms, if you do nothing in a short time, it could lead to death in a matter of days.
This whole picture has caused many to become desperate about Covid-related issues, launching into panic mode at the sight of any information. As a result, such people are not far away from falling for fraudsters.
With the different kinds of news flying around, you mustn’t be fooled by Covid-related scams.
The Coronavirus threatens the health of millions of people around the world daily, also killing thousands along the way. To curb the spread and remedy the situation, bodies like the CDC, WHO, and every country’s local health organisation like the NCDC, frequently circulate information around communities. However, it has also led to fraudsters taking advantage to provide fake news, and even asking for donations.
Each day, there seems to be a new account or NGO asking for donations into the health sector, and though some are legit, many are just fraudsters posing to take advantage of innocent citizens. So far, numerous complaints about scams have been recorded, especially with people who are looking to support the health cause in any way they can.
READ: Africa to spend $9 billion on Covid-19 vaccine, access to supply is big problem
Channels used for COVID-related scams
There are three major ways scammers take advantage of the haziness of the situation to dupe people. To start with, they appeal to the emotions of humans, who see the high death toll and suffering. As a result of what is happening, people have been willing to donate funds for medical supplies, isolation centres, and financial compensation for medical workers.
Scammers take advantage of this by posing as charity organisations and solicit for funds. Most times, as soon as their target is met, they clear their footprint without leaving a trace behind.
Another way they scam people is by manufacturing and selling fake or low-quality health products. Everyone wants to get their hands on a cure, or something that can at least protect them from the virus, and scammers are meeting their needs by providing just that.
READ: China joins WHO vaccine programme as it fills huge gap left by United States
The World Health Organization currently approves only one vaccine, and any other thing outside it is outrightly fake or just a supplement that will help your body. Currently, only the Pfizer vaccine is clinically tested and approved to work. Be sure to not throw your money in the wind by purchasing some of these fake drugs around.
Lastly, scammers create systems to extract a patient’s personal information, thereby having access to the person’s true identity. It could be in the simple form of opening a registration portal where you supply all your details.
Therefore, only give information to approved bodies and not any random online site that appears legit. These fraudulent individuals can do a lot of damage to your identity. Stay vigilant, only communicate with approved bodies, and always ask questions if you are not sure or suspect foul play.
The place of electronics in COVID-related scams
These fraudsters usually reach out to you through the digital sphere. Hence, watch out for cold calls, text messages, or emails requesting donations to certain bodies. The best way to confirm the legitimacy of such a message is to visit the organisation’s official website in a different browser. Never follow the link in the mail or text directly, as it can be easily embedded with spyware. Therefore, a single click could see them extract all your personal information, including bank details.
Also, please stay away from those who claim to have a cure, and accompany it with testimonies of people who have used it. They are low graders desperate for your money. Vet them by searching online and see what people are saying. In all, always look out for suspicious messages, and opt out if you are sceptical.
In a nutshell, you should not believe any cure, vaccine or supplement that the World Health Organization does not approve of.
Conclusion
The government or legit health institutions do not cold call citizens to request donations or coerce them into making one. If you receive a call out of the blues, chances are it’s a scam, which is why they mostly try to hurry you to donate before you realise it. Always consult the institution in charge of health-related matters to confirm any fishy information you come across.
