Financial Family Planning
If you’re waiting for the perfect time to have a baby, you’re going to be waiting a long time. Trying to perfectly line up finances, careers, and biology is tricky. One thing is for sure, have a family can be expensive. According to research done by LV, the cost of raising a child from birth to 18 in the UK is over £75,000, and that doesn’t even include childcare. Over time you’ll become an expert at budgeting and clever shopping. If you’re planning to start a family in the next few years, here are some things that you’ll need to think to about so you can start planning and saving to cushion the financial impact.
Photo by Jonathan Borba on Unsplash
Reduce Your Outgoings
If you were to look through your bank statements, you’re probably going to find some pretty easy wins when it comes to saving money. First of all, cancel everything you don’t need. Those recurring subscriptions you don’t use anymore. That Apple TV subscription you bought to watch one TV show and haven’t watched anything since.
Once you’ve removed anything you don’t need, look to reducing the costs of those essential monthly spends. Look at what you’re paying for your mortgage and see if you can get a better deal, there are helpful sites to help you calculate mortgage payments. Visit a price comparison site to reduce your energy bills, insurance and monthly mobile phone contracts.
You could potentially reduce your monthly outgoings by hundreds of pounds per month. Work out what you’re saving an put that money towards paying off any debts you have or into a savings account to pay for baby items.
Baby Supplies
Babies themselves want for very little, however, there is a multibillion-pound industry that tells you otherwise. If you’re lucky, you’ll get the big-ticket items such as a pram, pushchair and nursery furniture handed down from a family member or friend. The costs soon start adding up.
Some people like to have just the essentials bought as and buy extras as and when they need them, others like to buy everything (and more), well in advance of the baby arriving.
A great way to save money is to sign up for the baby newsletters that are sent out by the likes of Emma’s and Bounty. They often have great offers for things like travel systems, cots and nursery furniture.
If you’re having a baby shower, create a gift list as you would with a wedding. Fill it with things you actually need, like clothes, nappies, toiletries etc. It might now seem as cute and cuddly as the beautiful teddybears and photo albums you receive, but it will be a lot more useful to you in the long run.
Maternity Leave
Maternity leave and pay in the UK lags behind a lot of our European neighbours. For example, in Norway, you are entitled to 46 weeks of parental leave at full salary 56 weeks with 80 per cent pay. This can be split between both parents.
In the UK however, it is much different. Statutory maternity leave is 39 weeks. The first 6 weeks you receive 90% of your weekly earnings. The last 33 weeks are paid at £151.20 per week. And additional maternity leave is unpaid. Fathers are entitled to just 2 weeks of paternity leave at the statutory rate of £151.20.
As you can see from those numbers. If both parents have been working full time, there will be a significant drop in income during the first year after the baby is born.
Check your employer’s maternity/paternity policy as they might have enhanced terms for employees.
Child Care
If after maternity leave, both parents are intending to go back to work, then childcare costs will be a huge factor in your financial planning. Again, the UK is at the top of the league tables for the cost of childcare and bottom of them for subsidised childcare. A private nursery place or childminder could cost you £50 per day, even more in places like London.
Children don’t tend to get any free childcare until they turn three years old when they receive either 15 or 30 free hours depending on the parental circumstances. Even this is only during term time and many nurseries charge additional fees for these ‘free’ sessions to cover their costs. During school holidays, you will either have to make alternative arrangements or pay full price.
The huge cost of childcare is the reason many women don’t reenter the workplace after having babies. They simply can’t afford to. Many families try and reduce costs by having flexible working patterns or using relatives to help out with childcare.
If both parents (or one parent if single) are earning the equivalent of 16 hours per week of the minimum wage, you can open a Tax Free Childcare Account. This is a government scheme that pays in £2 for every £8 you contribute up to a maximum of £2,000 per child per year.
Savings Accounts
Many parents open a savings account for their child when they are born. Or there are special junior ISAs with better savings rates. The sooner you start saving for your child, the better. Even if it’s only a few pounds per month. It all adds up over time. You can top it up with money received for birthdays and Christmas and you might find yourself with more free cash when your childcare costs start decreasing.
Life Insurance
Having people dependant on you really focuses your mind when it comes to finances. No one particularly likes to think about dying, but you’ll want to make sure that your family is taken care of financially should the worst happen.
Work out how much your family would need to pay off any mortgages or debts and then add an additional sum on for living costs. You can find a good life insurance policy through a price comparison site or through a financial adviser.
Conclusion
Some people don’t have the luxury of time to plan. Sometimes that little bundle of joy is a surprise. But if you are planning in advance, then really take the time to offset some of the financial impacts so that you can at least have a more relaxed first year with your baby.
