Whether or not we plan on becoming parents, children have a habit of coming along.
But planned or a surprise, starting a family is expensive. Exactly how expensive will depend on your lifestyle, but recent research published in The Times suggests that the average cost of raising each child up to the age of 18 is £202,660 in the UK. It will be even higher by the time that they have been off to university and asked for help with the deposit for the first car or flat.
That kind of cost obviously needs to be planned for – so what should your financial priorities be when you start a family?
1 – Look at your budget
If there are two of you bringing in a salary, managing a home can be relatively easy. If one of those two salaries will be drastically reduced or cease altogether because of the need to take care of a small child, things can be more difficult.
Having a clear idea of the extra costs involved with a new baby and planning how you will cover them is vital. If it also means living on a single income for a few years, you will need to look closely at your budget.
You may need to cut down on a few extras. Evenings out and weekends away are probably going to be off the schedule for a year or two anyway, with a good night’s sleep being the most appealing luxury of all.
2 – Look at your mortgage
Keeping your cashflow positive will be easier if you have already dealt with saving for a deposit and got yourself on the first or even second rung of the property ladder. It might be time to look at your mortgage and see what opportunities there may be to reduce your monthly repayments. A remortgage, switching to a lender with a better deal can often mean important savings – and switching to a fixed rate deal now could mean avoiding any nasty rate increases in the next few years.
3 – Think about protection
When you are young free and single, you might not want to think about life insurance. When you are part of a couple, you should – and when you have children to think about a life insurance policy becomes an absolute necessity.
If anything were to happen to either breadwinner or carer, you could be sure a financial lifeline would be in place.
But you may not want to stop there. With a little expert help, your life cover can be the cornerstone of a complete protection package, designed to ensure financial security whatever life throws at you. Illness, unemployment, a change of career – with the right precautions you can protect yourself and your partner – and the new members of your family – from them all.
4 – Don’t forget your pension
With money probably shorter than it has been, it can be tempting to cut any expenses that are avoidable. Your pension should not be one of them. It is probably many years until you start drawing your pension, but the potential of compound growth means that the money you put in now may increase in value by the time you come to call on your pension pot. However it is important to constantly review your pension savings to maximise potential returns.
Thanks to the government’s generous tax reliefs, actually putting more into your pension now may be a shrewd decision.
5 – Get some help from a Continuum expert
Money management is easier with an expert and having children on the way is a reminder of the need to sit down with a Continuum expert to ensure you have the arrangements in place that you need for the future.
We can help you budget, find a mortgage to cut your costs, and help you secure the insurance protection you need for less. We can also help you find ways to make the most of your pension entitlements.
Simply contact us at Continuum for the financial planning you need for your growing family.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The value of an investment can go down as well as up, returns are not guaranteed.
When investing capital is at risk.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a specific financial planning strategy, you should seek independent financial advice in relation to your own circumstances before embarking on any course of action.