Starting a family is exciting, but while babies themselves normally come free, they have some major costs attached. Your little bundle of joy has a large list of requirements. From cots, to clothes, to car seats, they can add up quickly.
Research by Liverpool Victoria Insurance found that the average outlay from birth to 21 years has reached more than £222,000, and looks set to reach £350,000 in ten years’ time if prices continue to grow at the same rate. Parents who support their children from birth to graduation will pay out around the price of a house on each child.
Careful budgeting and financial planning is essential. Here’s our checklist to help.
Check your baby budget
Budget and plan your finances in advance of the birth as life gets really hectic afterwards. You’ll probably have less money coming in for a while – and you’ll certainly have more going out.
A new baby is going to mean an extra strain on your finances, so it’s crucial to make sure you’re budgeting correctly. Work out exactly where your cash is going, and where any baby spending fits in. You can forget about evenings out and restaurants. You will be too tired to enjoy them anyway.
Save while you can, make sure you are maximising your income, and start looking look at the costs of a new baby – and how you can reduce them
Check what you plan to buy
Baby shops will be happy to sell you all kinds of equipment, and it’s all too easy to think that you need it. You’ll need baby clothes, a cot and a changing mat. You’ll need nappies. You’ll need a buggy, and possibly a car seat. Everything else is a luxury, and could well just fill up a cupboard without ever being used. Listen to advice from other parents on what you really need.
Check you get your full maternity pay entitlement
If you’ve worked for the same company for longer than six months and take time off work when your baby’s born, your employer’s responsible for paying you at least a minimum level of salary. For 2016, it’s £139.58 per week or 90% of your average earnings, whichever is lower. Maternity pay is higher in the first six weeks, as you get 90% of your average weekly earnings before it’s capped. You’ll be paid for up to 39 weeks whilst you’re on leave.
Payments are made via your employer, so speak to your manager or human resources department. You’ll need to give your employer proof of pregnancy in the form of a letter from your doctor or midwife, or a MatB1 maternity certificate.
If you don’t qualify for statutory maternity pay, you may be able to get state Maternity Allowance. Gov.uk has details.
Paternity Leave for 2016 is £139.58 per week or 90% of your average earnings, whichever is lower. It’s paid by an employer for two weeks, usually to the baby’s father, once the child has been born.
Check you can protect your new family
There is something else to remember when you are planning to be a parent. Sadly, one child in 30 loses a parent before finishing education, so it’s crucial to consider the financial impact if the worst happened. Life insurance and perhaps critical illness cover for the breadwinner could help ensure that your new family could have financial security, with a home that is paid for.
Arranging cover is easy, and can cost much less than you might think – and any new parent will tell you, the peace of mind it brings is priceless.
For the same reason, you need to make sure you’ve made a will. Everyone with any assets such as savings or a house, and loved ones they’d like to look after, should consider making one.
To find out more about giving your new family the protection they need, and preparing for a future as a parent, it’s important to get professional advice. Simply call us at Continuum.
The Financial Conduct Authority does not regulate wills, taxation and trust advice.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.