Your family and your money

If we decide that having children is a step we want to take, we have reached an important new stage in life – and our finances will be affected.

They may be small when they arrive, but the costs are not. Nappies, baby food, car seat, pram, clothing – you can spend thousands of pounds kitting out your baby. Being a savvy shopper and getting at least some things second hand may help with the expenses of a newborn, but the costs are ongoing.

According to The Times, the average cost of raising a child from birth to 18 in the UK in 2023 is £202,660. This includes housing and childcare costs. That’s around £11,250 a year, or £938 a month.

Food and clothing, toys and education – even if they go through the state system – add up. But the problem is not so much the cost of having a child, as the loss of earnings. You may be able to go back to work, but some kind of career break is probably part of most parents plans.

Some support is available. Mothers with the same employer for at least 26 weeks up to the 15th week before they are due to give birth, should be eligible for Statutory Maternity Pay (SMP).

This is six weeks at 90% of average gross weekly earnings and after that you can claim either £172.48 a week or 90% of average weekly earnings, whichever is lower, for the next 33 weeks. If you are self-employed, you should be able to get Maternity Allowance instead which gives you the same amount as SMP.

Becoming a full-time parent may be tempting, at least when the children are very young. If you do decide to go back to work, remember the cost of care. Government figures suggest parents typically spend £242 a week for 50 hours of full-time care for a child under two in England and Wales.

Planning ahead

The good news is there are lots of ways to keep the costs of raising your child down – and it all starts with planning before your little one even arrives. 

Look at the income you will need to replace if you take a career break for a year or two. The payments from SMP will help but if you want to spend more time with your little one – perhaps up to school age – you will need to find a way to deal with the shortfall. Saving, or even better investing for a year or two before you start your family could help build up the kind of sum you would need to get through any cash shortfall.

It may also be an idea to look into the potential of working part time or working at home. Many employers have become more receptive to alternative working arrangements in recent years.

Full or part time, the government is planning to provide extra support from next year. The chancellor announced a £4bn expansion of free childcare to cover children aged between nine months and two years in England, providing 30 hours a week to households where all parents are working at least 16 hours a week. When your baby reaches the age of three, you can start claiming 15 hours or in some case up to 30 hours’ free childcare a week. 

Providing for your family 

But children mean ongoing responsibilities and you need to find ways to meet them even if you could not do it yourself.

This makes insurance essential. A standard life insurance policy could mean financial support for your children if you, your partner or both of you should pass away. Just as important, an income protection policy could help if you became unable to earn due to an illness or injury.

Getting some expert help

A Continuum we help people with their financial needs through every stage of life. That means we have the answers you need when the questions about children and money come up.

We can help you find the investment products you need to build up a nest egg if you are planning on waiting. We can help you find all the insurance cover you will need, and we can help you through the tax maze.

To discuss your finances, especially if they are going to become family finances, contact us today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products, you should seek independent financial advice before embarking on any course of action.

The Financial Conduct Authority does not regulate taxation advice.

The value of an investment can go down as well as up and you may get back less than you invested.

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