Children are expensive. Fact.
The latest statistics suggest that supporting your sprog until they’re 21 years old costs around £210,000 (£167,753 if you don’t put them through university, but that’s still a fairly hefty wedge). A little’un costs nearly £9,500 in his or her first year alone, but you can bear the financial brunt of your little bundle by making sense of the help available and getting savings-savvy now.
Budget for one income
Sit down and figure out how you’ll deal with living on just one income. You might need to rearrange mortgage payments and Direct Debits to make it easier, as well as examining your spending overall. Having a ‘practice run’ before the baby arrives will give you a good idea of how you’ll cope, as well as giving you the opportunity to put money into savings.
Figure out maternity/paternity pay
Women working for their employer for 26 weeks and earning at least £97 a week will be entitled to Statutory Maternity Pay (SMP) for 39 weeks. This works out at 90 per cent of their average weekly earnings for the first six weeks, and then 90 per cent of their weekly earnings or £124.88 per week (whichever is lower) for the remaining 33 weeks. The same applies to men for paternity pay, except they’re eligible for just two weeks of payment. It’s worth checking with your employer, though, as some companies offer more generous schemes.
If you’re not eligible for SMP, you can apply for Maternity Allowance through Jobcentre Plus.
Apply for benefits
All parents are entitled to claim Child Benefit, which works out at £20.30 a week for their eldest child and £13.40 for each subsequent child. You might also be able to apply for additional Child Tax Credits. To see if you’re eligible, check the Tax Credit calculator.
If you’re living on a low income, you might be eligible for a Sure Start Maternity Grant of £500, to help with the cost of maternity and baby items. Check out the Directgov website to see if you can claim. Similarly, those receiving Income Support, Jobseeker’s Allowance or Child Tax Credits could qualify for the Healthy Start scheme, which provides parents with vouchers for milk, formula, fruit and vegetables.
Save for tomorrow and beyond
There are many schools of thought on how much you should have squirreled away before baby arrives, and while some are prepared enough to have saved three months’ income (as recommended by the Institute of Financial Planning), many find themselves in a bit of a savings fluster. Financial experts agree, however, that the act of regularly saving is more important than the amount you’re able to save, so even if you can only put away a tenner a month, you can always increase it later on.
The new government has scrapped the Child Trust Fund scheme, but it’s still important to put some money aside for your child’s future. Just £2 a day into an account offering a fairly standard 2 per cent interest rate could yield around £13,500 by the time the child is 16. You could open an individual savings account (ISA) for them as soon as they’re born. There are dozens on the market to choose from.
Play it safe with ‘just in case’
You don’t want to be thinking about wills and life insurance while you’re preparing for a new baby, but it’s vital that you do. If you don’t have life insurance, now could be the time to get it. There are numerous products on the market, but new families might find more value in options like a Family Income Benefit (FIB) policy. Less expensive than regular insurance policies that pay out a lump sum, a FIB plan is designed to pay out an annual tax-free amount of a liveable value, should the worst happen.
A will is also a crucial necessity, designed not only to protect your money and assets in the event of your death, but your children, too. There are any number of do-it-yourself will kits available, but there’s always a risk that they won’t be properly upheld if they’re completed incorrectly. To be sure your wishes are fulfilled, appoint a solicitor to do the job for you. This will cost around £150.