Financial guide to having a baby

Your bundle of joy comes with a bundle of life-changing financial decisions, so make sure your wallet's prepared for the arrival of a baby…

What I remember about being pregnant for the first time is the sheer, mind-numbing panic. I didn’t know the first thing about babies, I didn’t know if I could afford to leave my job and I didn’t know if I could afford childcare if I stayed at work
Felicity Hannah, freelance journalist

Expecting a baby can be as terrifying as it is exciting.

There are lots of important financial decisions to make, from how to save for your child to whether you return to work.

In fact, the Money Advice Service says that couples without children spend an average of £170 a week each, while couples with kids spend £289 each a week (figures taken from its website in December 2013).

And when you consider that a baby will almost certainly reduce your disposable income, you can see why starting a family can be such a financially significant event.

But don't panic, there's financial help available, as well as plenty of advice on managing your money.

What maternity leave am I entitled to?

If you've worked for your employer continuously before the expected week of childbirth then you could qualify for statutory maternity pay.Piggy bank and coins

While on maternity leave, you're entitled to any pay rises you'd receive if you weren't off, and you can build up holiday entitlement, too.

Fathers may qualify for one or two weeks paid paternity leave and up to 26 weeks' paid additional leave if the mother returns to work. There's more official information here.

What if I don't qualify?

If you're self-employed or haven't worked for an employer long enough to qualify then don't panic - you'll still get some help. Most working mothers will qualify for maternity allowance.

If the cost of childcare makes working unaffordable, it's worth talking to your employer

You can find out details and how to apply via the Gov.UK website.

Can I afford to stop working?

Some mothers would like to stop work for a time when they have a baby, but that's a big financial decision.

If you want to stop working, it's worth examining how much returning to work would cost. You need to factor in childcare, travel and work clothing expenses. That way you know exactly how much money you'd lose and can make an informed choice.

You should also draw up a budget to see if you could manage on whatever income you have once your maternity allowance or pay is over.

This is a good idea even if you're staying in work, as a baby almost always means a considerable drop in spare household income.

There's an excellent budget planner available via the Money Advice Service, you could try a mobile phone app, or even resort to pen and paper.

Can I afford to work?

Perhaps you want to keep working but worry that childcare costs would be prohibitively high.

Having a baby is amazing, but it’s not all plain sailing. Plan ahead now to make sure that issues around managing the household budget don’t cause problems later
Money Advice Service

However, when you're making that decision it's worth considering the possible effect on your future salary.

If your future earnings will be affected by taking several years off now, then it may be worth remaining in work even though you make little or no money after childcare costs are paid.

If the cost of childcare makes working unaffordable, it's worth talking to your employer. They may be able to reduce your hours or allow you to work flexitime.

Get a clearer idea of how much childcare will cost you by using the Money Advice Service's Childcare Calculator.

Will I get help with childcare?

Childcare costs are one of the biggest expenses for new parents, often rivalling the mortgage for the position of biggest single household bill.

The good news is that there's help. Childcare vouchers allow you to pay out of your pre-tax income - you can read more about this via the Childcare Vouchers website.Credit cards and calculator

If you're on a low income then you may be able to top up your childcare costs with working tax credit. Check out this Money Advice Service guide.

Will I get child tax credit?

Use the official tax credits calculator to find out what you're entitled to and how to apply. There's also a tax credit helpline that you can call for advice.

How can I save for my baby?

First, decide why you want to save. You may want an emergency fund to give your family extra stability, in which case our guide to easy access saving will be a useful read.

If you want to save for your child's future and don't mind losing access to the cash then consider a Junior Isa

You may want to open an account for your child to save into, where the money can be withdrawn as it's needed.

If that's the case then a children's savings account could be more suitable.

If you want to save for your child's future and don't mind losing access to the cash then a Junior Isa could be the best bet.

Given that the savings are likely to be locked up for a significant number of years, you may want to consider the effects of inflation on eroding the value of cash and think about long-term investments that involve an element of risk to the capital, such as bonds, stocks and shares

How can I cut my expenses?

If a new baby means things are tight then the good news is that most people can save cash simply by being a bit more proactive about their household finances.How to save money on energy

Set aside an hour a week to manage your household money and you'll be amazed at how much you can save on your big bills such as energy and car insurance.

And it's not just insurance, loans and utilities - the internet is full of ways to save.

In the kitchen, for example, why not try out a supermarket comparison website like MySupermarket.co.uk. The Love Food, Hate Waste website provides recipe ideas for using up your leftovers and the NHS Change For Life page has low-cost healthy recipes and helps you make a meal planner.

What should I do now I'm a parent?

There are a lot of potential answers to that question, including stocking up on fish fingers and accepting that the cream carpet will never stay that colour.

Some payment protection policies have been given a bad name in recent times, but find the right product for your circumstances and you could give your family a valuable financial safety net

But there are two actions you'll want to take as soon as possible. One is to sort out life insurance, so that your loved ones are protected. Read our guide to life insurance for new parents for help choosing a policy.

You may also want to consider an income protection policy. Some payment protection policies have been given a bad name in recent times, but find the right product for your circumstances and you could give your family a valuable financial safety net.

It's also a good idea to make a will as soon as possible. That means that your family would be cared for as you want them to be, if you weren't able to do it yourself.

By Felicity Hannah