27 June 2014

Planning a family? Five things to consider

The 2013 Annual Cost of a Child report showed it costs a massive £148,000 to raise a child to the age of 18, so if you are planning to start a family, it’s important to give your finances careful consideration.

Can you afford it?

The first question you need to ask yourself is whether you can afford a new addition. Make a list of all your income and all your monthly outgoings and work out how much you have spare each month. 

Is it enough for all the day-to-day essentials a baby will need, including food and nappies, clothes, and extras like toys? If both you and your partner work, you'll also need to think about childcare. Research from the Family and Childcare Trust in March this year indicated that the average childcare cost for two children, one in part-time nursery care, the other in an after-school club, is £7,549 per year. More, the Trust says, than the average UK mortgage.

It’s worth considering how much you have in savings, as the items you’ll need to buy before your baby is born – pram, car seat, cot etc – can add up to hundreds of pounds.

How about while you are on maternity?

Even if you can afford all the extras which come with a baby on your current income, it is important to remember that parents may not be earning the full amount while on parental leave.

Many companies only offer Statutory Maternity Pay; for the current tax year, this is paid for 39 weeks and amounts to 90% of your regular salary for six weeks and £136.78 or 90% of your average weekly earnings (whichever is lower) for the remaining 33 weeks.

Women can top up their salary by working up to 10 Keeping in Touch days (KIT) over the course of their maternity leave. The employer pays the full salary entitlement for these days, without affecting maternity pay.

What benefits can you claim?

If you think you may struggle to afford a child, remember there is a range of benefits you may qualify for, which can help ease the financial pressure.

In this current tax year, parents can qualify for £20.50 per week Child Benefit for their eldest child, and £13.55 for each additional child. However, taxpayers whose income exceeds £50,000 a year, and who receive Child Benefit, or whose partner claims Child Benefit, may have to pay a 'high income child benefit' charge. Visit GOV.UK (This link will open in a new window) for more information to suit your circumstances.

Where will you live?

If you currently live in a one-bedroom flat, you may be thinking about moving before you start a family. Many people like to try and get their foot on the property ladder before they have a baby and there are a number of schemes which could help first-time buyers, including Nationwide’s Save to Buy 5% deposit mortgage scheme.

Preparing for the future

In all likelihood it’s not just when they are a child that you’ll find yourself supporting your offspring. A growing number of parents are paying for university fees, and helping their children out with deposits for their first home or with paying for their wedding.

Starting to put cash aside for your child from a young age can help ensure they have a stable financial future. One of the best ways to put cash aside is in a tax-efficient Junior ISA which can’t be accessed by the child until they reach 18. More information about saving for children can be found in our Starting a Family Guide or take a look at our Junior ISA page to see how we can help.

However, it’s important to remember there’ll be plenty to pay for before your little one hits 18, so don’t neglect your own savings pot.

YOUR MORTGAGE IS SECURED ON YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DON'T KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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