22 August 2016

How to plan for your new family finances

Whether you’re already expecting a new arrival, or plan to adopt or try for a baby soon, it's important to consider the financial impact of becoming a parent.

Planning for your baby’s first year

The average cost of raising a child to the age of one in the UK is expected to be £11,498 in 2016 – a 2.4% rise from 2015, according to the 13th annual “Cost of a Child” report from insurance specialist LV=. This figure is made up of costs such as food, furniture, clothing, car seats, buggies, toys and childcare.

The table below provides examples of initial outlays you need to be prepared for:

Item Average Cost*
Buggy £196
Car seat £185
Cot £337
Mattress £110
Stair/safety gate £44

*Source: Average online prices from department store John Lewis, correct at the time of writing.

Money saving tips

You may be able to save money on some items by buying them second hand, but it’s not recommended for car seats and cot mattresses because of possible safety issues.

Instead, consider cutting costs by:

  • Checking whether you can reduce childcare costs by enlisting the help of grandparents and other family members. The Government has even announced plans to let working grandparents share parental leave and pay by 2018

  • Buying second–hand clothes and taking advantage of hand–me–downs. Babies grow so quickly that clothes are usually still in good condition – just avoid drawstrings and make sure that zips and buttons are secure

  • Reviewing your spending. At first you may find that you’re too tired to maintain your usual social life, but the little things add up. Tot up how impulse–buys such as takeaways and coffee add up over a year

  • Making use of discount coupons and special offers, but only for things that you need to buy. Usually you’ll receive some at the hospital when your baby is born.

The toddler years and beyond

Between the ages of one and four, your child enters the most expensive period for raising them. The average annual cost during this period is £21,075 – a rise of over £9,000 from the first year.

The research published by LV= states that much of this rise can be attributed to childcare, with an average of almost 30%of the total likely to be spent on nurseries, childminders and babysitters.

Other interesting statistics uncovered by the study include:

  • 38% of the average net income of UK households is spent on raising a child
  • 59% of parents are struggling to keep on top of their outgoings
  • 49% of parents have no income protection plan in place to cover accident or illness
  • The total average cost of raising a child from birth to 21 (including university fees) has reached £231,843 which equates to £11,040 per year.

Assessing your income

When you sit down to calculate your new income and outgoings, don’t forget to factor in any financial help you may receive from the government.

If you’re a UK resident with a new baby, you’ll typically be entitled to receive £20.70 per week in Child Benefit for your first child until they’re 16 if they leave full–time education or 20 if they stay in approved education or training. This alone will contribute £1,076.40 per year to help cover your increased outgoings as a parent.

Statutory Maternity Pay (SMP) is paid for up to 39 weeks and you'll receive 90% of your pre–tax weekly pay for the first six weeks followed by 33 weeks at £139.58 or 90% of your average weekly earnings (whichever is lower). For example, if you received £139.58 for the full 39 weeks, this would equate to £5443.62.

Depending on your circumstances, you may also be eligible for Child Tax Credit which provides a basic family element of up to £545 per year.

Budgeting for baby

Bea Marshall, Founder of Yes Parenting whose expert voice you may have heard on TEDx, Radio 4 Women’s Hour or ITV, has three pieces of financial advice for expectant mums and dads.

  1. After the initial outlays, Marshall says it’s important to have money set aside for leisure activities: ‘As they grow – you’ll want to say yes to the opportunities that ensure your baby blossoms into who they are created to be. Activities, adventures, days out, holidays, music lessons, hobbies etc. Set money aside now so you’re ready for later – it's wonderful to say yes to your child’s interests and preferences.’
  2. One parenting expense we haven’t touched on yet is pocket money. As well as managing your own finances, when they're older, it’s essential for your child to learn how to manage their own money. ‘Let them make mistakes while the consequences are minimal,’ recommends Marshall.
  3. It’s not just about being able to provide your child with opportunities when they’re young, though. Marshall explains: ‘I’ve saved on behalf of my children since their birth,’ she says. ‘A small amount per month soon adds up over the years. It gives them a strong foundation for when they are ready to step away from your capable parenting hands.’

Learn more about our range of savings accounts and life insurance.

Other bits you may be interested in:

family group on sofa

The content displayed on our recent news and articles page is for information purposes only, and is accurate at the time of publication. The information will not be maintained, and so we cannot guarantee that at any given time the information will be up to date or complete. Please verify any information you take before relying on it.

Nationwide is not responsible for the content or availability of external websites. Nationwide does not make any recommendation or endorse any advertising, products, services or other content on such external websites. Views expressed on third party websites are those of the public and unless specifically stated, are not those of Nationwide.

Most popular

Alfred’s story


We're taking a look back at our first ever mortgage customer in 1884, Mr Alfred Idle.

You may also be interested in...

Our helpful guides

We've created a range of helpful guides to help you make better financial decisions regardless of your circumstances. Find out more about owning property, growing wealth and planning for life events.

Our products

Whether you are after a current account, a savings account or even looking for a mortgage, Nationwide has a range of great products that could help you, no matter the situation.