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Having a child costs £96,000 – here are 7 tips for new parents

Isobel Lawrance

31st Jul 2023

Reading Time: 4 minutes

Having a child costs £96,000 – here are 7 tips for new parents

It has been revealed that couples with children spend an average of £5,356 more a year than couples without kids. Over the course of 18 years, this comes to an eye- watering £96,416, with parents less likely to have enough cash leftover at the end of the month. They are also far less likely to have emergency savings or life insurance, compared to non-parents. Figures from the HL Savings and Resilience Barometer also show those with kids are more worried about debt.

So, here are 7 top tips for new parents, to help you save money in the short and long term, giving both yourself and your children financial security and resilience.

Try to get into a better financial position before having children

You’re going to need to draw up a tighter budget when the child is born, so why not do it as soon as you start planning for a family? You can use the cash you free up in order to pay down expensive short-term debts and build up any savings you can.

Make decisions about childcare

Often the biggest challenge in the early years is childcare. In some cases, a parent will want to give up work for a while, but in other cases they would prefer to work, but don’t feel they can afford the cost of childcare. It’s worth considering all the options before deciding.

Take the time to explore everything that’s available in your area – the difference between an expensive nursery and a childminder can be significant. You can also take steps to cut the formal care you need to pay for. This can include asking grandparents for help, juggling shifts with your partner, or sharing care with other friends.

See what help is available

Check if the government will offer help too, because both tax credit and universal credit have childcare allowances. Today’s babies will also benefit from the change that means from April 2024, working parents of two-year-olds can access 15 hours of free childcare. From September next year, this will be extended to babies from the age of nine months.

From September 2025, this will be expanded to 30 hours. In the interim, if you don’t already use childcare vouchers, you can’t sign up for them, but you can still get tax-free childcare to make your money go further.

Protect your family

Make sure your will is up to date and takes all your children into account – including establishing guardians if something was to happen to both parents. You also need to make sure you have enough life insurance, so they’re financially cared for if you pass away. Check your sick pay too – what it covers and how long it lasts for. If it’s not very generous, consider income protection, which will provide cash for you and your family if you are unable to work for a period.

Widen your safety net

We should all have a savings safety net of 3-6 months’ worth of essential expenses in an easy access savings account, in case of nasty surprises. When you have children, your essential expenses will increase, so you need to build your net bigger to account for this. If you already have emergency savings, consider the impact of inflation too – which will mean you’ll need more emergency cash to cover any expenses.

Set up a Junior ISA for gifts

If family and friends want to buy a present to celebrate your child’s birth – or for any subsequent birthday or Christmas – you can ask them to pay into the JISA and help build up a nest egg for when they turn 18. You can choose between a cash or stocks and shares JISA.

Parents may worry about investing, because they see it as a risk. However, while investments will go up and down in value in the short term, over an 18-year timescale, share-based investments will offer far more potential for growth than cash.

Don’t neglect your own needs

Children can easily soak up all the cash available, but it’s vital to keep your own needs in mind too. If you put your savings and long-term investments on hold, you’ll have an enormous amount of ground to make up later – particularly when it comes to pensions.

Where one parent works part-time for a longer period, there’s a risk they have a long break from paying into their pension, which can have serious repercussions for their retirement income. Some parents will choose to make extra contributions into the pension of the person working full time to make up for it, but it’s worth understanding the implications of that – particularly for unmarried parents. It makes sense to consider your household finances in the round and talk about ways you can free up cash so you can both pay into a pension if possible.

Sarah Coles, head of personal finance, Hargreaves Lansdown, says:

“Children may be priceless, but they come with a shocking price tag. Couples with kids spend an average of £5,356 more every year than couples without – which over 18 years comes to an eye-watering £96,416. And as a result, their financial resilience suffers across the board. For single parents, life is even tougher, and they face far lower resilience on almost every measure.

“It’s not what parents need to hear as they embark on one of the most expensive times of year, but everything is more expensive with children in tow. Even when you just boil it down to the absolute essentials, couples with kids spend almost a fifth more than those without (£2,266 a month vs £1,923), while single parents spend more than a quarter more than singles without (£1,428 vs £1,150). It’s no wonder that, at the end of the month, a couple with kids has an average of £227 left after paying the bills, while a couple without children has £382, a single person living alone has £34 and a single parent just £25.

“It’s no wonder that only among couples with no children do more than half of people have enough cash at the end of the month to be resilient. Only 44% of parental couples have enough cash at the end of the month – and 25% of single parents (compared with 34% of singles living alone, and 54% of couples with no children).”

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