9th August 2024
Financially Preparing for Children: Tips from Paul’s Podcast
This month, Chief Executive Paul Tilley draws upon his personal experiences as we talk about financially preparing for children. Whether you’re planning to start a family or are already expecting, this episode is packed with valuable information to help you navigate the exciting journey of parenthood without breaking the bank.
According to recent studies, the average cost of raising a child to the age of 18 in the UK is estimated to be around £150,753. It’s a substantial figure, but with proper planning, you can ensure a secure financial future for both you and your little one.
Discussing Childcare
A big conversation is needed with your partner right at the start of your parenting journey: how do you picture your life as a parent? With childcare costs rising, many couples find it financially beneficial for one parent to stay home. As of 2022, part-time care costs an average of £138 a week while full-time care costs £270. Discuss how you each visualise at least the first year playing out. If one parent plans to stay home try living on a single income for a few months and save the other income. This helps you adjust and build a robust financial safety net which feeds into my next piece of advice.
Revisit how you manage finances as a couple when bringing kids into the equation. Discuss whether you’ll pool resources, allocate an allowance each, or have other arrangements. There are no fixed answers, but you must be on the same page.
Workplace Parental Policies
Have a conversation with your workplace about parental policies. Statutory parental leave and payments are detailed on the government website, but check your specific workplace policy to factor it into your revised budget. Adoptive parents usually qualify for paid time off work too. For the self-employed, options vary: you might be able to pay yourself Statutory Maternity Pay or claim Maternity Allowance.
Taking time off work can impact your State Pension, but claiming Child Benefit can help you keep receiving National Insurance credits. Ensure you have at least 10 years of contributions for any State Pension.
Creating a Baby Budget
It won’t surprise you that I suggest creating a budget specifically tailored to the new addition to your family prior to their arrival. List all the necessary ongoing costs: nappies, food, clothing, and more. If you have enough disposable income for these already, that’s great. Otherwise, think about what you’re going to adjust and consider making that adjustment well in advance of the baby’s due date. This not only helps you acclimatise but also allows you to save for less frequent costs like prams, cots, and toys.
Setting clear financial goals is key. Whether that’s saving for a bigger home, creating an education fund, or planning family holidays, establish priorities that align with your values. Having specific goals helps you stay focused and motivated on your financial journey.
Second-Hand Savings
If you’re feeling frugal, check out local parenting groups, Facebook Marketplace, or Gumtree for second-hand items. Avoid second-hand car seats for safety reasons, but hand-me-down clothes and even pushchairs (with the correct British Standard stickers) can be excellent budget-friendly options. Remember, children grow faster than you’d expect, so there’s no point in wasting money on designer clothes that will be no use in a month.
Savings Accounts
Most parents open a savings account for their child. At esbs, we offer suitable accounts like the Foundation Account, which requires a minimum deposit of £250 and offers a higher interest rate of 4.45% with limited withdrawals. Alternatively, our Early Saver is an instant access account with just a pound to open. Consider a Junior Cash ISA or a Stocks and Shares ISA for tax-friendly saving and investing.
Involving Your Support System
Ensure you’re on the same page as your personal support system. Friends and family will likely want to help, so guide them on what would benefit the baby most. Contributions to a savings account might be more helpful than multiple small gifts.
Lastly, if you haven’t written a Will or sorted life insurance policies, now is a great time. Prepare for your baby’s future as much as possible.
They say children are an expensive hobby, but hopefully after this episode you’ll feel more confident handling the financials once your baby arrives. Share this with any soon-to-be or current parents in your life. Next time, we’ll discuss how to prepare for retirement. If there are any topics you’d like to hear more about, let us know via our social media channels @earlshiltonbs.