Having a child can be one of the most meaningful things that we do in our lives. It can bring you and your family a huge amount of joy. However, whether it’s your first child or your third, getting things ready for the big arrival can seem challenging. There are plenty of things that you might feel like you need or could be missing. One of the things that can have the biggest impact is finances.
It’s no secret that the costs of having a child could put your finances under pressure. While it might seem like there’s a lot to consider, we’ve put together a handy guide for you of some of the most common costs to consider. Making plans now could mean that you and your family can sit back and enjoy the magical time that is having a child.
How much could it cost to raise a child in the UK?
According to research conducted by Child Poverty Action Group, the basic cost of raising a child in the UK in 2020 over an 18-year period stands at £71,611 for a couple and £97,862 for a lone parent. While this figure might seem intimidating, it’s important to bear in mind that this is spread over a long time. Having a strong financial plan in place can help you cope with these costs over time. It’s also important to remember that this figure references the basic costs. This means that it would be the absolute minimum spend over that time period. So, for example, if you wanted your child to receive private education that figure could increase.
There are other costs that could potentially take your family by surprise, such as the costs involved with looking after a sick child. Some of these costs could be replacing the lost income from taking time off work. We all hope that when we have kids it will be smooth sailing, but it’s important to remember that accidents can happen. Therefore, it can make sense to have a financial plan in place. The more prepared you and your family are, the more the potential for stressful situations decreases. Let’s look at some of the most common ways you can get financially prepared for when your child arrives.
Some of the essential costs
When having a child there are some costs that are essential. These costs are universal no matter who you are. These often reflect the basic needs of the child. The NHS have a handy guide of some of the most common basic costs to have ready for when your child arrives. When it comes to things like a cot or a pram it could make sense to spend a bit more money to get quality so that you can be sure of your child’s safety. Clothing is an area where you can try and save a bit of money as they will grow so quickly that it won’t really matter in the long term. This is where you could ask family and friends for a little bit of help. Getting a few bits second hand can make all the difference.
At some point, you might have to return to work. This can mean having to seek out a childcare service. According to research, the cost of sending a child under the age of two to a nursery is between £138 a week part-time (25 hours) and £263 a week full-time (50 hours). Luckily there are support systems from the government in place to help you pay these costs. Alternatively, you could seek out a childminder. The cost of a service like this really depends on where you live. One of the ways you could offset this cost is by asking a family member to look after the child during working hours. It might not be a full-time solution, but it could help reduce the number of hours that you require a nursery.
Potential future costs
As your child gets older you might want to get them involved in different sports and activities. They could show an interest in a certain hobby like art, sports or music. While it’s fantastic to see them grow and develop their own personality, it can be costly. Getting your finances ready early can help take the pressure off and allow them to reach their full potential.
You can start the process by looking into some of the activities that are available in your area. Things like swimming lessons or musical instruments could be pricey enough over a long period of time. In order to prepare for this, you could start an “activities” fund now. That way when the time comes you and your family are ready to support your child.
How to make a budget and stick to it
After reading all of that, it can feel a little daunting. Taking some time now before the baby arrives to look at your finances can be hugely beneficial. There are some simple steps that you can take to make sure the arrival of the baby is as smooth as possible.
What’s coming in?
Probably the simplest place to start is by looking at the money that’s coming in. The obvious one to start with is your wages. How much is coming in each month and what is the figure that you’re left with after paying some essential costs?
It can also be a vital step to look at some of the benefits you can avail of from the government. This can be added into your calculations when the baby has arrived.
What’s going out?
This is probably the trickier thing to figure out when it comes to your finances. Without a child around there are plenty of small things that you could be spending your money on. Whether it’s a takeaway here or there or some clothes online, it can all add up. This is the perfect time to sit down with a pen and paper a look at all these outgoings. When considering what’s essential and what’s not, it can be helpful to consider the following things:
- Cost – how much did you spend on the item or service?
- Item/Service – what was the item or service that you bought?
- Date – when did you buy the item or service?
- Recurring expense – is the expense something that will need to be paid regularly, like a bill?
- Payment method – did you pay with cash, debit card, credit card or another way? This is important to bear in mind when tracking money, as the money may come out of your account later on.
While you might already have a strong idea for your outgoings, it can be helpful to look at each one of them and even how you paid for them. Doing something like this can help you take more control of your finances and help you feel more comfortable for what’s to come.
Make sure to have savings goals
While it’s all well and good to say you’re saving money, it can be tough to stay motivated to save over a long period of time without a goal in mind. Having clear achievable savings goals in mind can make the process a bit easier. They could be something like paying for your first family holiday, or it could be a specific value in pounds. When you’re setting your savings goals, it’s always important to make sure they are achievable. There’s no point in setting something too big or too small because you just won’t stick to it.
Get an emergency fund started
No one likes to think about what would happen if things were to go wrong but the reality is that you might need access to an emergency fund at some stage. Of course, it is up to you how you decide what would be an emergency or not. However, you might want to look at keeping it there for things like medical emergencies or when something essential gets broken in the house like the heating in winter.
Securing Life Insurance
While you might be able to plan for certain costs, there can be times in your life when you’re just not prepared. The reality is that when a loved one passes away, it could potentially put financial pressure on the ones left behind. Life Insurance is a way for you to get peace of mind that if a tragedy was to strike there is support there.
If you’re UK resident aged 18 to 64 Smart’s Family Life Insurance can help you protect your family’s financial future. Depending on your age you can choose up to £750,000 worth of cover. There are no complicated forms, and you won’t have to submit a medical. Plus, you’re covered from day 1 (except if death is the result of self-inflicted injury in the first 12 months). It can help give you comfort knowing that no matter what the future holds you can support the ones you love.
Financial mistakes to avoid
While we all might be aware of some of the tried and tested financial tips, it can often be helpful to be aware of some of the mistakes. These are common mistakes that people can make when approaching their finances. While it might not completely revolutionise your approach to your finances it could end up saving you money. In the long run all these small savings can really add up and make the difference.
Relying too heavily on credit – It can often be tempting when you’re in a tight spot to look to loans and credit cards for help. When it comes to the repayments, companies could add interest which could mean your payments increase massively over time. It might make sense for certain things like paying for a car or renovating the house but it’s important to consider it carefully.
Not researching a supplier – One of the great things about modern life is that we have so much choice. It can also be a bit of a burden when it comes to less exciting purchases. However, taking the time to consider the right supplier can save you money. This could be for things like electricity, heating or even phone bills.
Impulse buying – We've all done it at one stage or another. It can be tempting to pick something up last minute in the shops or buy a few things on Amazon late at night. When considering a purchase, have a think about how essential it really is. A great way of helping with this is sleeping on it. Often you can feel completely different about a purchase the next day.
Support for your family’s future
While all of this might seem a little overwhelming at first, it can often become second nature once you get into the swing of things. It’s important to remember nobody follows these rules to perfection and it’s okay to have times when you spend a little extra money. It’s important to enjoy the journey and treasure the time you have because before you know it, they’ll be flying the nest.