Every year since 2003 the investment and insurance company Liverpool Victoria has put out a report on the cost of raising a child. The first report in 2003 calculated that the typical cost of raising a child from birth to their 21st birthday was £140,398. Since then, in the past nine years, the cost has risen by 55% to £218,000 (just under £200 a week). This figure can seem fairly daunting, especially to couples who are thinking of expanding their family in the near future. However, though this figure is said to be ‘typical’ of a British family, through handling your finances wisely you can turn this figure into something much more manageable.
In a number of cases the decision to have a baby is unplanned, however if you are thinking of having a baby one of the first things you should do is to start a ‘baby fund’. Put an amount of money aside each month before the baby arrives – once the baby has been born this money can be used to cover any unexpected costs and fees that may take you by surprise. Another way that you can prepare for the new addition to your family is to practice living on less. Look over your expenses and cut anything that is not essential, this will help you to see how much you can really afford to live on and how much of an impact a new child will have on your life and your finances. Try and pay off any outstanding credit cards if you can as it will give you one less thing to worry about.
If you don’t already know how to budget – learn. Budgeting is important in all aspects of your financial life. It can help you organise and gain control over your finances and can help you see if you are heading towards financial difficulties. A good budget will protect you from the worst of any unexpected bills and can provide you with extra money if you successfully cut down on unnecessary spending. It is an important skill to teach your children when they are older. You could even show them how to budget for things with their allowance or pocket-money.
An easy way to save money in the early years of your child’s life is to research and bargain hunt for baby equipment and supplies. Many things that your baby will need in the first few years of their life, such as a pram or a high-chair, they will rapidly grow out of. This means that there are plenty of families stuck with equipment that has been barely used or is still in very good condition. The equipment also takes up space in the house and many couples are eager to get rid of it. Buying second-hand is not, therefore, something to avoid. There are dedicated websites for second-hand baby supplies or you could try eBay. You can also check whether your friends and family have old baby things that you could buy for a decent price.
Make sure that you are getting the most out of your money and ensure that your children are getting all the benefits that they are entitled to. In most cases your children will be eligible for Child Benefit – you get £20.30 a week for your eldest child and £13.40 a week for each of your other children. You can also look into investing money or saving for your child’s future. Junior ISAs or Stocks and Shares ISAs may be good potential avenues for your money. The tax-free aspect of a Junior ISA is particularly useful and will help you to save money for big costs later on in your child’s life such as their first car or to go towards their university fees. Children born before September 2002 and after the 2nd of January 2011 are eligible for a Junior ISA that their parents and family can put up to £3,600 in a year.
These are all important aspects to think about if you are planning a new addition to your family. However, don’t stress over every single aspect of your financial life and don’t worry too much about whether you are ‘financially ready’. Babies and the new life that comes with them are full of surprises and not everything can be anticipated. Do make sure to think about your finances and make sensible decisions as it can greatly benefit you in the long run.
© Izzy Evans 2012
If you are interested in learning more about saving money for your children and their future you can visit Children’s Savings