The arrival of Meghan and Harry’s new baby, Archie, has gripped the nation, but the royal couple is unlikely to worry about their newborn’s financial future. For most parents, a few money tips are usually very welcome…
It’s a hectic time when a baby arrives. Whether it’s your first, second or even third child the clock stops. Everything else gets put on hold while the new arrival becomes the centre of attention.
Quite right, too. A baby changes the whole family life dynamic. Ahead lies 18+ years of nappies, feeding, good times and bad, 1001 lifts to clubs, friends’ homes and school trips.
Oh, and don’t forget the money. On average, it costs around £80,000 to raise a child (excluding any childcare). That’s an average calculated by Money Supermarket. According to the online price comparison site, it costs more to bring up a girl than a boy.
Interestingly, the site also highlights the fact that it costs around £27,750 to complete a university degree (excluding tuition fees) and about £18,000 to own a pet dog.
Families must plan their finances
Bringing up your children will always be top priority. However, that doesn’t mean you should let other things in life slip. One of those is your money.
Planning should start as early as possible. Unless you have royal blood, and having a nanny around the house 24/7 is not an option, one parent will usually spend a year or more at home after the birth.
Maternity pay can get complicated, and much will depend on your employer. After 39 weeks, however, your employer is not obliged to pay anything. This could leave a significant hole in the household finances.
Ideally, families will prepare for this – maybe one, two or more years in advance. Building up a contingency fund and having savings to offset reduced earnings is the ideal scenario. And investing that cash wisely, in funds that can be accessed quickly if required would be better still.
The baby budget
Ultimately, you should draw up a budget. What are your outgoings and how will they change when the baby arrives? Will you change spending habits and what will your income be? All vital questions that will enable you to build up a good picture of available monies when your child is born.
Don’t forget things like tax credits or child benefits. Every little helps, as does free NHS prescriptions and dental care. If it can save you money, this could be put aside, saved or invested.
Make a list of items to buy. What a baby needs will change almost monthly. New clothes, toys, push chairs, car seats and shoes. Building all these things into a budget will help you avoid costly last-minute bills that could put pressure on the family’s cashflow.
Future peace of mind
From day one it’s important to plan for the future. That means taking out protection and insuring against the unexpected. It’s not a topic anyone wants to talk about. However, putting such matters off could leave your family struggling financially if nothing has been put in place.
Insurance to cover the monthly bills, the mortgage and other significant commitments does not have to be costly. With the right advice is can be just a few pounds each month, and easily built into the family’s budget.
It’s also advisable to consider the children’s future. Opening a savings account or a Junior ISA in the early years will grow steadily. There are also many tax benefits on offer, making it attractive to invest any spare money that could support your children when they grow up.
When the children turn 18, they can access their savings. That might fund their first car, a year out travelling or provide a deposit on an apartment. It’s a great way to give them a great head start in life.
As a family, you can also plan even further ahead. It is possible to open a pension for your children, with tax relief on contributions helping to boost the fund. The pension accounts can be controlled by the children when they reach 18. It’s a long way off, but with so much financial pressure on the government, private organisations and pension funds it makes sense to make provision early.
Independent financial advice
Remember, investments can go up and down. It is important to take professional independent advice before making any complex decisions relating to your personal and family finances.
With a wealth of experience helping families to avoid pitfalls and successfully plan for the future, we’re here to help. Call us on 0808 1234 321, or email email@example.com to start the conversation…