While children can certainly add to your life, there is no getting away from the fact that the arrival of a new baby will also take away certain freedoms – freedom of time, freedom of independence and financial freedoms.
Put simply, babies are expensive. They’re really, really expensive. Actually, the cost of having a new baby is frequently a great deal more expensive than most new parents had bargained for. The Money Advice Service recently estimated the average cost of having a baby in the UK and raising it till the age of 18 to be £75,436 for a couple and £102,627 for a single parent. When you consider that many children pose demands on your finances for far longer than that, the actual cost of having a child can be significantly higher.
Despite this, many new parents fail to take more financial action during the first year of their baby’s life. We’d recommend working through the following simple checklist to help with your budgeting and give you the peace of mind that everything is going to be ok – after all, with a new baby
Rather than just ‘winging it’, it’s always best to sit down and actually consider how caring for your new baby is going to impact your regular household income. The same article by The Money Advice Service determined that in the first month of your baby’s life you will end up spending more than £500 just on the basics, such as nappies, feeding equipment and clothing. This is all at a time when you, or your partner, will be away from work to care for the baby, or being paying for external help and support to do so. Check much paid time off your employer will provide for you and your spouse in plenty of time and consider what you will do to make up the shortfall in any earnings. It’s wise to also consider what will happen once your maternity, or paternity, period ends. Will you go back to work? Who will look after the baby then? How much does childcare cost? Are there friends and family nearby who can help?
New parents often fall into the trap of going out and buying plenty of toys and lovely new clothes, but it’s important to make sure you have the more ‘boring’ essentials covered first. From the daily essentials like nappies and wipes, to the bigger outgoings for cots, prams, carry seats and baby monitors, it will all need to be covered. It’s often a good idea to ask friends and family to help with these new baby essentials, rather than a mountain of toys and beautiful clothing. Beyond that, look around for deals and don’t underestimate the power of buying in bulk. You will go through a mountain of nappies so if they are on offer, grab them while you can.
Your outgoings will have just jumped dramatically, but now is the time to start saving. Particularly for the big expenses that will come later in life, like school or university fees, help with deposits for a first home or a wedding. These larger expenses might seem far away, but it’s important to start saving now as your daily costs will go up in all areas from food shopping to holidays. An extra person, no matter how small, is always going to be expensive.
There has never been a more important time to ensure that your will and estate is in order. If you were to have died yesterday, would your family, and your new child, be financially ok? Ensure that you have the best insurance policies to cover illness should you be unable to work, and death, if the worst should happen. You will need to update your will to add your child as a beneficiary and write a letter of wishes so that those you would be leaving behind know what to do if you passed away.
Finally, don’t lose focus of your own lifestyle goals. Be careful not to neglect your own savings and lifestyle financial plan while ensuring that your child will be ok. You are all important and your savings and investment strategies should be adapted to ensure that your whole family, including you, are still on the right path. If you’re unsure how to adjust your financial plan to include the needs of your baby, just talk to us and we will help you.
This article does not constitute financial advice and should not be construed as such.