10 WAYS TO PREPARE YOUR FINANCES FOR A NEW ARRIVAL
FROM SAVING AHEAD TO CUTTING COSTS WITH HAND-ME-DOWNS, MONEY EXPERTS GIVE THEIR ADVICE TO EXPECTANT PARENTS.
WTHE arrival of a baby is an exciting time, but as you make preparation, it’s also important to consider how your finances will be affected.
According to Office for National Statistics (ONS) figures covering 1995 to 2014 in England and Wales, births tend to pick up during spring and peak in September.
Sarah Coles, head of personal finance at Hargreaves Lansdown says: “If you’re expecting a baby in the coming months, nothing will fully prepare you for what’s in store, but it’s worth making all the financial preparations you can.”
Even if you’re at the start of your journey planning a family, it’s helpful to start thinking about the financial side of things.
1. Build a fund
The sooner you start building your savings pot, the better, even if you’re only putting away small amounts at a time.
“When you’re of working age, you should be aiming for three to six months’ worth of expenses in an easy access savings account – and once you’ve had a baby, the cost of essentials will just keep on increasing,” says Sarah.
“It’s not easy to find cash to put aside, especially if you’re buying things for your child, or moving house for more space, but you’ll be grateful for every penny if you need it.”
2. Revisit your budget
You’ll need to tighten your budget once a baby arrives, to factor in all the additional costs and possible income changes.
Sarah suggests drawing this up early, so you have time to adjust.
“You may well need to cope on a lower income or face much higher outgoings if you’re paying for childcare – or indeed both.
“It’s worth doing the calculations to see how you can afford to live,” she says.
3. Find out what support with childcare will be available
Researching the help available and finding out about local childcare availability will help you budget.
More information on support can be found online – find the ‘Help with childcare costs’ page on the gov.uk website.
Sarah adds: “You might want to speak to family too. In an awful lot of cases, help from grandparents is the only thing that makes childcare manageable.”
4. Shop around for a Junior Isa to set up when your child is born
Junior Isas, or Jisas, are long-term savings accounts and your child can only withdraw the money when they turn 18.
Sarah suggests: “If family and friends want to buy a present to celebrate your child’s birth – or for any subsequent birthday or Christmas – you can ask them to pay into the Jisa and help build up a nest egg for when they turn 18.”
5. Make sure your will reflects your growing family
Sarah adds: “Consider critical illness insurance or income protection, which will provide cash for you and your family if you are unable to work for a period.”
6. See what costs you can ditch
While having a baby will come with new costs, remember that some expenses may drop out of your budget.
Alice Haine, personal finance analyst at Bestinvest, says: “Remember, your costs straight after the baby is born won’t be the same as your working life, so commuting expenses, lunches at work or office clothing can be instantly cut from your budget.
“There could even be the potential to go down to one car in the short-term if you are a two-car family and there are plans to take an extended period off work.”
7. Buy or borrow secondhand
You can save a fortune doing this, whether it’s via local baby groups, charity shops, auction websites or items being passed down by friends or family. While everyone loves a bargain however, Alice suggests that for items where safety could be a factor, it’s best to buy new.
8. Seek out recommendations
If you have friends who already have young children, ask them what items they found essential – so you can identify the must-haves and avoid wasting money on the
duds. Parents’ forums and review websites can also shed light on this
9. Don’t feel pressured to ‘keep up with the Joneses’
“Just because your friends have all the latest baby gear or an ‘Instagrammable’ nursery, does not mean you need it,” says Alice. “They have probably spent far too much and most of the items will become redundant once their family is complete.
“Plus, remember babies don’t need expensive activities to keep them entertained – free toddler and baby groups will suffice and should hopefully introduce you to a new circle of friends.”
10. Finally, don’t forget pensions
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: “If you are employed and go on maternity leave then the contributions you pay will be based on your current salary, rather than your prematernity leave salary.
“However, your employer contribution continues to be paid based on your salary before maternity leave and
this can really boost how much goes into your pension.
“This covers the time during which you receive statutory maternity pay,” she adds. “If you plan to take longer, say a year, then check the scheme rules to see what you are entitled to.”
Once baby arrives, be aware that child benefit comes with national insurance credits that can count towards your state pension. If one parent earns over £50,000 though, there may be a tax charge to pay.
Helen says: “You can now opt to receive the national insurance credit that comes with child benefit without receiving the benefit itself, so you don’t have to pay this tax every year.”