How to plan your finances when having a baby
Deciding to have a baby can have a huge impact on a couple's finances, LV insurance have previously stated that the first year of a baby's life will cost parents an average of £8,500. So, whether you're planning a child in the future or are imminently expecting, we have compiled a collection of our top tips for planning your finances when having a baby below.
Begin saving for your family's future
Parents should aim to have saved at least three month's wages before the baby arrives. This way, you will be prepared should any unexpected circumstances or emergencies arise. Whilst this is recommended, some people may not be in a position to put away this amount of money each month, however, the habit of saving is more important than the amount put aside so don't feel disheartened.
Determining how much maternity/paternity pay you will receive
As long as you have been working for your employer for 26 weeks and earn in excess of £95 per week you will be entitled to statutory maternity or paternity pay. So, how much can you expect to receive and how long will you be able to claim this for? Usually, Statutory Maternity Pay lasts for up to 39 weeks. During this period, you can expect to receive up to 90% of your average weekly earnings for the first 6 weeks and £148.68 or 90% of your average weekly earnings (whichever one is lower) for the following 33 weeks. This money is paid as your wages usually are and tax and national insurance will also be deducted from this amount as usual. For more information regarding disputes and maternity leave panning, visit the GOV website.
Get yourselves insured
When living the single life, or even as one part of a couple, life insurance may not be at the top of the list of your priorities. When you have a child however, they are dependent on you as a parent to provide for them financially. Should something awful happen, if you and your partner have not set provisions for how your child will be looked after, it could leave your beloved little one vulnerable for their future. The most sensible option is to select a policy that pays out a tax free “income” yearly, rather than one large sum that could be depleted quickly.
When having a baby (especially your first) it can be easy to get carried away with items that you may not actually end up using or, could find elsewhere, unbranded, for a fraction of the price. When shopping, consider asking friends or family if they have the item in question that you could borrow for a period of time and focus on the must-haves over the nice-to-haves. This is all part of planning your finances when having a baby.
Making a will
Although not planning your current finances, when having a baby, it is important to ensure a will is in place. The thought of making a will can seem rather emotional, however, you do need one in order to appoint a guardian for your child should anything happen to you as well as make a plan for where your assets should go. You do not need to know the name of your child when creating the document so this can be done before the baby arrives. You will want to instruct a lawyer to assist you in the process and ensure your will is set to achieve everything you require from it. This should usually set you back by around £150.
After the baby is born
Once your bundle of joy enters the world, life will become very different. You must establish a plan for looking after your baby once the maternity and/or paternity leave is over and decide whether the ever-crippling cost of childcare outweighs your income benefits. Some ideas for saving on childcare in the first couple of years (should you decide to return to work) include joining a babysitting club or grouping together with some other parents in similar circumstances to share an au-pair or nanny. Alternatively, if you wish to remain home with your child after your maternity or paternity leave, you will need to become sufficient at living off of only one income (or have a passive income strategy in place) for the foreseeable future.