How To Financially Prepare For Starting A Family

Becoming a parent is probably one of the most thrilling times in your life. Sure, you’ll have your fair share of stressful days and life won’t always be rosy, but it’s all worth it to have the joy of caring for your little one and watching them learn and grow. 


And while every family is different, most parents agree that they want to provide the very best life they can for their children. This might mean making financial sacrifices so that you can provide for your family in the long run. 


Raising your child might be expensive, but it doesn’t have to break the bank. A little planning and saving now could make all the difference to your money later down the line.


Let’s have a look at what you can do now to help lessen the financial burden of a growing family.

 

How much does it cost to raise a child?

 

You’ve probably been preparing for the arrival of your bundle of joy since the moment you found out you were expecting or started trying. You might have read all the books and done your research, and you feel ready to take on sleepless nights, tantrums and teething. But are you prepared for the cost of raising a child?


According to the Child Poverty Action Group, in 2019 it cost couples about £151,000 to raise a child up to the age of 18. That’s a 5.5% increase since 2012. While it cost lone parents about £185,000 – a staggering 19% increase since 2012.


It’s a lot of money, and most Brits find that stretching their income doesn’t always cut it. If you’re planning on growing your family, the sooner you get on top of your finances the better.

 

Basic needs of a child


From nappies and baby food to cots and car seats, the expenses may start small, but they quickly add up. In fact, according to the Money Advice Service, you could spend anywhere between £1,600 and £7,200 on your baby in their first year. And that’s excluding childcare. 


Of course, what you spend will depend on what you want to buy new, and what you could pick up second-hand. The NHS have put together a handy list of the essentials you’ll need for your baby’s first few months.


Ask around family and friends to see if anyone has any baby gear they can spare or no longer use to help you cut down on spending. This is particularly important for baby clothes; they grow so quickly that there’s no real need to buy brand-new clothing.

 

Childcare


Some parents, where able, will opt to be stay-at-home parents. It’s a very personal decision and one that only you can make. If you do return to work you should factor childcare expenses into your budget.


When your child is old enough to be enrolled in a nursery it could cost between £127 and £242 per week, depending on whether you choose to go with part-time or full-time enrolment.


You may also need to hire a childminder on a regular basis. According to the Money Advice Service, you could end up paying £113 per week for 25 hours of childminding, or £221 for 50 hours.


You can get help with childcare costs, so do make sure you do your research and find out what you’re entitled to.

 

Nurturing your little one’s talents


Raising children can be incredibly rewarding. As a parent, you have the opportunity to nurture your children’s interests and talents but this can come with quite a big price tag.


As your child grows, they’ll start to develop their own personality. They may be passionate about one thing in particular, like art, sport or music. Or they could have a whole list of talents and interests that they want to explore. As a parent, you want to encourage your children as much as possible to help them reach their full potential.


You might want to get your child swimming lessons or music lessons or get them involved in various sports and activities. These all add up and can cost parents an eye-watering £28,000 during their child’s life. While this is a lot of money, some after-school activities could actually save you money. If your child has lots of after-school activities, then you could avoid having to pay for childcare during those activities.


Baby-proofing your finances


One of the best ways to baby-proof your finances and prepare for your growing family is by getting on top of your finances before they get out of control. Before your bundle of joy arrives, you should try to figure out what kind of essential and non-essential expenses that you’ll have to pay for.


This handy baby costs calculator can help you to work out a rough estimate of how much you might spend in your baby’s first year. It looks at everything from bedding to nursing pillows. When you have an idea of what you need to buy and what you might spend money on, you’ll have a much clearer picture of your future finances.

 

Getting on top of your finances


Whether you’re expecting already or just about to start trying for a baby, now is the perfect time to give your finances a tidy up. Set some time aside so that you can go through all of your spending. You might already be meticulous about your finances, but it won’t hurt to have a thorough sift through them anyway.


When your baby comes you’ll be caught up in the wonderful whirlwind of being a new parent and it’s unlikely you’ll get the same opportunity to go through your finances with a fine-tooth comb.


What’s coming in?


In order to stay on track with your finances, you need to know exactly how much money you have coming in and how much is going out every month.


If you earn a salary, do you get paid weekly or monthly? This could affect your budget and your ability to pay bills on certain dates so make sure you know exactly when your money will be in your account.


Do you have money coming in from any other sources, like a small business, a hobby or another job? Make sure to include everything and anything that’s coming into your account so you can make the most of it. 


Pin down your spending


When getting your finances in order you need to work out what your spending habits are. You might think you already have a good idea of where your money goes each month, but you could be surprised at all the seemingly small expenses that quickly add up over the weeks.


Track your spending for at least a month in a way that works for you. That might be using a budgeting app, a spreadsheet, or just good old-fashioned pen and paper. When you’re tracking your spending, keep the following things in mind:


  • Cost – how much did you spend on the item or service?
  • Item/Service – what was the item or service that you bought?
  • Date – when did you buy the item or service?
  • Recurring expense – is the expense something that will need to be paid regularly, like a bill?
  • Payment method – did you pay with cash, debit card, credit card or another way? This is important to bear in mind when tracking money, as the money may come out of your account at a later date


Decide what’s essential


Once you have a clear idea of what it is that you spend money on each month, you can start cutting back on unnecessary expenses or looking for cheaper alternatives. Decide what’s essential to you and what kind of expenses are needed for your growing family.


You might choose to swap expensive days out for free activities, decide to eat out or order takeaway less often, or you might just shop around more to find cheaper alternatives. It’s completely up to you and depends on what kind of savings you’d like to make. If you do choose to cut out some expenses remember that balance is everything, it’s alright to want to make big savings but that doesn’t mean you have to cut out everything you love. You just need to be clever with your spending.


Set some savings goals


Managing your finances is a lot easier if you have some tangible goals to work towards. When it comes to deciding what kind of goals you’d like to reach, you should think both about the short term and long term. Your family is growing, and it could change in ways you hadn’t expected so it’s best to think ahead and put some goals in place that will help to protect your family financially.


When deciding your goals, remember to be realistic. Choose a clear, single objective for each goal to avoid confusion. Have a clear amount that you want to save and decide how much you can put away each month to reach that goal. If you want to reach a goal by a particular date make sure that it’s doable with your budget.


If you’re not sure where to start with your goals, here are some common ones:


Keeping your emergency fund full 


An emergency fund is just that. You save a set amount of money each month that goes towards it, and you don’t touch the fund except in emergencies. An emergency could be anything from a broken appliance to a sudden job loss. Keeping your emergency fund full at all times means you’ll always have some money to fall back on in unexpected situations.


Securing Life Insurance


With a life insurance policy, you can help to protect your loved ones from potential financial hardship if you were to suddenly pass away. This is a long-term goal that doesn’t have to break the bank. Depending on your age, lifestyle and the cover you’d like, you could get life insurance for just a few pounds a month. While it might not be the first thing that you think of getting when starting a family, it could provide a lot of financial protection for your family


Creating a college fund


This type of goal is one you might consider to help provide opportunities for your child when they’re older. It doesn’t necessarily have to be for college it could be anything, like a gift to help them get on the property ladder or some money for a rainy day.

 

Create a budget


Now that you know what your spending looks like and you have some clear goals, it’s time to set yourself a budget. Budgets are great for lots of reasons, not only do they mean you’re less likely to end up in debt, they also help you to make the most of your money and maximise your savings. This is especially important because every penny will count when your little one comes along.


At this stage, you should already know what your outgoings and incomings are, as well as what are essential expenses for your family. Use this information to draw up a budget that you can use and stick to. If you’re feeling a bit unsure about getting started, our Simple Financial Guide for Young Families covers everything you need to know about creating your budget. 


Some budgeting do’s and don’ts to keep in mind when creating your budget:


  • Do be thorough when looking at your finances. What do you spend? What do you earn? What can you save?
  • Do choose a way to track your budget that works for you
  • Do leave some wiggle room in your budget for emergencies
  • Don’t get disheartened if you lose control of your budget once in a while. It happens. But make sure to get back on track instead of forgetting about your budget completely
  • Don’t be afraid to ask for help. Your friends and family might have second-hand items they could give you that will save you a few pounds


Planning out your budget might feel a bit overwhelming at first, but once you have one in place it will feel like second nature to you. 


Financial mistakes to avoid 


When you decide to start a family, you could become wrapped up in all that new baby excitement. And when you’re distracted it can be easy to let your guard down when it comes to other things, like your finances, and mistakes can happen. It’s important to be aware of common financial traps so that you can avoid them. Let’s have a look at some of the traps new parents might find themselves in...


Relying on credit cards – credit cards can be a great thing when used correctly, but it’s very easy to start using them too often and rack up debt. If you decide to use a credit card, make sure that you have a plan in place for paying off your bill. Don’t buy too many things at once on it, and before you buy anything ask yourself if it’s an essential item that’s worth the months of paying it off. Never use a credit card to pay for rent, utilities or groceries if you can help it.


Choosing any old supplier – when it comes to your bills, you could end up paying too much for what you need if you pick the first supplier you come across. This goes for your mobile, electricity and gas, broadband and TV provider. We get it, it’s not fun to trawl through all the offers out there, but a little time spent comparing deals from different supplies could shave off the pounds on your monthly bills.


Impulse buying – we’re all guilty of picking up something last minute when we’re out and about that we don’t actually need. It’s okay to do this once in a while but getting into the habit of buying something unnecessary every time you visit the shops can wreak havoc with your budget. Try to shop with purpose by bringing a list with you of everything you actually need to get. 


Forgetting about financial protection – in all the new-baby excitement some parents might forget about putting financial protection in place. Without suitable protection, your loved ones could be left in the lurch if the worst were to happen. By thinking ahead and putting a plan in place sooner rather than later, you can relax knowing you’re looking after your family’s future. And you could actually save yourself some money in the long run. 


Looking to the future


Being a parent isn’t an easy job. You’ve always got to be alert and prepare for every scenario. That means trying to prepare emotionally, physically and financially for everything that comes with raising a little one. 


An important part of preparing financially for starting your family is to make sure that you have a financial cushion to offer you some relief if the worst should happen. As well as having a healthy emergency fund, a quick and easy way to help you prepare for every eventuality is by securing life insurance. We can’t predict what’s coming down the line but we can do our best to prepare for it. With lots of options out there, life insurance could offer you a flexible and simple way to safeguard your family’ future. 


As your family changes and grows it’s likely your financial plan will too. Remember that while your budget might work for you now, it could need a refresh down the line to reflect any changes in circumstances or changes within your family. Aim to be flexible with your finances and allow some breathing space so that if you do face any unexpected expenses you won’t be under too much pressure.


Enjoy the journey


Sorting out your finances can be stressful enough without also planning for a new addition to the family, but it’s important to take a step back and enjoy the process too. Growing your family is a really exciting time and if you put the effort in now to plan financially you could have some peace of mind knowing you’ll be ready for your new arrival and can focus on what really matters.


When it comes to sorting out financial protection, we can take some of the stress off by helping you to find the right protection for your loved ones. With Choozi, you can easily compare policies from the UK’s leading insurers in one place. So finding cover that offers you the protection you want is simple.


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