Are you prepared for the cost of having a baby?
If you are contemplating having a child, or have recently added a little bundle of joy to your family, then long-term financial considerations are perhaps not at the forefront of your mind. More likely you’re worried about when you’ll next be able to get a full night’s sleep, or if you’ll ever be able to catch up on that TV series everyone at work is talking about.
While it is assumed that bringing up a child will put in a dent in your finances – it is another mouth to feed, after all - research carried out by the Centre of Economic and Business Research (CEBR) has laid bare the immense financial cost associated with having, and subsequently bringing up, a child.
According to the study, the average cost of raising a child to the age of 21 is a staggering £229,251, which equates to approximately 29% of parents’ gross annual income. That’s a 63% increase since 2003, the year the first CEBR study was carried out, meaning the cost of raising a child has risen 50% faster than inflation over the last decade.
Let’s break that figure down:
£46,695 - Cost for first five years of child’s life
£10,916 - Cost per year
£909 - Cost per month
£10,942 - Total spent on clothing
£74,319 - Total spent on education (does not include private school fees)
£67,586 – Total spent on childcare and babysitting
£19,517 – Total spent on food
And, should you have twins, the financial outlay is likely to be far greater. Estimates suggest that the cost of raising twins is at least 50% higher than bringing up a single child, and could set parents back by as much as £1,200 each month.
So, how can a financial adviser help?
- They can help you prepare for big purchases, such as a new home/car
- They can give you an overview of your financial situation, so you have a detailed breakdown of what can be spent each month and what can be saved
- They can assist with choosing the best banking/savings options for your specific circumstance
- They can give guidance that will ensure you don’t fall behind on other payments, such as a mortgage or household bills
- They will be able to provide information about taking out life insurance
- They can offer guidance about writing a will (though a solicitor will likely have more expertise in this particular area)
- They can help select a suitable savings option – such as a child trust fund – that will enable you to set aside savings for your child’s future
- They can help you work out your entitlement to childcare tax credits
Bringing a child into the world is a huge commitment both personally and financially, and the benefits of careful planning coupled with stringent management of your money should not be underestimated.
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