Starting a family: Getting finances ready along with the nursery
Monday, 02 November 2009 01:08
There are certain life-stages that force us to re-evaluate our lives, including our financial affairs, and one of the most important is having children.
Sarah Routledge looks into finance during pregnancy.
The important thing is to make your life as stress-free as possible - so sort out your finances now, experts recommend.
Lisanne Mealing, managing director of independent financial advisers MDM Associates, says: "I would hope that during pregnancy you could put your feet up and forget about the finances!
"Well, that's the place you should aim to be, but in reality it doesn't quite work that way."
Budgeting
"If you have a partner and your plan is to take a long maternity break, good practice is to try to live on one salary during the pregnancy, squirreling away the other income to increase reserves for when one of you is not working," says Ms Mealing.
"Spreading the cost of all bills and lessening the need for large capital payments is also sensible. Pay back those credit cards and personal loans if you have them - you want life to be as stress-free as possible."
Anna Sofat, founder of wealth management service for women Addidi, adds: "Review things which you might not need - are you really going to spend much time watching Sky? - you can get a rebate on season tickets."
Sitting down and working out what your income and outgoings will be - including the new costs of childcare, or a potential drop in salary if you or your partner plans to go part time - will save worrying later.
"You might think it's going to be lots of expenses going up - but quite a few will be going down too, as simple pleasures like going for a walk may seem preferable to nights out, and costs associated with work will also fall," says Kate Moore, editor of Moneyformums.co.uk.
Ms Moore also suggests that women who are used to paying their own way should also sit down with their partner and work out how things are going to change - as one partner may become more financially dependent on the other.
Benefits
"There is a huge amount of benefits available from both the state and employers," says Ms Moore.
Many new parents who have never had to claim any benefits from the state may not realise what they are entitled to, she says.
But everyone, regardless of earnings, gets child benefit, while a health in pregnancy grant of £190 is also available.
Child benefit is £17.45 per week for their oldest child and £11.70 for other children, with lone parents qualifying for more, and you can get a form from www.hmrc.gov.uk/childbenefit.
New mums also receive free dental checks ups and dental treatment as well as free prescriptions throughout their pregnancy and until their baby is a year old.
Ms Sofat advises: "Make sure you know what you are entitled, like child benefit, working tax credits (if you let the Inland Revenue know of your changed circumstances, they can calculate your entitlement to this), maternity pay etc - most women are now entitled to a year of maternity pay but it's not at full pay!"
If your family income is at a low level, you may also be entitled to child tax credit, working tax credit, council tax benefit, housing benefit and a maternity grant to help you buy essential baby equipment.
Many employers also offer extra benefits during pregnancy, such as longer paid maternity leave.
Working parents who need childcare should also ask their employer about childcare vouchers, which can cut the cost of care fees.
Insurance
It's not something that new parents want to think about, but how would your family cope if the worst happened?
"What we're finding is, when planning for a baby, parents go planning mad - they plan a big nursery, they want everything ready in time - but life insurance doesn't get a look in because it's not something they want to think about," says Louise Colley, head of protection at Aviva.
Life insurance does not have to expensive or complicated, Ms Colley says. Parents simply have to think about what they would in the event of one partner dying - especially if there is one main breadwinner.
Many people already have life insurance from when they bought their first house and although this is a good start, it may not be enough to cover all the costs, such as day-to-day bills and nursery fees.
It isn't a nice thought, but parents have to think about their responsibility to their child, and this includes planning for the worst, says Ms Colley.
"What's most important is looking after your child if something happens."
Aviva offers £10,000 worth of free life cover for new parents, to run up to their child's first birthday.
Although Aviva says this is not enough cover, the insurer says many new parents do not have the time in the first few months to arrange a policy and the offer is both a helping hand and a reminder to get protection sorted out.
Make sure you check your entitlements at work first, however, as many employers offer life insurance policies as a benefit - will this carry on while you are on maternity leave?
For the same reason life insurance is important, you should also make or update a will to ensure your family is protected.
Savings
"Think about setting up a bank account for your child," Ms Moore suggests.
"It could be somewhere to put child benefit payments and a way to encourage your child to save.
"You should also consider a long-term savings account for them that will help pay for things like university when they are older."
The government's Child Trust Fund (CTF) scheme is one way to save, and has the advantage of coming with a £250 voucher to get the investment off to a good start, with a further £250 added when the child reaches seven.
Saving into the account is tax free and up to £1,200 can be added to the pot each year. Any money added cannot be taken out until the child is 18, so this could be a good way of funding their first car or further education costs.
But the money they receive will be theirs, so your plans for it may not be the same as your teenager's.
Awaiting nappies
There is no doubt having a baby will turn your life - and your finances - upside down. But there is help available through benefits, while you can also help yourself by making a budget and taking out a protection policy to insure against the worst.
Don't be afraid to talk money with those closest to you - and if you are concerned you might struggle with finance, make an appointment with Citizens Advice who will be able to help you resolve any problems.
Hard work early in putting all your finances in order and mean the pregnancy can be a time to chill out, before the nappies arrive.
Comments
Newsletter sign up