Top financial tips for planning and raising a family

4 min read


There are lots of things to think about when planning for and bringing up children, and your finances are a big part of this. Read our top saving and budgeting tips for raising a family

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Children are an expensive business. If you include childcare, the rough cost of raising one child to age 18 is around £8,000 a year (about £660 a month) according to the Child Poverty Action Group.

It’s not an easy amount to swallow for a couple, or single parent, with fairly standard household disposable income, and most families will need to save and budget a bit more than they used to before they had children. Here are some tips to keep your finances in check when raising a family.

For the baby years

Work out how much extra cash you’ll need

If one or both of you is taking parental leave, your household income is likely to be a lot lower than usual for that period. Check your company’s maternity and paternity pay policies and then work out how much your net (after tax) household income will be for that first year.

The difference between this and the amount of disposable income you currently earn annually gives you a rough idea of how short of cash you’ll be for the first year of your baby’s life. Try to save an amount equal to this shortfall for the first year before your baby is born.

Check your holiday allowance

If you want to extend the period for which you receive pay by as much as possible, consider adding any holiday allowance you have from your employer for the year to the beginning or end of your leave period.

Don’t buy something until you know you need it

It’s easy to get sucked into the marketing of baby wear, toys and furniture, but most of it’s unnecessary. Some things you do need, like a buggy, nappies, baby grows and somewhere for your baby to sleep safely, however there are plenty of things you might be tempted by which are avoidable.

Buy second hand

The quality of second-hand baby clothes and toys is usually good, because they’ve probably had little wear. Ebay, Freegle, Freecycle and Gumtree are great places to find hardly used baby things for a fraction of the full price, as are National Childbirth Trust (NCT) sales and local charity shops. Toy libraries are a great way to avoid the cost of new toys too.

Orange school hat

For the toddler years

Do your research when it comes to childcare

If you need childcare, find out as soon as you can how much local providers charge. The cost can have a bearing on whether you choose to return to work part-time or full-time, and also on other financial plans too.

Make use of financial support

There is help for childcare costs, mainly in the form of Tax-Free Childcare, where the Government contributes 25% towards the cost of your childcare if you work (there are other conditions, which you can check in our article). For other forms of support for childcare costs, visit GOV.UK.

Remember childcare costs can affect borrowing potential

If you’re considering buying a house, be aware that lenders will take childcare costs into account when working out what size of loan you can afford. The early years are the most expensive, so will have the most impact on your borrowing potential.

Get help from willing relatives

Your parents, or other family members, might be able and willing to offer some free help towards childcare for you to reduce your bills.

For future goals

Have savings pots for Christmas and holidays

The hardest things to manage when budgets are squeezed are one-off large expenses, such as Christmas and holidays. Every year, work out what you can afford to put aside each month towards each of these short-term goals and set up a savings account for them.

Try to start saving for your child as early as possible

The earlier you save, the more chance that money has to grow. You and your relatives can save into Junior ISAs, which are transferred into your child’s name when he or she reaches 18. Or you can use your own ISA allowance to save for your children (up to £20,000 a year tax-free in the 2020/21 tax year).

Find out more

Want to plan your finances before you start a family? Read our Family Financial Planning Guide for more information.

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