09 June 2019

Pre-school costs more than mortgage or rent for working parents

6 min read

Royal London logo
Becky O'Connor

Personal Finance Specialist


Parents with pre-school age children who work full time are paying more for childcare than their own home, new analysis suggests.

The monthly cost of full time nursery care for a child under the age of two in England is £1,065[1] and £1,040 a month for a 2 to 3-year old (see table below).

This compares with £658 a month on a mortgage[2] – the mean monthly repayments for homeowners aged 29 to 34 (the typical age bracket for new parents[3]) or £833 on rent – the mean monthly private rent payment for this age group, according to a Freedom of Information request by Royal London (see notes to editors).

There are approximately 1.2 million parents with pre-school children who are both working full-time and any of those who are paying for full-time childcare and who don’t receive help from grandparents or other family are likely to be paying more in childcare than in mortgage repayments.

 The figures are revealed in the Royal London family financial planning guide, published on June 11 (https://www.royallondon.com/media/good-with-your-money-guides/) to coincide with Early Years Action Week from June 10.*

The guide gives couples who are planning a family an in-depth look at the cost and income challenges they are likely to face when they have children, as well as guidance on how to budget and save for a family.

Even after parents have received government help from the tax-free childcare scheme, which offers 20 per cent towards childcare costs, the cost of full-time nursery care exceeds mean mortgage repayments and is roughly equal to the cost of rent. Costs continue, albeit at a reduced level, when children turn 3 and Government funded hours begin and do not reduce significantly until children start school.


Source: CORAM Family and Childcare survey 2019

Using ONS data on live births[4] and the working patterns of mothers, which shows that about a quarter of mothers work full time before their youngest child goes to school[5], Royal London estimates that without free help from relatives, around 1.2 million parents face having to pay full-time childcare costs at any one time, with nearly two million parents potentially required to pay part-time childcare costs. 

The average joint disposable income for a couple aged 29 to 34 is about £34,000 (ONS[6]).

Young parents earning this amount and paying for full-time childcare and private rent have less than £1,000 a month left over to cover other living costs, such as energy, food, travel and clothing, leaving them potentially exposed to financial shocks.

The guide also reveals a long-term reduction in household income of between 20 and 30 per cent for families with children under 11. This lasts for a decade, as most mothers do not return to full time work until their youngest child is 11.

Royal London has labelled the young family years the “concertina” years, as a result of prolonged higher living costs and reduced income.

Becky O’Connor, personal finance specialist for Royal London, said:

“The financial pressure on people with young families is immense and can last a decade.  Young couples rely on two full-time salaries to meet living costs before children come along.

“Once children arrive, childcare costs have to be paid and one parent often goes down to part-time hours, reducing household income.

"As a result of this ‘concertina’ effect of higher costs and reduced income, there is very little left at the end of a typical month for savings or emergency costs.

“Paying for childcare puts parents at real risk of financial hardship.

“With housing and other living costs being high relative to income, there isn’t the breathing room for one parent to take significant time off work to look after children that there might have been decades ago.

“Grandparents and other relatives often give free help but it is hard for parents to depend on this and hard for grandparents to offer it.

“The Family Financial Planning guide is designed to give couples planning a family a frank and clear view of what’s to come and some guidance on how to save and budget for it effectively.

“It’s everything I wish I’d known about the cost of children before I had them”.

For further information please contact:

Lucy Field, Press Officer

About Royal London:

Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.