Are you planning to have a child in the future and wondering how to prepare financially? Reports show that in the UK, raising a child from birth to age 18 in 2023 costs £223,256. This figure includes housing and childcare costs – it also showcases a rise of 10% since 2022.
It’s clear that raising a child can have a strong impact on a person or couple’s finances, which is why it’s so important to do financial planning before trying for a baby or if you’re already expecting. But don’t panic, there are a few simple steps you can take to help prepare.
Financial Preparation Before Parenthood
First and foremost, if you’re in a couple, you should openly discuss the financial impact that a child could have. By doing this, you can identify areas that might require more attention, allowing you to set financial goals to work towards. You can use online calculators to work out how much it could cost to raise a baby in their first year and other means of financial planning as a starting point.
When it comes to taking action, you might decide to prioritise boosting your credit score to prepare for any significant financial changes, such as applying for a mortgage. Refreshing your budget and identifying how much you can put aside where possible can also help you prepare for what’s ahead.
Investing in Your Child’s Future
A savings account is a great way to help you build a pot that will support your child’s upbringing. It might be used for their education for example, or simply to give them more financial security as they grow older. Either way, parents who are able to save money in this way will be able to make a real difference to their child’s future.
The sooner you start saving, the more interest you’ll gain, meaning you’ll receive a greater return on the money you put in. Every penny counts – even if you routinely change the amount you invest to accommodate your own financial circumstances.
Budgeting for Ongoing Childcare Costs
It’s important to prepare for and accommodate ongoing costs. Childcare fees take up a significant amount of any parent’s budget, so anything that can alleviate this can be extremely helpful. Nappies, formula and other items need to be rebought frequently too. Other costs include clothing and footwear, as little ones grow out of items extremely quickly. Borrowing or inheriting clothes from friends and family can make a huge difference.
By identifying these costs and tracking your spending, you can work towards more cost-effective solutions. You should also anticipate unforeseen costs, which might include school trips and other expenses required for their education, as well as baby classes or hobbies and clubs as they grow older.
Stay Out of Debt
Whilst this might sound obvious, it’s easier said than done. Unexpected costs can take you by surprise, with many parents taking out loans to cover them. Healthcare is often an unexpected cost that pushes many families into debt, but more recently, simple bills for food, energy and rent are pushing more and more people into the danger zone. If you do find yourself in debt, you can find help from a bankruptcy lawyer here.
This is especially useful if you’re facing foreclosure on your home, or you’re being harassed by debt collectors. Many lawyers are happy to give advice based on their years of legal expertise, so don’t suffer in silence if you’re struggling.