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How to prepare your finances for having a family

15th March 2019

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For any soon-to-be parents, it’s an exciting chapter in your life. It’s also an opportunity to have a rethink of your finances, and we’ve got 8 steps to get you started.


We’re not claiming that a child will cost you millions of pounds, as some scary headlines insist, or that you should be worried about the future – we’re saying that now is a good time to tie up all those financial niggles you may have ignored or not thought about before. Anything you can do to smooth the path ahead today will be a welcome move a few years down the line.

“The bad press would put the best of people off,” advises Kerry Nelson, managing director and owner of Nexus Independent Financial Advisers. “You just have to take it in your stride and have a plan that works for you.”

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Create a budget

The first step, financial advisers say, is to take a long look at what is coming into and going out of your bank account and create a budget, whether that’s on a weekly, monthly or annual basis. (Even better, all three.) Kerry advises making sure you have a good deal on your utility bills, and getting rid of any unnecessary subscriptions.

“A good budget means there are no surprises. If you’ve got young children, you can’t afford surprises,” says Kerry. “It’s about making sure your money works really hard for you and you can get the best deals possible so you have more money to spend on your children.”

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Hold off on the ‘100 things you need to buy’ lists

There’s no need to go crazy with buying new stuff.

“Only buy things as and when you need them,” says Lena Patel, director of ISJ Independent Financial Planning. “Obviously you need a car seat and a cot for the baby to sleep in. There’s a lot of pressure with these ‘100 things you need to buy’ lists. But a lot of people do baby showers and get gifts that way.”

Lena Patel smiles in business wear
Lena Patel, director of ISJ Independent Financial Planning
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Start saving

Most advisers encourage people to have at least three to six months’ worth of expenditure in cash savings. This golden rule applies whether you are planning to have a family or not - beyond the budget, it’s all about saving while you can. The earlier you start the better, says Philippa Gee, founder and managing director of Philippa Gee Wealth Management.

“For example, during the pregnancy, if you find that you are not going out as much, you could save that money towards the costs of a baby,” she says.

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Find out about the state benefits you’ll be entitled to

Now is a good time to read up on what state benefits you will be entitled to. All parents earning up to a combined £50,000 are entitled to child benefit. For example, the current benefit is £20.70 a week for the first child and £13.70 a week for each additional child.

“I saved my child benefit for my first child and now he has a savings fund for when he turns 21,” says Lena. “His fund is in my name but it’s creating good financial habits that you need when you’ve got children.”

Single and low earning parents might be eligible for other benefits, adds Lena, including free childcare between the ages of two and four, and working tax credits, if you have one or more children and work at least 16 hours a week as an individual or at least 24 hours as a couple. (Many benefits have now been rolled into the Universal Credit system.) Gov.uk has a good list of the potential benefits.

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Account for maternity and paternity leave

If you are a couple, which parent is going to take time off and for how long? Or perhaps both of you will take time off – shared parental leave now gives parents more flexibility about how to split the childcare. Statutory maternity pay or shared parental leave is paid for up to 39 weeks, starting off with 90% of your average weekly earnings. If you’re not sharing the time off, fathers may not get both leave from work (usually one to two weeks) and pay. It’s worth checking well in advance what your rights are and what your employer will offer you on top.

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Philippa smiles in business wear
Philippa Gee, founder and managing director of Philippa Gee Wealth Management

Make sure you have the right protections in place

If the worst happens, it’s good to know your family is protected. At work, you may be entitled to a ‘death in service benefit’, a tax-free lump sum paid out on your death, which is usually between two and four times your salary. And if you are part of a workplace pension, make sure you fill in your ‘expression of wish’ form to nominate your beneficiary – who would benefit from your pension pot if you died.

Financial advisers also encourage parents to obtain a will and the right kind of insurance, including income protection, life insurance and critical illness cover. (We’ll be publishing a separate blog on life insurance later). They also recommend ensuring you have a good rate on your mortgage.

The right combination of these products can help ensure that, in the worst case scenario, you don’t leave your family with debt.

“A will is a definite. You need to be able to say who you want to look after your child if you’re not there,” says Philippa. “Life insurance is also important if you have a family or debts, to cover those significant costs.”

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Look into Junior ISAs and savings accounts

A parent or guardian may well also want to consider opening up a Junior ISA, a modern equivalent to the previous Child Trust Fund, to build up savings for their child. The JISA allows you to save a maximum of £4,260 for the current tax year, with tax-free interest. Any child can have a cash and/or a stocks and shares JISA, and the money will become theirs to spend as they wish when they turn 18.

For shorter term saving, banks offer deals for children’s savings accounts, with as high an interest rate as 4.5% AER. It’s best to shop around as every deal has different terms, for example, how much you have to deposit each month, the interest rate, how often you can make withdrawals, the age limit for the child and whether grandparents can manage the money on the child’s behalf. Moneysavingexpert has compiled a useful guide of the best savings accounts for children.

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Keep learning and don’t put too much pressure on yourself

As your family grows, parents will often find themselves following the same steps as before – although with less childcare benefit and a perhaps more stretched budget. At least, the next time, you will have accrued plenty of hand-me-downs and parental wisdom.

But it’s not all about money. Philippa reassures parents that it’s impossible to get everything right the first time – or even the second or third time – no matter how good your budget.

“The level in your bank account does not determine your level of good parenting,” says Philippa. “Money can help; it can buy options and alleviate certain stresses, but it is not everything by any stretch of the imagination. Being a good parent is down to you, not your account balance.”

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