Financial planning for your family
There’s no denying it, children don’t come cheap, but by planning ahead and managing your cash flow, you can take some of the stress out of raising a family.
The cost of raising a child (excluding housing, childcare and council tax) from birth to 18 is £71,611 for a couple, and £97,862 for a single parent or guardian, according to the Child Poverty Action Group. https://cpag.org.uk/sites/default/files/files/policypost/CostofaChild2020_web.pdf
When you consider these kinds of figures it’s obvious that planning ahead for your family’s future is the sensible option.
Planning for maternity leave
An additional cost to consider is maternity leave. Depending on your employment status, you may be eligible for Statutory Maternity Pay (which is paid by the employer and claimed back from the government). If you are not eligible, you may instead be able to apply for Maternity Allowance. Whatever you decide, you should be aware that you will receive less than if you were working – at least for some of the time. Plan ahead by putting some money aside, so that the household has the same amount coming in each month (look at putting the money into an easy-access savings account, such as a Cash ISA for example) – or focus on the household budget to find ways to save money while you are at home caring for your new arrival. It’s important to remember to keep paying into products such as your pension, so that you are not at a financial disadvantage later down the line.
To avoid strain on your relationship, make sure you make mutually agreed decisions about who will be the main carer, how your money will be divided and how you will pay for bills and baby things, so that it is fair for everyone and there is no resentment on either side.
Cost of childcare
One of the major expenses in the early years, which isn’t even included in the figure above – is childcare. Whether you choose a nursery, childminder, nanny or au pair, the cost of childcare can rise into several hundred pounds each month. As parents you will need to consider whether you earn enough to make childcare worthwhile, or whether the main carer wishes to continue working in order to ensure they do not lose progress within their career.
There are ways to make childcare more cost effective – you could nanny share with another family, for instance – and remember that the Government now offers a tax free childcare scheme (which replaced the old childcare vouchers scheme). https://www.gov.uk/tax-free-childcare
You can get up to £500 every 3 months (up to £2,000 a year) for each of your children to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year). There are also 15 free hours of childcare available weekly for 3 and 4 year-olds. https://www.gov.uk/help-with-childcare-costs/free-childcare-and-education-for-2-to-4-year-olds
Paying for school-age children
Once children start school, you may still have to pay for wraparound childcare if you work full time. That means paying for breakfast and afterschool clubs or local childcare. However, hopefully the days of paying out for full time childcare are behind you – don’t forget to factor in care for the school holidays though. Now, you will need to plan ahead for buying school uniforms and school shoes, especially if your child’s school has a strict uniform policy that demands blazers and sweaters with school logos, rather than generic items available from supermarkets and department stores. As they get older, there will be school trips to pay for too.
Of course, if you are planning on private education, this should be factored into your financial planning and cash flow forecasting, as you will be paying out several thousands of pounds each term.
Planning for special occasions
As children get older, they also start to cost more when it comes to birthdays and Christmas. When they are small, if money is tight, looking for second-hand bargains in charity shops and online selling sites is a great way to save money. Small people neither know nor care if something has been pre-loved, and you can usually find things in great condition that other people’s little ones have simply outgrown.
As they grow older, their demands may become more specific and expensive – bikes, games consoles and so on don’t come cheap. Nor do children’s birthday parties – with go karting, trampoline parks, pamper parties and laser tag parties for big groups popular within the 6 to 12 age group. So, planning ahead financially for special occasions will take the stress away and allow you to enjoy the occasion without worrying about how you are going to pay for it!
There are also all kinds of clubs and extracurricular activities to pay for. There’s something for everyone nowadays, whether it’s football training or dance classes, circus skills, musical theatre class or coding sessions. Budgeting for these extra activities will mean you can let your kids learn new skills, make friends out of school, and gain confidence and independence.
Looking ahead to further education
As they head into secondary school, the school trips will become more expensive – thankfully schools usually allow payment in instalments, and you can often find out what trips happen in what year, so that you can plan ahead once more. There will be books to pay for (it’s worth looking on Facebook parents pages for second hand uniform and revision books – often in mint condition and half the ‘as new’ price!).
And just when you think your child has reached adulthood, there will be more costs – university fees and living costs, driving lessons, and more. These are big commitments that may be funded by other means. Investing in financial products that will mature in time to pay for a car for the new driver, education fees and so on makes good financial sense.
Planning, planning, planning
The key to managing the finances for your family is in planning ahead. We may not always know how much we will earn, or indeed what our earning potential will be, but by looking at cashflow, and investing in the right products for the years ahead, you can make life easier and more comfortable for everyone.
Being a parent never ends. Nowadays with the high cost of property ownership, many parents find themselves using equity from their home to give their adult children a helping hand onto the property ladder. You can find more information about this at https://www.jfinance.co.uk/how-covid-19-has-changed-equity-release-lifetime-mortgages.
Planning the financial future for your family is something that should not be taken lightly. Getting advice from experienced professionals is definitely worth considering.
If you would like to discuss cashflow forecasting, financial planning, ISAs or any other financial matter, J Finance, which is a member of the Equity Release Council, will be happy to help. Please contact us without obligation.
Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. They serve clients across England and Wales. If you would like to discuss your mortgage or protection, please contact them on 01635 521 300 or email [email protected] You can find out more about J Finance on their website at www.jfinance.co.uk.
EQUITY RELEASE CAN AFFECT THE FUTURE INHERITANCE OF YOUR BENEFICIARIES, NOT TO MENTION YOUR OWN FINANCES. THEREFORE, IT IS IMPORTANT THAT BEST ADVICE IS SOUGHT DUE TO THE COMPLEXITY AND VARIATIONS BETWEEN ALL EQUITY RELEASE SCHEMES.
J Finance Ltd was founded in 2001 by Jonathan Bright and is a financial services company located in Newbury, Berkshire – though we serve the whole of the UK. We are a team of financial advisers and mortgage consultants who are focused on giving you, our clients, professional advice along with outstanding customer service. We do this by developing long term relationships and offering an excellent, personal service. We’ll take the time to discuss your current situation and your plans for the future, and we’ll use this information to help identify the best financial products for you.