Baby and You

Budgeting for baby

Nick Hill from the Money and Pensions Service offers some practical tips on how expectant parents can financially prepare for their new arrival

Sleepless nights go with the territory when you’re a new parent. But don’t let money worries keep you awake. At this stage of your life, extra stress and worry is the last thing you or your baby need. The Money and Pensions Service can help you get ready and financially prepared.

Managing money has become increasingly difficult for many people nowadays – we live in tougher economic times, the cost of living keeps rising and job security has faded for many people.

Money worries can be worse for expectant parents, especially as the cost of having a baby can be so steep. Parents now pay an average of £127 per week, or over £6,600 per year, for a part-time nursery place, according to new research from Coram Family and Childcare. However, it’s worth noting that these costs vary substantially depending on where you live in the UK.

Expecting a baby is hugely exciting but can also be pretty daunting when it comes to the money aspect. Your small bundle of joy will make a big difference to your household spending.

A new arrival nearly always means a drop in disposable income for most people, so the trick is to start planning ahead, and take control as soon as you can – work out how much it’s all going to cost and how much you can afford.

ON A BUDGET

It’s important to work out your budget as soon as possible, ideally as soon as you become pregnant. It’s never too early to start saving! Any extra you can set aside before the baby is born could help you build up a reserve fund and help you to get used to living on a little less. Consider how the baby will affect your income and
make time to think about these three important factors:

  • If you’re employed, think about how stopping/cutting back your hours will reduce your earnings.
  • If this is your first baby, consider how much you’ll need to budget for essential equipment you’ll need from day one, such as a buggy, a car seat, cot, clothes, bedding and toys; and of course nappies, baby formula (if you are not breastfeeding) and baby food. Search for ‘baby costs calculator’ to find the tool we
    created along with the NHS on the Money Advice Service website.
  • If you have a partner, have a conversation about how you will split the financial responsibilities while you are on maternity leave – for example, who will pay for what.

FINANCIAL HELP

It is always worth checking which benefits will be available to you to help towards the costs of having a baby. This could include child benefit and maternity allowances. You will need a MAT B1 Certificate or a letter from your doctor or midwife in order to claim Statutory Maternity pay from your employer or Maternity Allowance from the government. You should receive your Certificate from your midwife or doctor after your 20-week scan.

If you’re getting other benefits you might be eligible for a Sure Start Maternity Grant towards the cost of your first baby, worth £500. You can also find out if you qualify for food vouchers and vitamins from Healthy Start. It’s also good to know that in England, prescriptions are free while pregnant and for a year after the birth (prescriptions are free for everyone in Wales, Scotland and Northern Ireland anyway).

You may also be able to claim Universal Credit. It’s a benefit payment for people in or out of work. It replaces Child Tax Credit Housing Benefit, Income Support, Working Tax Credit, Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance. For your first child you will get £231.67 and the same again for a second child. You will not be paid the child element of Universal Credit for a third or subsequent child born unless you qualify for an exception to the Two Child Limit. If your child has additional needs further support may be available. Use the benefits calculators on the GOV.UK website to find out if you can qualify and get a rough idea of how much you could be entitled to.

The cost of childcare can eat up a large chunk of the family budget. Help with childcare costs is available from the government and employers. Working families may get £2,000 per child each year towards childcare with Tax-Free Childcare.

Tax-Free Childcare is a government scheme to help working parents with the cost of childcare in England, Scotland, Wales and Northern Ireland. It can pay for things like registered childminders, nurseries, playschemes and nannies. You’ll need to earn at least £131 per week on average each, and have no more than £100,000 adjusted net income per year per parent. You can’t use Tax-Free childcare at the same time as Universal Credit or Tax Credits. If you have a disability eligibility you may not have to work to be eligible. Check what help you can get with the childcare calculator.

PLANNING FOR YOUR AND BABY’S FUTURE

Baby proofing your home is one way you can protect your baby. You can also take steps to help secure their future, such as ensuring you have appropriate insurance, writing a will and clearing your debts. First, check what protection insurance you have such as life insurance or critical illness cover. Maybe you get life insurance through work. Doing your research, and shopping around will help you find something that is right for you. Use this time also to get any debts under control and build up some savings if you can. Use the Money Advice Service debt locator tool at https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator to find free debt advice in your area.

Your statutory maternity leave will end within 12 months after you start using it. If you want to return to work earlier or later than intended, you must give your employer eight weeks’ notice in most cases.

You may consider sharing your leave with your partner, making use of Shared Parental Leave and Pay. This allows you to share up to 50 weeks’ parental leave and 37 weeks’ pay with your partner. If you’re eligible, you can even take the leave in up to three separate blocks instead of taking it all in one go.

ON THE REGISTER

When your baby is born, you must register the birth within 21 days in Scotland and 42 days in the rest of the UK. Try and do this at your local registration office as you’re going to have your hands full in these first few weeks. It’s worth putting in your claim for state help quickly to help your cash flow and to make sure you
don’t lose any, as most state benefit claims can only be backdated three months.

As soon as you have registered your baby’s birth, put in your claim for Child Benefit. You’ll find a claim form in the Bounty Pack you get after the birth, or you can request one from GOV.UK.

Child Benefit can be a big boost to your family budget. If you’ve just had a baby make sure you get your claim in before your baby is three months old. And even if you think you won’t be entitled to anything because either you or your partner earns over the limit, you should still claim – otherwise, you’ll miss out on a
number of other entitlements:

  • National Insurance credits that protect your entitlement to State Pension
  • Other benefits such as Guardian’s Allowance
  • Your child being automatically issued with a National Insurance number before their 16th birthday

KEY FACTS ABOUT CHILD BENEFIT:

  • If either you or your partner earns between £50,000 and £60,000 a year, you will have to pay a portion of your Child Benefit back in extra Income Tax.
  • If you or your partner earns over £60,000 you will have to repay all of your Child Benefit in the form of extra Income Tax. Read the guide Child Benefit for people earning £50,000+ for more information.

Further information is available from the Money Advice Service website. The ‘Having a Baby’ section at https://www.moneyadviceservice.org.uk/en/categories/having-a-baby provides detailed guidance about what to do before your baby arrives. There are lots of free calculators to help you plan, budget and save cash to help with your changing circumstances.

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