With baby Sussex due any day what are the financial implications of becoming a parent?
As the nation eagerly awaits the birth of Prince Harry and Meghan’s first child, there have been reports that the couple will be breaking with Royal tradition and won’t pose for press photos within hours of the birth – and even that they could soon be moving to Africa.
This could be a blessing for the new Prince or Princess. They will have less of a media spotlight on them than their royal cousins, Prince George, Princess Charlotte and Prince Louis, which would mean they could lead a much more ‘normal’ life. It may also be a little bit cheaper for the UK tax payer too who will be footing the bill for the new baby.
For most people who don’t have the luxury of being royal, bringing up a child is a costly business.
A report from Child Poverty Action Group[i] reveals that the basic cost of raising a child until the age of 18 is £75,436 for a couple and £102,627 for a lone-parent family. Add childcare into the mix and these costs spiral to £155,100 and £187,100 respectively.
And for those planning to educate their child privately, the expenses run even higher. A report last year from Lloyds Private Banking[ii] found that the cost of private education in Britain has risen by 49 per cent in the past ten years.
It found that the average annual fee for day pupils has increased from £9,579 in 2008 to £14,289 in 2018. This is 19 per cent above the rate of inflation and equivalent to more than a third of the average UK annual gross full-time earnings of £36,451.
Meanwhile, even parents who plan to rely on the state school system may hope to at least help their child get a foot on the housing ladder in the future. If not, they may never leave home!
For many millennials this is the only route to owning their own home and this is unlikely to change any time soon. A report by Social Mobility Commission in [iii]2017 found that 34% of first-time buyers had help from their families, an all-time high.
So if you aren’t Harry and Meghan, who’ve just moved into a new home in Windsor that was a gift from family (in this case HM The Queen!) the arrival of a new baby is going to be very costly indeed, not to mention a huge lifestyle change.
A new child brings about new responsibilities, and for most people money is a major concern. Research from MoneySuperMarket[iv] found that more than a third (37%) of expectant parents are worried about how they will afford the cost of their new addition. And, of those parents, a worrying 44% say the stress has caused them to row with their partner.
What should people be doing then to make things a bit easier for their new arrival?
Our advice for anyone considering having a baby is to sit down and plan. Take a long hard look at your finances; look at your budget now and what your projected new expenses will be.
Consider what savings you have and how you can boost them. Look at your salaries and how these may change in the future, especially if one parent decides to give up work once the baby arrives.
Do you pay enough into your pension pot? Will it be enough to support you in retirement and have some spare to help your children out with university costs or their first home?
You may not have had to do this before, but now you’re thinking about having a baby preparing a financial spreadsheet with all this information is essential.
Not only will you have an accurate picture of your finances, but you’ll be able to make informed decisions to improve your financial situation.
Becoming a new parent like Harry and Meghan is one of life’s most exciting milestones; but it can also be one of the most daunting if you are not prepared.
So as well as excitedly painting the nursery, buying the pram and thinking about names…. remember to take some time to plan your finances too…
Stuart Bartholomew, Associate Director, Punter Southall Focus