How do I prepare financially for a new baby?
Are you planning a baby this year? Or do you already have one on the way? Exciting times then. You may have lots on your mind already, but it’s also important to think about how your family’s finances may change, as well as your future family.
Your income and outgoings will change
Most employed parents can take maternity leave contractually: the government does support Mums taking time to look after their children, Dads too now. After the first six weeks of maternity leave though, the amount of pay you receive from the government is capped at £138.18. With that in mind, it makes sense to get your finances in order as soon as you can.
Getting your debts paid off should be a priority. The fewer bills you have while on a reduced income, the better. It’s also a good idea to save if you can. Unexpected bills can arrive at any time (usually the worst time), and having something to fall back on could be a lifesaver.
But when it comes to buying things for your new baby – take a deep breath. This child will be amazing, and so precious to you, but do you really need ‘bling’ in baby’s bedroom? New mums will have plenty advice, among which will be the things they wish they hadn’t bought. Stick to the essentials – and do stock up on nappies. If there’s anything else you desperately need you can buy it once the baby is here. Check out our top 5 essentials for your new baby.
Find out what you’re entitled to
In the UK, a new parent can claim child benefit once the baby is born, but did you know you can also claim for free prescriptions and dental treatment while you’re pregnant? And for 12 months after your child is born, too? You may also be able to claim some income-related benefits, depending on your working circumstances and how long you’ve been employed.
If you’re self employed you might think paid leave is a luxury you’re not entitled to. But at the moment, you can claim Maternity Allowance for up to 39 weeks, which works in the same way as Statutory Maternity Pay. From April 2015 the rules around maternity and paternity leave are changing, making it more flexible and giving Dads a chance to spend more time with their new baby. More details can be found at the government’s Money Advice Service.
Plan for your baby’s financial future
Now you’re going to be a family not just a couple, it’s time to think about the future. Many people leave writing a will until it’s too late. A Solicitor will charge around £200-£400 a couple for a straightforward will, a will writing service could charge from around £75 each. A DIY will kit could be a lot cheaper, but you might find it doesn’t do the job properly. Best to be on the safe side.
Do look into life insurance. It doesn’t have to cost a fortune. No one likes to think about something awful happening, but you’d want your family to be looked after if it did. Life insurance could pay a lump to help your partner with living costs and your child’s future needs.
How much money would you need?
Everyone’s ideas about how much money’s needed are different: we discovered some detailed costs of raising young children, with our research at the end of 2014. Parents are spending an average of £6,990 a year on their under-fives (which puts the importance of having life insurance in perspective).