Starting a family is a huge commitment. The latest estimates are that it costs an eye-watering average of £222,458 to raise a child to the age of 21. There’s more to raising a family than looking after money matters of course, but getting the family finances on track is always a good start.
The added costs of raising children can come as a shock to many new parents. Friends and family will often help out with the equipment and accessories needed when you first bring a new-born home, but even if they do, there are day to day expenses to cover. What you’re spending your money on might vary depending on the child’s age – from nappies and baby grows through to school uniforms and mobile phone contracts – but the one constant is that children are expensive.
It can help to set a household budget. Add up all income and expenditures and be brutally honest about it. If the household income is reduced due to maternity leave or one of you leaving work, this must be taken into account.
Look through current accounts to find the best one for you, whether this means one with a better overdraft facility or one that pays a small amount of interest when you are in credit, is down to your personal situation.
If the household budget allows, you might want to start saving. This could be ‘rainy day’ money, a general pot for the future or you might want to earmark it for a specific use, such as funds for university, a car or a deposit for a house.
Whatever the purpose, you’ll generally want to look beyond your current account for long-term savings. Savings accounts offer better rates of interest, while instant access accounts allow you to take money out if you need to, but offer a lower rate. Notice accounts require you to give a certain amount of notice before authorising particular transactions and ISAs allow you to earn interest tax-free.
It’s not a pleasant thing to dwell on, but you also have a responsibility to think about what would happen to your family if you weren’t there. There are numerous life insurance policies available. ‘Term life’ insurance policies only pay out if you die within the time period set out. After that, you’ll need to renew or purchase a new policy.
‘Whole of life’ insurance policies pay out whenever you die, as long as you continue to meet the premiums. These are typically more expensive, as the insurers are guaranteed to pay out at some point. The size of the payout you require will depend on your family’s needs, but you have to balance the fact that larger payouts require larger premiums and will affect your current budget.