Emotions vs. economics and the costs of raising children
For good or bad, Money Means operate in the financial sector. And for good or bad, the financial world has a gift for stripping anything down to pure pounds and pence.
We’ll even do it with your children.
We’re not alone in that, though. Certainly not. The media will regularly and sensationally cast children as big stressy projects and financial black holes …
And that’s a shame. Because raising a beautiful little human with wide eyes and a joyful heart … you just can’t put a price on that.
Can you?
Yes.
Having a child is pricy. In 2023 it’s an average of £11,250 per child per year pricy, according to The Times.
The costs of raising children start big and don’t really let up. A report by the Family and Childcare Trust found that full-time childcare in England for under-twos costs an average of £240 per week or £12,000 per year. In London you can add another 20%.
Dental and healthcare are constants; clothes, shoes, food and entertainment …
Going to school means shelling out for uniforms, sports kit, books and supplies. Then there’s holidays, holiday camps and holiday childcare. Soon we graduate to school trips, private tuition, extra-curriculars …
And speaking of graduate, the average uni undergrad will pay £9,250 per year in domestic tuition fees. Potentially more if they want to study abroad.
Birth business
The UK birth rate has been steadily declining since the 1960s. It has crashed by 16% in the last decade and even more dramatically in the last two years.
In the 2022 LifeSearch Health, Wealth & Happiness Report, 36% of UK under 35s said they’re delaying having children specifically because of the cost-of-living crisis. And this is typical during uncertain times: the aftermath of the last four US recessions were all characterised by a years-long decline in fertility rates.
But planning a child, really, is not unlike planning any other big moves. Certainly from a financial point of view.
Experts will tell you there’s no perfect time to invest. No perfect time to buy a home. And there’s no perfect time to have a child …
Babynomics
The best starting point in planning for the financial side of having children is to understand your costs and benefits.
It means seeing what you’re entitled to in terms of Child Benefit, which is a tax-free payment of £21.15 per week for the eldest or only child, and £14 per week for each additional child. And Tax Credits, which are means-tested payments designed to provide additional financial support to low-income families.
It means understanding what you’re entitled to in terms of maternity and paternity leave and pay. It means staying on top of any new policies like, for example, the increase in free childcare hours announced in the recent Chancellor’s Budget.
On costs, we’ve noted some averages here but you need to think about your own situation. Childcare costs for you might look very different, especially if your workplace has a creche or you have supergran on stand-by.
The key thing is to know where you stand in as much detail as possible. This’ll help you set expectations, anticipate challenges and, of course, firm up your financial foundations.
Plan the worst, hope the best
Preparing one’s financial foundations. While the rules change slightly if you’re planning children, the same key principles largely apply.
It’s about having a bedrock of savings and an emergency fund …
It’s looking into life insurance so that, if anything happens to you or your partner, your big debts can be paid and your children taken care of …
It’s thinking about other life insurance products such as critical illness cover and income protection to protect your income and savings so that, if your health takes a bad turn, life can continue in relative comfort …
It’s looking into private healthcare costs, and noting that life insurance firms increasingly offer elements of private healthcare when you buy through them …
It’s about writing a will so that you decide how your assets are distributed and not some judge or lawyer …
There’s no perfect time
Sigh. Life insurance, emergency funds, financial black holes, last will and testaments … you’re forgiven for thinking children are just admin, effort, worries and cost. And, well, truth be told, that’s some of the deal.
But not all of it. Most parents will tell you having kids is the greatest thing they’ve ever done. The most rewarding job ever. Ask any parent to tote up having a child and they won’t give an answer in pounds and pence but emotions, love and memories …
There’s the economic side of having children, sure. But the emotional side? You can’t put a price on that.
Sources
- https://www.familyandchildcaretrust.org/childcare-survey-2020
- https://educationhub.blog.gov.uk/2023/03/16/budget-2023-everything-you-need-to-know-about-childcare-support/)
- 2022 LifeSearch Health, Wealth & Happiness whitepaper
- https://www.moneyhelper.org.uk/en/family-and-care/becoming-a-parent/childcare-costs
- https://www.nct.org.uk/life-parent/work-and-childcare/childcare/average-childcare-costs
- https://www.daynurseries.co.uk/advice/childcare-costs-how-much-do-you-pay-in-the-uk
- https://cpag.org.uk/policy-and-campaigns/cost-child
- https://www.lv.com/life-insurance/cost-of-raising-a-child