While finding out you’re pregnant can be joyous and exciting, it can also feel extremely daunting. One reason for this can be financial stress, as children can drain your bank balance as quickly as they can drain you of sleep.
This is why starting a family has the potential to create mental health challenges at a time when you may already be feeling vulnerable. There is good news though, as you can take steps to reduce financial stress, meaning that you can enjoy parenthood to the full.
As this is Maternal Mental Health Week, Independent Mortgage & Protection Adviser and soon-to-be-mum Ella Stanton, looks at seven ways to prepare financially for life as a parent.
1. Create a financial plan
If you’re planning a family, the best time to create a financial strategy is before you fall pregnant. Or on the other hand, if your pregnancy is a happy surprise, the time to create one is as soon as you find out.
A good way to do this is to produce a spreadsheet that allows you to keep track of your household’s monthly budget. This means you can stay on top of your finances by following your income and outgoing, providing peace of mind that you can prepare for any change in your future expenditure.
One step you may want to consider is to put money aside to cover the drop in salary while you are on maternity leave. For example, putting £200 aside every month for 39 weeks provides the equivalent of 10 weeks of statutory maternity pay, which might enable you to extend your maternity leave.
2. Research your employer’s maternity policy
When you’re ready to tell your employer that you’re pregnant, it’s likely that the Human Resources team will want to discuss your maternity rights. Use this opportunity to ensure you understand the package being offered and any caveats that could exist, such as paying back any enhanced pay if you leave the company.
3. Consider your pension
While retirement is likely to be the furthest thing on your mind, it’s important to remember that your maternity leave may impact on the pension income you receive.
Should you decide to postpone your pension contributions while on maternity, your employer will still pay their contributions into it. If you continue with your employee contributions, they’ll usually be based on your Statutory Maternity Pay, not the salary you received before you started your leave.
This means that whether you continue to contribute to your pension or not, the total amount that goes into it will be lower. It’s therefore important to understand the potential impact it could have on your retirement, which is something a financial adviser can help you with.
4. Decide how you’ll take parental leave
Discuss with your partner whether one or both of you will take time away from work to care for your new arrival. Doing so prevents any confusion and disagreements later on, and will give you the time you need to check your employer’s maternity and paternity policy.
5. Consider future costs
When you discover you’re pregnant it can be very tempting to rush out and buy all the exciting baby items, such as a cot, pram and car seat. Be mindful that if you do this, costs can quickly spiral.
With this in mind, the following could help to keep your spending in check:
- don’t buy everything at once – while it might be tempting to buy everything for your new-born, you may not need to buy certain items until later on. For example, babies don’t usually need to sleep in a cot until they’re six months old, and buying an expensive cot straight away may cause unnecessary cash flow problems
- consider buying nearly new – with Vinted and Facebook Marketplace, it’s easy to pick up bargains on many nearly new items. Alternatively, you could buy items you need from someone you know who has had children recently
- ask someone you know whether you can borrow items – if a friend or relative has had a child that has outgrown something you need, ask them whether you could use it on loan while they’re not using it.
6. Think about future childcare costs
One of the biggest costs you’ll face is childcare once you return to work. UK nursery fees are among the highest in Europe, and spaces can be limited depending on where you live.
It’s often recommended that you register with your chosen nursery at least 12 months before you plan to send your youngster there. While registration fees vary, they’re typically between £30-£100. The good news is that you can receive Government support, which comes in the following three forms:
- Child Benefit – in 2024/25, this is £25.60 per week for your first child, and £16.95 for each additional child. Your eligibility depends on your and your partner’s income, details of which are available on the Government’s website. If you claim the benefit, you automatically receive National Insurance credits, which could help ensure you receive your full State Pension later on
- Tax-Free Childcare – if you’re working, you could receive up to £2,000 a year for each of your children from the Government to help with childcare costs. This amount doubles if your child is disabled. Your eligibility for this will depend on household income, as well as your child’s age and circumstances
- Free hours – the rules for this can be found on the Government website. Broadly though, if you have a two-year old child, you can claim up to 15 hours per week of free childcare. This increases to 30 hours if your children are aged between 3-4. From September 2024, you’ll be able to claim up to 15 hours per week for your child once they reach the age of nine months as long as you’re working.
7. Speak to a financial adviser
Even if you have family members or friends who want to help you financially, speaking to a financial adviser could be a wise strategy. They can provide guidance on how best to prepare for your new arrival and ways to secure your (and their) financial future.
If you’re pregnant and would like to discuss any of the above tips or any other questions you may have about how you could prepare financially for parenthood, please get in touch. We can be contacted on 01527 577775 or speak to one of our advisers as we’d be happy to help.
Wednesday 2 April 2024