Being a parent is a huge responsibility – and something that many people might not consider is the financial aspect of raising children.
There are endless reports of parents struggling to accommodate childcare costs and more. The charity Child Poverty Action Group states that the cost of raising a child to age 18 is £166,000 for a couple and £220,000 for a lone parent.
Here’s what you need to know about the financial challenges encountered in parenthood.
Financial Challenges of Parenthood
Some common costs that parents face include:
- Childcare expenses
- Day-care expenses
- Daily living expenses
- Emergency funds
Certain times of the year can be particularly strenuous for parents from a financial perspective. Christmas and birthdays can be very expensive, for example. So can school holidays where parents may have to take time off work or pay for holiday clubs or childcare.
There are also regional differences associated with the costs of raising children, with those living in the North West (£145) paying less than those in Inner London (£177), for example.
Strategies for managing family finances
There are several ways you can go about managing family finances.
The first is to set financial goals and establish how you plan to reach them. This might involve saving up for a family holiday or a family-friendly car. It could be as simple as building a pot for childcare costs. By saving incrementally over time, you can set the right amount aside to make investments that will accommodate your child’s needs and wants. You can use monthly planning tools to help you achieve this.
This will help you balance income and outgoings. Simultaneously, you should keep an eye on your expenses. While it’s easy to be ‘tap-happy’ you need to think long-term about the consequences this could have on your family finances. Some people follow the 20:30:50 rule to split their savings, wants and needs.
In terms of ensuring your credit score is on good form, you should check that all the information on your credit report is correct. Inconsistencies or errors could adversely affect your credit score and potentially prevent eligibility for certain loans or mortgages.
If you’re raising a child with a partner, you should ensure you’re both on the same page when it comes to finances. This is important regardless, especially when there are little ones in the picture. Frequent, open and clear communication is key to this.
Something else you might want to consider is working for a company that offers flexible working. This in turn can help to save on childcare costs if you can pick up your child from nursery or from school. Otherwise, you could try to save money by asking relatives to help out if they can do so.
To conclude…
It’s crucial to examine the potential impact that having a child could have on your finances long-term. The practical elements are hugely important to consider before you decide whether having a child at this moment in time is the right thing for you.