It is often said that if parents worked out how expensive having a child would be, they would never take the plunge. Thankfully, few seem to do the sums or if they do, they do not let it put the results off. One investment company estimates that bringing up a child costs parents an average of ?46 a week or ?43,000 by the time they reach 18 years. Add in the cost of school and/or university and the sky?s the limit.
In the early days you will be spending far less on socialising (sleep deprivation will put paid to any ideas of a glamorous nightlife!), but there will be other expenses and ? more importantly – these will come at a time when money is tight. And if you do not find it easy to manage your own money ? either in your own right or as a couple ? it will inevitably make things worse.
The relationship advice service Relate says that the pressures of having a baby can easily trigger conflicts over money. For example, some new mothers who are used to earning their own income say that they find it difficult when they have no money of their own and become a ?kept woman?.? A change in status within the relationship like this can mean that resentment builds and what starts off as a financial difficulty can become a relationship problem.
Other problems can develop around work. The new mum may want her partner or husband to take a different job; either one that pays more or that gives him more time to help at home. Often it is the worry over debts that triggers the arguments and, while you will not be able to cushion yourself from the financial impact of having a baby completely, you should be able to soften the blow.
If you owe money through personal loans or credit cards, try and cut down your spending before the maternity leave kicks in. Use the money you save to increase your debt repayments and, if possible, switch your loans to a more competitive rate and your credit cards to a 0% deal.? Some banks charge a redemption penalty on loans if you pay them off early, so check the small print of the agreement or contact the lender if you are in any doubt.
There are plenty of financial comparison websites that will give you details of competitive loans (such as moneyfacts.co.uk, moneysupermarket.com and moneynet.co.uk); just bear in mind that the interest rate that lenders quote in their adverts is not one they have to offer every applicant, so if your credit history is not particularly good you may not qualify for the best rates.
Credit cards that charge 0% on balance transfers are a great way of paying off money you owe more quickly. However, most of them come with a catch: balance transfer fees. These can amount to as much as 3% of the amount you transfer and whilst you will not pay interest on the balance, the transfer fee is not interest-free.
Do not borrow more to pay off existing debts as the maths just does not add up. However it may make sense to convert existing credit card debt into a personal loan if you can get one at a low interest rate and you cannot transfer your credit card balance to a 0% card.
Be very wary about borrowing more against the value of your house to pay off your credit cards as you?ll be converting unsecured debt into secured debt. What that means is that if you cannot keep up the repayments, you could risk losing your home.
If money is very tight and you have a flexible mortgage, you may be able to make underpayments on your loan – where you pay less than the full monthly amount – or take a payment break (where you miss payments for a few months). Not all flexible mortgages allow these and some will only let you underpay your loan once you have built up a reserve through overpayments.? Payment breaks or reduced payments can give your finances valuable breathing space, but you will be charged interest on payments you have ?missed?, so it is best kept as a short-term solution.
Don?t forget about state benefits. You should receive an application form for child benefit in the ?bounty pack? you receive when your baby is born. Otherwise you can download one from the Revenue and Customs website (www.hmrc.gov.uk). Child benefit is currently paid at a rate of ?18.10 a week for the first child and ?12.10 a week for every child after that (in the current tax year).
On top of that, the majority of parents qualify for child tax credit (CTC). It is payable (to the main carer) to parents with a household income of less than ?58175 or ?66350 if it?s the first year of your child?s life. The big problem with CTC is that the process of working out how much you might be entitled to is very complicated and there have been a lot of complaints about the claiming process. However, I would still recommend claiming if you think you may be entitled to it.
Top pre-baby money-saving tips
1.?Try and clear as much of your debt as you can before maternity leave starts.
2.?Switch your credit cards to 0% deals and your loans to a more competitive rate if you are paying over the odds. Look at two or three financial comparison sites to get the full picture.
3.?Resist the temptation to buy the ?best? (i.e. most expensive) of everything for your baby.
4.?Draw up a budget and see how easy it will be to live on your reduced earnings.? Work out where you can cut back and whether you can save money by remortgaging, switching energy suppliers etc.
5.?Claim state benefits you are entitled to.?
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Financial Bliss is published by Prentice Hall Life, costing ?9.99. If you would like to buy a copy of the book, visit www.pearson-books.com/financialbliss ? Mothers Who Work readers get a 20% discount on Financial Bliss and some other titles.
Photo by Chris Brown