Starting a family is one of the most exciting times of your life, but it can also be one of the most expensive. According to a report from investment and insurance group, LV=, when raising a baby, the first year alone will set parents back approximately. In order to make sure that you’re financially prepared to add a new member to your family, we’ve compiled a list of tips and tricks to set you on the right track to financial security.
Create a budget for one income
One of the most significant financial implications of starting a family is the sudden reduction in your income. If you are raising your child with a partner, creating a budget around one income is going to be a shock to the system if you don’t adequately prepare for it in advance. If you’re willing to take on the challenge, it’s a good idea to start budgeting as though you only have one source of income for some time before the baby is born, so that you can start making lifestyle changes and have time to get used to them before they become a necessity. This will also help you to build your savings so that you’re better prepared in case of an emergency.
According to the Institute of Financial Planning, it’s advisable that you set aside at least three months‘ worth of your income for emergencies before the arrival of your baby. You will have plenty of time throughout your pregnancy to save this amount so there’s no need to panic and deprive yourself of spending money on things you enjoy. As long as you set aside a certain portion of your income each month, you can relax in the knowledge that you’ve got enough put by to cushion the blow if an unexpected expense comes your way.
Make a will
Making a will might seem like something that you need to do at a ripe old age, but this couldn’t be further from the truth. The purpose of writing a will is to make sure that your valuable assets are protected when you die, and the most valuable asset in your life is now your new child, so it’s vital that you have a will in place so that you can create a plan for their future.
Writing a will might seem daunting, which is why hiring a professional will writer or solicitor is a good idea so that they can help you create a will that has every loose end tied up. This should set you back around £150, but it’s well worth it so that you don’t end up making mistakes. Read more about writing a will here.
Get life insurance
As a single person with no children or even as part of a working couple, it’s unlikely that you’ve been concerned about life insurance before. However, now that you have a child on the way, it’s vital that you get your life insurance cover sorted.
One of the most sensible life insurance options is a ‘family income benefit’, which is an insurance policy that pays a tax-free income annually rather than in a lump sum. This way, your money will be spread out over the years rather than all at once, so that you can handle it sensibly. Knowing that you have life insurance in place will provide you with added comfort knowing that your family will be taken care of should anything happen to you.
Sign up for the ‘Health in Pregnancy’ grant
If you are over 25 weeks pregnant, you are entitled to a tax-free payment from the government of £500. This is called the ‘Health in Pregnancy’ grant which was introduced in 2009 to support the health of expectant mothers before the birth of their babies. In order to receive this grant, you need your doctor or midwife to sign a claim form and then send it off to HM Revenue & Customs. The money will then be directly deposited into your bank account without any fuss.
Find out how much paternity/maternity pay you will receive
If you earn over £95 weekly and have been working at your job for over 26 weeks, you will be legally entitled to statutory paternity or maternity pay (SMP). With SMP, you will be paid 90% of your average gross weekly salary for up to six weeks. During the following 33 weeks, you are entitled to 90% of your weekly earnings. For more details about SMP, visit the government website. Your employer, however, may have set up their own unique SMP scheme, so it’s important to contact the HR department at your company so that you know exactly what you are entitled to.