We’ve just welcomed a new Royal baby, Prince Louis and whilst having a baby is one of the most joyful things that can happen during our lifetimes, for many of us (who aren’t in the Royal Family!) it can also be overwhelming in terms of how you’re going to pay for everything.
Our latest research showed that a quarter of parents of newborns were having to fund parental leave on credit, with them racking up debts of over £2,700.1 And despite trying to save and prepare their finances in advance, many new parents under-budget for their new arrival by as much as £500 a month.2
Because of this, many couples are facing money worries on top of the challenges of caring for a newborn, with over half (53%) of those we spoke to saying they felt anxious about their finances during their parental leave. Due to these concerns, over a third of parents (35%) had to return to work earlier than planned in an effort to ease their money worries, and others told us they had to rely on support from their family and friends, use their overdrafts or even take a second job. 3
Budgeting and thinking ahead
If you’re preparing to go on parental leave it can be a really busy time, but it’s really important to budget as much as possible to help reduce any financial anxieties after the baby arrives. Think ahead and if you are considering using credit as a short-term solution whilst you have a reduced income, make sure you can comfortably manage this. Otherwise this could potentially affect your credit score and your chances of getting credit for larger things like a new home or bigger car when your family grows.
Financial planning for prospective parents
If you’re expecting a baby soon or thinking of starting a family in the near future, here’s what we suggest you could do to prepare financially:
- Save, save & save some more – sit down with your partner and look at your incomings and outgoings and agree what you can comfortably put to one side in the lead up to the birth. It’s important that you try and stick to the amount each month too, as the more you can save during the pregnancy, the more you’ll have at your disposal once the baby’s here.
- Budget – As well as the costs of a new baby, you need to consider how your income will change whilst you or your partner are on parental leave. To find out what statutory leave and pay you’ll be entitled to when your baby’s born, click here. Once you know, try to put together a budget so you can keep on track of your spends. Find out more about budgeting here.
- Talk to friends and family – Before going shopping for things for the baby, it’s a good idea to speak to family and friends who have children to get their opinions on what you really need to buy and which (sometimes costly) items aren’t necessary. As much as it’s tempting to buy lots of toys and clothes, try not to get carried away, as it’s likely you’ll get these as gifts when the baby’s born
- Get what you’re entitled to – As well as statutory maternity pay or a maternity allowance, you might be entitled to things like tax credits or child benefits, so it’s worth doing your research. Also don’t forget mums can register for the NHS Maternity Exemption Certificate, so you can get free prescriptions and dental care during pregnancy and for 12 months after your baby is born
- Take stock of your finances – Before your baby arrives, get a clear view on how healthy your finances are by checking your credit report and score. You can do this for free by logging in or signing up to Noddle. Your credit report will show you all your outstanding credit, as well as what you have left to pay on things like credit cards, loans and mortgages. Have a look at the information and consider areas where you may be able to cut back and whether any problems could arise if you do need to borrow more while you’re on parental leave
1 Noddle commissioned Opinium Research to interview 1,004 UK parents online from 9 – 16 April 2018. Results are weighted to be representative of the UK population.
Of those who used credit (25%), average debt by end of leave was £2,764
2 25% of respondents said they under-budgeted, with the average amount £559 p/month
3 13% relied on support from family and friends, 9% used their overdrafts, 4% took on a second job