Welcome to parenthood finance

Welcome to parenthood finance

September 28, 2020

People say it’s the journey that matters, not the destination. If your North Star is your child’s 18th birthday then read on for some facts and myths about how much that journey is going to cost you. Spoiler alert, it's a lot.

Babies are expensive - Myth (ish)

First of all, they’re not iPhones. You can’t buy them. Although how cool would it be if they were that smart from the get-go and that easy to get? Goodbye pregnancy and labour, you will not be missed! I'd be first in line at the Apple store.

Joking aside, preparing for a baby can be expensive but it all depends on decisions you make along the way. Do you need to buy the newest bouncer or can you get one from a friend? How do you feel about borrowing or renting a pram and cot? Cool with hand-me-downs?

My son’s first year has probably been the cheapest so far. We were lucky to count on other parent friends to lend us everything we needed which meant we only bought a crib and mattress (frugal, I know). The overall cost for essentials was £65 for the cot and £70 for the mattress from Ikea, £4 per week in Lupilu nappies, £2 per week in Huggies wipes and £11 per week in Aptamil formula. I also bought some cute clothes in sale, so let’s add another £150. Our rough minimum came in at about £1200 or £100 per month for the first year. I’m going to exclude the cost of beauty products purchased to mask my sleepless nights or the increase in coffee and tea consumption in our household.

We managed to save £700 for a 3-in-1 Venicci pram & car seat , £130 for a SleepyHead pod, £150 for a BabyBjörn bouncer and £85 for their carrier. We borrowed these from friends instead for £0. We also skipped on the Snüz or Next-to-Me type of cribs, didn’t need a baby monitor and got a complete Tommee Tippee feeding set as a present. Overall we probably saved at least £1,500 on the upfront cost of parenthood. Using that money to invest in his future seemed like a much better idea.

Although not counted in the essential budget, we loved travelling in the early days because bringing a baby along didn't add much, if anything, to the bill. On that note, thank you Bank of Mum and Dad 🙂.

We also received tons of toys and clothes (some new, some pre-used) along the way so it’s fair to say that our baby really didn’t feel expensive at all. In fact, the latest iPhone in 2017 was probably more expensive.

Childcare is expensive - 📣 F.A.C.T. 📣

I can brag for days about how little we had to spend in the first year but once I went back to work and we had to put our son in nursery it felt like we had just taken out a second mortgage.

While everyone is entitled to 15 hours of childcare per week for free (if both parents work then it’s 30) that only kicks in in the term after your child’s third birthday. For summer babies, that’s September. An October baby would only benefit from the following term which is January.

In the meantime, you can expect to pay a minimum of £55 for a full day for under 3s (in reality most nurseries can charge a lot more than that). 5 days a week, that amounts to minimum £1,200 per month for a full time nursery. Opt for a nanny and it can be even more than that. Get grandparents to babysit a few hours a day or even a week and the saving will be HUGE.

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Private schools are for millionaires - Myth

Giving your child a private education is not cheap. Well, unless they get a full scholarship. For most parents, the notion of having to pay on average anywhere between £5k and £10k a term for each child can be daunting. Even if you choose to only pay for secondary and sixth form you can expect a final bill between £110k and £210k per child.

That price tag can be hard to grasp and your initial reaction could understandably be ‘no way jose’. I, for one, freaked out at learning that. What put me at ease was understanding that private schools should be a long-term goal, not something you’re required to splash out on from day one. Saving a minimum of £180 a month (rising with inflation, of course) per child from the day they’re born can allow parents to afford sending their kids to private school from the age of 11 to 18.

Although still high, I can probably work with that number. Maybe it’s about cutting down on takeaways, cycling more, cancelling that gym membership I never use and taking up running instead or resisting the newest gadgets, creams, etc. The point is that starting an investment plan early will make it way easier to afford things down the line and no, you don’t need to be rolling in dough, so to speak, to afford private education.

(For more info on private school fees and monthly savings recommendations, check out the blog post our CEO wrote to help parents visualise this cost better.)

Your job is done when they’re 18 - Myth

While your child is legally an adult, (s)he is most probably quite far from being ready to cut the financial cord. Yes, they can get a student and maintenance loan, take up a part-time job, keep living at home rent-free but you’ll still be footing the bill for most of their living expenses. Whether they choose to study or jump straight into a career, your job is far from done.

I don’t expect to buy my son a car when he turns 18, mostly because my own interest in driving is close to zero (hence my decade-long provisional licence). But what if he wants or needs one? Will I let him lease or will I be prepared to unload a pot of money to buy it for him? According to a 2018 study by GoCompare, the average cost for first set of wheels is about £5k, a 42% increase from the previous year. Considering I’d prefer to buy new and electric (will there even be non-electric cars in 2040?!) for reliability and sustainability purposes, I’m expecting that price to be way higher. Do a quick Google search and you won’t find anything new under 15k in today’s market.

Same with property - will I pretend not to care that he’s renting and paying off someone else’s mortgage or will I present him with a downpayment for his first home? I’ve paid rent all though my 20s and I think it’s safe to say that if I can find a way to support him with the alternative, I’ll do it in a heartbeat.

How much is that likely to cost? While you’ll read that you can climb on the property ladder with as little as 5% deposit, chances are as a first time buyer you need to be somewhere around 15% deposit. Rightmove found that if you live in London, that’s about £70k on average.

So what’s the minimum you can expect to spend on a child from birth to 18? If you have a look at the latest CPAG* report they’ll tell you it’s around £75k for a working couple or just over £100k for a single parent. Remember this is the no-frills, essential cost so treat it like a starting price. All the elective add-ons like housing, childcare, private schools, sports equipment, holidays, fancy gadgets, home deposits etc will push the total up by a considerable amount.

Buckle up for the ride, it definitely won't be cheap! It doesn't however have to be a struggle and planning for it early on will make a huge difference. Don't know where to start? Let us give you a helping hand!