- April 30, 2021
How Should Parents Create a Budget for their Baby?
Having a baby post-marriage is a delightful experience for all parents. However, the guardians must prepare for the budget for raising the child. According to a source, it costs £500 or more every month to raise a baby in the UK.
Therefore, parents would have to make a few lifestyle changes to incorporate the new household expenses. But guardians should worry because budgeting becomes much easier and a norm after the baby’s arrival into the home.
The best method of budgeting for a baby would include a 50, 30, and 20 percent approach, instead of the normal 70 and 30 percent. 50% would represent essentials, 30% would include financial desires, and 20% would help pay for savings and debts.
Besides this practice, parents should create a minimal cost list of essentials, non-essentials, childcare, food, and activities. However, they should not worry about recovering certain expenditures, as cost-cutting tips can prove useful.
5 Steps to Create a Budget for a Baby
● Enlist the Essentials
The essentials for a baby would include a car seat, clothes, nappies, food, Moses basket, baby bath, pram, and changing bag. On average, these cost £100-£200, £50-£60, £12-£24, £50-£100, £70-£90, £25, £150-£1000, and £25, respectively.
Besides this, you would require to sort financial priorities like retirement savings, debt payments, and emergency funds. Ideally, 15 percent of the income should go into retirement savings. Also, a single person should have emergency funds for at least six months.
The emergency funds should help recover from a financial crisis during unexpected unemployment, health issues, etc. Moreover, the emergency funds should include the expenses of a baby when parents face any such issues.
The best method of creating a new household budget is reviewing the bank statements for the past few months. After evaluating the costs, add new recurring expenses of the baby. A few non-essential expenditures could include a play mat, baby bouncer, and changing mat.
The average cost of non-essential costs would be £25, £20-300, and £7. Besides this, working parents would have to hire a nanny or caretaker. However, they can always ask the child’s grandparents for help.
● Leaves and Compensation
A UK citizen receives payments for 39 of 52 weeks of statutory maternity leaves. Moreover, after the sixth week, the number of receivables would diminish by 90 percent. According to a source, the weekly salary would become £151.20.
However, specific companies offer more than minimal compensation to their employees. Therefore, you should review the maternity leave pay with the HR department. Besides this, employees who have worked for a business for more than nine months become eligible for paternity leaves.
The average weekly compensation during this two weeks tenure is £151.20. However, many organizations offer full fortnight payments. Moreover, guardians should also consider shared parental leave that offers splitting fifty weeks before the first birthday.
Additionally, parents who receive minimal compensation can avail fast loans in the UK by showing their salary statements and credit ratings. These can prove useful in diminishing the financial burden.
● Cost Cutting
While shopping, guardians should check for discounts, offers, and cashback on transactions. At times, credit and debit card service providers even offer deals with their partners. These can help to diminish ongoing household expenses.
Moreover, parents should join local groups online and offline to meet similar-minded people and learn creative ways of diminishing expenditure. Besides this, parents would need to avail child care services that have an average charge of between £242 weekly.
However, guardians can apply for tax-free childcare to diminish costs by twenty percent. Moreover, friends and family members can lend toys, stair gates, etc., until the child grows up if they don’t require it anymore. So, don’t hesitate to ask for help from reliable people.
Moreover, local councils also sometimes offer vouchers for reusable nappies; however, you might require clarification. Besides this, childcare costs diminish to £60 weekly during toddling years, or when the child ages four and requires after-school care.
Optionally, babysitting swaps with other local parents can also reduce nanny or childcare costs. Additionally, unsubscribing from TV packages, gym memberships, and switching the energy service provider can prove beneficial in cost-cutting.
If you start receiving minimal industry compensation, it is best to inform lenders and avail better deals. These could include a payment holiday, lower repayments, higher tenure, etc. Lastly, decluttering by selling unrequired items of a child can compensate for additional household income.
Also, the practice of using secondhand, buying in bulk, estimating through a baby budget calculator, etc., can help in cost-cutting practices.
● Availing Entitled Benefits
Parents can reduce the strain of creating a budget by understanding entitled benefits and applying for them. For example, parents receiving certain benefits can apply for the Sure Start Maternity Grant that offers £500 to help with the cost of having a kid.
Similarly, people in Scotland can avail a Pregnancy and Baby Payment of £600 for the firstborn. It also provides £300 for the consecutive children born. Besides this, parents become eligible for a child tax credit, child benefit, NHS dental care, free prescriptions, and health start vouchers.
Additionally, a working parent would also receive payment for time off for antenatal care. These include midwife, medical, and doctor recommended appointments. Additionally, you can even claim Working Tax or Universal credit from the government.
However, if you are on benefits need a loan today, you should check your personal credit rating and eligibility criteria. It is essential to verify before applying to avoid rejection and maintain the ongoing credit rating until the application passes.
Besides this, there is also statutory adoption leave and pay. It provides a weekly compensation of £120. The scheme is available to employees that have worked for twenty-six weeks with a company before having a child or at least fifteen weeks before the due date of birth of the child.
The employee receives payment for thirty-nine weeks. According to the guidelines, the worker would receive ninety percent weekly early before tax for the first three weeks. It will follow by £151.97 or the same ninety percent earnings, whichever is lower for thirty-three weeks.
However, the employee would not receive any compensation for the next thirteen weeks. Unemployed people can claim Employment and Support Allowance (ESA) and income support. Additionally, parents can even avail Sure Start Maternity Grant.
The residents of Scotland can apply for Best Start Foods and Best Start Grant, and Scottish Child Payment. Initiatives like the Health Start Vouchers and Healthy Food Scheme are also available in Wales, England, and Northern Ireland.
Besides this, schools and colleges also offer benefits, scholarships, and education grants.
● Estimating Future Expenses
As clarified earlier, certain expenses would become null and void as the child grows up. These could include costs for formula, daycare, and toys. However, they would replace with school and college expenses, besides other necessities like clothing, food, etc.
Moreover, the breadwinner must secure assets along with family. Therefore, insurance costs for homes, vehicles, gadgets, etc., should become recurring costs. These help to recover or diminish expenses when the roof starts leaking, the house catches fire, or the car has an accident.
Parents should know that accidental and health insurance coverage is equally essential for timely recovery and reducing large costs. Guardians would even require to save funds for sending their child to a preferable college if there is no option for a scholarship or grant.
Therefore, a significant portion of the income would include saving for school, graduation, and post-graduation. However, parents can open a savings account for a child during the early years. The interest and saved amount would become sufficient for compensating the costs.
Aside from this, the child would have interests in specific activities at school and colleges. Therefore, they might ask for additional training. Additionally, some children might even require tuitions for different subjects. It becomes a recurring cost during the child’s schooling years.
Furthermore, breadwinners should create alternate methods of making money, ask for a raise, sell or downgrade a vehicle, and refinance student loans or mortgages. Also, consider switching service providers by using comparison websites.
Parents that can’t manage expenses should opt for unsecured loans with bad credit, guarantor, or other loans to reduce their burden.