The Consumer Financial Education Body’s Kate Humphris offers some practical advice and tips for new parents on how to get their finances in shape for their new family

Research has found that the cost of bringing up a child to the age of 18 can be well over £150,000, so it’s important to start thinking about the best ways of managing your finances as early as you can. With the stress of becoming a new parent, money issues can inevitably take a back seat in the rush up to baby being born.

 

If your financial circumstances change or worsen due to having a new baby, and coupled with the fact that money is often a difficult subject to talk about, it can be confusing to know where to get sound, jargon-free guidance.

On a budget
If this is your first baby, you’ll need to budget for a lot of equipment, such as a buggy, car seat, cot and so on, as well as other items such as clothes, bedding and toys. Baby’s arrival will bring costs in the form of nappies, milk (if you are not feeding yourself), baby food and other regular expenses as well as some unexpected ones. If you have a partner, discuss the best way to manage your finances; who will pay for what, whether to use a joint bank account, and so on.

Financial help
Nine out of ten families with children qualify for tax credits, but you don’t need to have children to claim. You may be able to claim working tax credit if you (or your partner) work and are on a low income. And you may still claim it while on paid maternity or paternity leave.

A single parent or a couple who both work can get substantial help towards childcare costs. Most parents can get child tax credit whether or not they work. If your income is low, you may qualify for a Sure Start Maternity Grant of £500. From April 2009, most women can claim a Health in Pregnancy grant of £190. If you’ll be a working parent or student, find out what childcare options are available locally and how much they cost.

Check what life cover you already have. Now that your baby has arrived, you may need extra cover so shop around as soon as you can. It’s never too late to start some sensible savings habits and although with a new baby there is a lot of expenditure, you should try and clear what debt you can.

Taking your leave
Most mums and dads are entitled to paid time off work when they have a new baby. Mums working as employees can have up to 52 weeks maternity leave, regardless of how long they have been in their job – and up to 39 weeks can be paid leave, provided you have been with your current employer for 26 weeks or longer. Dads who have been with their current employer at least 26 weeks can have up to two weeks paid leave.

On the register
When your baby is born, you must register the birth within 42 days. Do this at your local registration office. You’re going to have your hands full in these first few weeks! However, it’s worth putting in your claim for state benefits quickly to help your cash flow and to make sure you do not lose any benefits. Most state benefit claims can be backdated only three months.

As soon as you have registered your baby’s birth, put in your claim for child benefit. You’ll find a claim form in the Bounty Pack you get after the birth or you can get one from HM Revenue & Customs. You can usually claim child tax credits if you have a baby. If you’re adopting or fostering, you can claim tax credits for them as long as you’re not getting any money from your local authority or Health and Social Services Board. If you or your child has a disability, you may be eligible for extra financial help, for example, disability living allowance and carer’s allowance.

Currently babies are eligible for a Child Trust Fund account, but the government is planning to reduce the payments from August 2010 and stop them altogether from 1 January 2011. You will automatically be sent a Child Trust Fund voucher after you have claimed child benefit.Use the voucher to open an account into which the government pays money to build up a lump sum for your child by age 18 and you can add extra money to the account. Open the account as soon as possible to maximise the return your child gets.

Planning for the future
Looking further ahead, are you planning to look after your child yourself – say, until they start school? Maybe you will return to work or go to college or start your own business? Now the baby is here, you might want to revise plans you made earlier and do something different. Gather information to help you make your choice and make sure it’s an informed one.

Your maternity leave will end within 12 months of your baby being born. If you want to return to work earlier, give your employer eight weeks’ notice. Claim or ask for a review of your previous claim if you will now be eligible for working tax credit.

Arrange and try out your childcare before you start back so that both you and your child can get used to the arrangement before you go back permanently. Claim any help with the cost from tax credits or your employer. Your local Families Information Service can give you details of locally available childcare. If you want more time for your family, consider asking your employer for flexible working. 

Further advice
Further information is available from the Consumer Financial Education Body’s Parent’s Guide to Money, a practical, impartial and free guide for parents, and will help to answer questions about their changing financial circumstances and to help them prepare for the arrival of their baby.

For more information, visit www.parentsguidetomoney.co.uk