Preparing for Parenthood: Ten Essential Steps to Get Your Finances Ready for Having a Baby

Starting a family is exciting, life-changing, and yes, financially challenging. Kids are bundles of joy, but they’re also bundles of expenses, from nappy changes to nursery fees. The average cost of raising a child to age 18 is a whopping £166,000 for a couple and £220,000 for a single parent, according to the Child Poverty Action Group. So, before the little one arrives, taking steps to get your finances in order can give you a solid foundation and peace of mind.

Below are ten practical steps to prepare your finances for parenthood. We’ll guide you from basic budgeting and savvy spending to securing your family’s future with insurance, savings, and beyond.

1. Build an Emergency Fund

Before focusing on any other goal, aim to have an emergency fund in place. A basic emergency fund should cover three to six months of essential expenses, providing a cushion for unexpected costs, whether it’s a leaky roof or medical expenses. With a baby, this fund becomes more essential than ever, as it helps protect against financial strain if there’s an income interruption.

2. Set a Family Budget

Work out a clear budget to cover both your current expenses and the baby’s needs. A family budget includes everything from monthly bills and food costs to baby gear and medical expenses. Use budgeting apps to track spending, and consider setting separate savings pots for baby-specific needs. Budgeting as new parents can be challenging, as there will be unpredictable costs for items you may not yet realise you need. Unexpected medical bills, sudden childcare needs, or new baby gear can quickly add up, so building a buffer into your budget will help you manage these unknowns.

3. Trim the Fat: Essential Cutbacks

When it comes to baby prep, every pound counts. Start by identifying easy areas to save on, such as unnecessary subscriptions, insurance, or unused memberships. Switching short-term debts to lower-interest options and reassessing regular bills are simple, impactful changes. Prioritising these cuts sooner rather than later will free up cash you’ll need when the baby arrives.

4. Keep Tabs on Your Mortgage

If you have one, your mortgage is likely one of your biggest monthly expenses, so make sure it’s optimised for your new financial reality. You may want to consider a longer-term fixed rate, which will offer predictable repayments through the early years of parenthood. If remortgaging, weigh the benefits of extending the term, which can reduce monthly costs, though this may impact your retirement plans down the road.

5. Beg, Borrow, and Bargain for Baby Gear

Baby costs can be overwhelming, but many of the essentials don’t need to break the bank. From clothes and prams to monitors and sterilisers, see what friends and family might loan or gift. And if you’re buying, focus on must-haves over “nice-to-haves” – babies quickly outgrow things you might never end up using. Online marketplaces and second-hand stores are treasure troves for gently used baby items, often at a fraction of retail prices. Not only is this approach budget-friendly, but it’s also eco-friendly, helping reduce waste from short-lived baby gear.

6. Get Familiar with Parental Rights and Benefits

Understanding your workplace rights and government benefits can make a big financial difference. Employers are required to offer maternity and paternity rights, such as paid time off for antenatal appointments and parental leave. Plus, check the UK government website for updates on potential changes to parental leave and childcare rights. Knowing your entitlements ensures you don’t miss out on support you’re eligible for.

7. Apply for Child Benefit – Even If You Earn Over the Limit

Child benefit, which pays £25.60 weekly for your first child and £16.95 for each subsequent one, isn’t automatic. Registering, even if you don’t take the payments due to income limitations, can help you or your partner earn valuable National Insurance credits. These credits count towards state pension eligibility, and opting in now could save thousands in retirement income later. You can register once your child has been born and the birth is registered. If you or your partner earns over £60,000, some child benefit may need to be repaid, and at £80,000 or above, it must all be repaid. However, it’s still worth registering, as this provides valuable National Insurance credits for a non-working parent, which count towards their state pension.

8. Insure Against Life’s “What Ifs”

A family’s security is priceless, and life insurance is a key element of this. Basic term life insurance covers your mortgage, while family income benefits replace your income if something happens to you. It’s also worth considering if you can add your child to any existing private medical insurance you might have through work. Updating your will (or writing one if you haven’t yet done so) is essential, especially for unmarried partners. Without a will, your child could inherit everything, potentially leaving your partner unprotected. It’s equally important to establish legal guardianship for your child by clearly naming who you’d want to care for them in the event of your death, ensuring their future is safeguarded.

9. Plan for Childcare Costs

According to MoneyHelper, the average family in the UK spends around £7,210 per year for 25 hours of childcare. For 50 hours, this cost jumps to £14,030 a year. After-school clubs for five days cost an average of £67.42 weekly, adding up to significant monthly childcare expenses for many families. With childcare often eating up a large portion of your budget, exploring government schemes is a smart move. The UK offers options like 15 or 30 hours of free childcare weekly for eligible parents, along with the Tax-Free Childcare scheme, which matches every £8 parents contribute with £2, up to £2,000 annually per child. Look into these options as soon as possible to maximise your savings.

10. Don’t Forget Yourself

While children bring new priorities, your future plans and financial security still deserve attention. Pausing pension contributions or other long-term investments to cover baby expenses might be tempting, but this could leave you financially behind later in life. Striking a balance between immediate child-related costs and consistent savings toward your own retirement or other long-term goals can help you avoid financial strain down the line. It could be a great time to think about your finances more widely and go through and create or update your long-term financial plans. This will ensure that while you provide for your child, you also build a secure, balanced future for the whole family.

Summary

Preparing for a new baby is incredibly exciting, but it can feel like there’s a mountain of things to organise and so little time to do it all. While it’s natural to focus on essentials like nursery décor and baby clothes, it’s equally important not to overlook your finances. Taking the time now to get your finances in order will mean a safer, more secure start for your growing family. It may seem overwhelming, but a few steps toward financial preparedness will pay off immensely when you bring your new baby home.

Start with basics like building an emergency fund and establishing a family budget. Once you’ve got these in place, work through any necessary cutbacks, review your mortgage, and plan for childcare. Finally, consider essential protections like insurance and long-term savings. Carve out some time with your partner to tackle these steps together, adjusting as needed along the way. By planning now, you’ll be able to focus more on the joy of welcoming your baby, knowing you’re on track for a stable financial future.

If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.

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