The shocking truth about the cost of raising children

Calling all parents! Did you plan for the cost of having children?

I’ve been reading new research on the cost of kids. On the one hand, it’s got me thinking how daunting the figures must seem.

On the other hand, though, there are many variables, so costs will vary family by family. It’s helpful to have some sort of figure to work with.

Well, new research by brokers Hargreaves Lansdown puts the figure at £90,590.

Families with children, on average earnings of £34,819, based on data from the Office for National Statistics, spend £3,869 more every year on the bare necessities than those without – a fifth more.

These bare necessities include things that meet a basic need, such as housing costs, food, and childcare.

Over 18 years, this adds up to £90,590, assuming 3 per cent inflation – and that’s without any of the extras that children expect, from toys to days out and mobile phones.

As a result, parents are less likely to have enough cash at the end of the month, enough emergency savings, or enough life insurance than are non-parents. They’re also more worried about debt.

Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “Having kids may be priceless, but it’s also incredibly expensive.

“The overall bill is far higher when you factor in the things that people want for their kids. Couples with children spend an eye-watering £50,495 each year – 43 per cent of which is on the extras. Unfortunately, as a result, parental financial resilience suffers across the board.

“Some estimates of the cost of children simply add up everything you have to spend on them. Our Savings and Resilience Barometer also takes account of the massive spending sacrifices parents make along the way in order to make ends meet.

“Parents simply don’t have thousands of pounds extra a month to lavish their children with, so they have to cut back their own spending significantly.”

It’s clear to see that children come with a cost. It means parents need all the help they can get. Here’s where to start.

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Check if you’re eligible for free childcare. How it works depends on where you live in the UK. Visit the Childcare and parenting page on gov.uk as a starting point. It will also help to look at childcare costs in your area.

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Child Benefit can be paid to either parent, but if one of them is stopping work for a period of time, they should claim so they qualify for the National Insurance (NI) credits that come alongside it, as this helps build their state pension entitlement.

Higher earners will have to pay at least some of it back if your income is more than £60,000 in the 2024/2025 tax year. Once you earn £80,000, you need to pay it all back.

If you earn more than £80,000 a year, you may think there’s no point claiming Child Benefit. However, if you still need the NI credits, you can contact the Child Benefit office and say you want to claim the benefits but opt out of payments. This means you’ll no longer receive the money, but will still receive the NI credits.

Visit the Child Benefit tax calculator on gov.uk for an estimate of the high-income Child Benefit tax charge you or your partner may have to pay.

Check other help that may be available from the government, including the childcare parts of Tax Credits and Universal Credit. You might be able to claim 85 per cent of childcare costs if you’re eligible for Universal Credit.

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Family finance expert and founder of Hoops Finance, Funmi Olufunwa, says parents can often overlook the importance of protection.

“As well as life insurance, think about ongoing protection. People often think of worst-case scenarios, like death. Actually, if you think about what pays your bills on a day-to-day basis, that’s your income. Protecting that income is important when you take into account that you could fall ill and not die, but not be able to work.

“Parents can consider critical illness insurance and income protection policies. There’s also family income benefit, which a lot of people don’t know about.

“This type of policy provides families with an ongoing regular income if you die or are diagnosed with a terminal illness, as opposed to the lump sum that life insurance typically offers.”

Another thing parents focus on is saving for their children, but not considering how financially protected they are themselves.

Olufunwa says: “One of my clients did a review of her and her partner’s finances and realised they were underinsured from a protection perspective.

“They decided to cut the amount of money they were paying into their primary-school-aged daughter’s Junior ISA so they could redirect the money towards critical illness insurance policies for both of them.

“They considered that they are their daughter’s income, and if they didn’t protect themselves as the source of that income, they were leaving their daughter unprotected. It’s an important consideration.”

If family and friends want to buy a gift for your child, whether for a birthday, Christmas, or any other special occasion, you could ask them to pay into your child’s Junior ISA and help build up a nest egg for when they turn 18.

Let’s be honest, no one needs more stuff. I’d much rather contribute to the savings of a loved one’s child than buy them another toy or video game. At least this way, I’d be contributing to their financial future.

The financial guidance website MoneyHelper has a section on the costs of becoming a parent and where to access support.

Finally, don’t forget wills. If you’re in a relationship – but not married or in a civil partnership – then without a will, your partner isn’t provided for. This is the case even if you have children and are living together.

If you have children, a will covers guardianship. This is important as if both parents die without officially appointing a guardian, courts will decide who is best to look after their children.

Talia Loderick is a money coach. Talia helps people understand and take control of their behaviour with money so they can stop stressing and have enough to live well – now and in future. Visit: talialoderick.co.uk