Can you afford to have a baby?

David Stone

by , Team PensionBee

at PensionBee

17 Nov 2016 /  

Can you afford to have a baby?

This article was last updated on 02/08/2023

The costs that come with having a baby can seem overwhelming. Baby stuff’s expensive, pay for parental leave’s limited and UK childcare’s costly.

Some parents say that you can never truly prepare for how much a baby will cost. You may be considering just taking the plunge and starting your family. But it’s still a good idea to work through the financials first and see how everything may add up. Read on for what to consider to give yourself a head start.

How much paid parental leave can you get?

Maternity pay

Statutory Maternity Leave consists of up to 52 weeks if you’re employed in the UK. Statutory Maternity Pay lasts for 39 weeks which usually starts at the beginning of maternity leave. The amounts available are:

  • 90% of the mother’s average weekly pay (before tax) for the first six weeks

  • The lower of £172.48 or 90% of the mother’s average weekly pay (before tax) for the next 33 weeks.

This’ll apply as long as the employee has worked for 26 weeks or more for an employer by the time they’re 15 weeks from their due date. This is only the legal minimum though, and many employers offer more generous maternity pay packages.

At PensionBee our Parental Leave Policy applies to anyone taking on parental responsibilities and aims to address challenges that all new parents face, while fully supporting them throughout their journey.

Maternity allowance if you’re self-employed

For those not entitled to Statutory Maternity Pay, for example anyone who’s self-employed, there’s the option of applying for Maternity Allowance. Those who qualify will get the lower of £172.48 or 90% of their average weekly earnings for 39 weeks. Unlike with Statutory Maternity Pay, the last 13 weeks of maternity leave will be unpaid under Maternity Allowance. To receive the full amount, and applicant must:

  • Have been registered with HMRC for at least 26 weeks in the 66 weeks before their due date

  • Have paid National Insurance contributions for at least 13 of those 66 weeks.

Paternity pay

Paternity Leave is available to fathers who:

  • Earn at least £123 per week (before tax)
  • Have been continuously employed for at least 26 weeks by the 15th week before the due date, or by the date they’re matched with a child when adopting
  • They’re employed up to the due date.
  • Statutory Paternity Pay’s the lower of £172.48 or 90% of a father’s weekly pay and is paid for one or two weeks.

Shared Parental Leave

Alternatively, parents who meet the required criteria can divide the time taken off between them in what’s known as Shared Parental Leave. Up to 50 weeks of leave can be shared along with 37 weeks of Statutory Shared Parental Pay. The amount available is again the lower of £172.48 or 90% of a person’s average weekly earnings. Use the government’s parental leave calculator to check what your household could receive.

Adoption pay

Those adopting are entitled to Statutory Adoption Leave of 52 weeks. Only one person can take this, so it’s useful to explore some of the other options at the same time, if adopting as a couple. As an alternative, those who adopt may also be eligible for Shared Parental Leave. Like Statutory Maternity Pay, Statutory Adoption Pay’s paid over 39 weeks and is made up of:

  • 90% of the adopter’s average weekly pay (before tax) for the first six weeks

  • The lower of £172.48 or 90% of the adopter’s average weekly pay (before tax) for the next 33 weeks.

Adopters can also take paid time off work to attend up to five adoption appointments.

Other maternity entitlements

Pregnant women are entitled to take paid time off work for antenatal appointments. Free NHS dental care and free prescriptions are also provided during pregnancy and for 12 months after the baby’s born. Plus, those who receive certain benefits can get the Sure Start Maternity Grant, which is a one-off £500 payment.

Child Benefit

Once your baby’s born you can claim Child Benefit of £24 per week if it’s your first child. You’ll receive an extra £15.90 per child on top of that if you go on to have more children. However, if you or your partner earn more than £50,000 per year, you’ll face a tax charge. You may want to check how much tax you’ll pay before you make a claim. If you’re over the earnings threshold it’s possible to register for Child Benefit and decline the payments. This can help you stay on target to receive your full State Pension as you’ll receive National Insurance credits when you claim for any children under 12. This can be handy if you take a period of time away from work or if you don’t earn enough to pay National Insurance contributions.

How much will baby stuff cost?

Studies suggest that, on average, you’re likely to spend over £500 in just the first month of your baby’s life. Therefore, you’ll need some cash to prepare for your new arrival. Purchases range from big things like a pram and a cot, to smaller things like nappies, blankets and babygrows.

However, you can really cut down these costs and prepare for your baby on a shoestring if necessary. Many newborn items are only used for a very short amount of time. Getting second-hand items from places like NCT nearly-new sales and friends and family can be a good option.

Check out our article on financial planning for your first baby for more tips.

Returning to work or paying for childcare

It can be tricky to manage on statutory pay and it doesn’t last forever, so what do you do after that? Many parents face the difficult decision of whether to both return to work and fork out on childcare, or for one parent to stay at home - sacrificing one of your incomes in the process.

The cost of full-time childcare

The typical weekly cost of childcare for a child under two’s £269.86 in the UK, that’s £14,030 per year! It’s worth exploring the help that’s available from the government and from employers. You may be entitled to 15-30 hours of free childcare per week when your child reaches the age of three. From April 2024, this’ll be extended to include 15 hours per week of free childcare for children aged two.

The cost of staying at home

Once you’ve been out of work it can be difficult to re-enter the workforce. The income hit could be long-term as well as short-term. It’s still more likely to be the mother that stays at home to take care of children during the early years. Our research on the gender pension gap shows that, on average, men’s pension pots are 38% larger than women’s. Time taken off to look after children’s one of the key reasons for this.

Staying in work without paying for full-time childcare

You may be able to find a way to keep working but avoid paying full-time childcare costs. All employees have the legal right to request flexible working. This could mean working from home, job sharing, working part-time or flexitime.

Alternatively, maybe you’re in a position to ask your family to help with childcare. Over half of those surveyed in a recent Gransnet poll said that they’re regularly looking after their grandchildren all year round.

Getting in good financial shape to have a baby

If you’re thinking about having a baby, it’s a good idea to sit down and make a budget so that you’ve got a clear picture of your income and outgoings. You can then figure out if and where you can trim your spending to make room in your finances.

Having a target amount of money that you pay into a savings account monthly may also be helpful. Even if you’re not thinking of having a child just yet, saving up now could be very helpful when the time comes.

Although it’s useful to think through the financial implications of having a baby, try not to let money worries overwhelm you. Remember that most people feel like they can’t afford to have a child, but also that most parents find a way to make it work when their child arrives.

Thinking about starting a family? Listen to episode 19 of The Pension Confident Podcast. Our guests discuss preparing to have kids, childcare costs and more. You can also watch the episode on YouTube or read the full transcript.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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