Twelve Top Tips For Families

By Cliff D'Arcy
July 5, 2006

According to friendly society Liverpool Victoria, the first five years of a child's life cost its parents, on average, almost £46,700. Ouch!

To be frank, there are more than enough emotional and physical demands placed on parents without them having to worry about their household finances. However, a little budgeting and planning goes a long way, so here are a dozen top tips to help you get over the financial shock of raising a baby or young child, courtesy of The Motley Fool and Co-operative Financial Services:

1. Reduce your mortgage repayments

Seven out of ten homes in the UK are owner-occupied, and the average mortgage is close to £87,000. At a typical interest rate of, say, 5.5% a year, this mortgage would cost almost £400 a month in interest alone, which is a lot to hand over, especially if you're on Statutory Maternity Pay. Hence, it makes sense to avoid paying too much for your mortgage by shopping around for a lower interest rate, ideally before you go on maternity leave.

Furthermore, switching to a fixed rate makes it easier to budget, because you know exactly how much your monthly repayment will be over a given period. For expert mortgage advice tailored to suit your needs, check out this award-winning, no-fee mortgage broker.

2. Buy a more economical car

You may have seen the Yellow Pages commercial on TV where James Nesbitt decides to swap his two-seater 1974 Chevrolet Corvette convertible for a people carrier, after learning that his girlfriend is pregnant. As a parent, you need a practical run-around which is both reliable and economical to run, in order to minimise fuel and servicing costs. For more advice on cutting your motoring costs, read How To Beat Fuel At £1 A Litre

For a low-cost car or other loan, visit the Fool's Personal Loan centre!

3. Save during pregnancy

It's a good idea to develop better budgeting skills before your baby arrives. What's more, mums-to-be won't be doing as much socialising or going to the gym during pregnancy, so the money saved can be put aside to help cover maternity leave. You'll find Best Buy high-interest savings accounts here.

4. Look out for vouchers and money-off coupons

Companies love parents and their spending power, thus many firms, such as Boots, have specific baby clubs which encourage parents to collect points and redeem them in-store. Keep your eyes peeled for any free offers and money-off vouchers.

5. Kill your interest bill

Why waste your hard-earned money paying interest on your credit-card balances, when you can enjoy up to a year's interest-free credit by transferring your existing balances to a 0% credit card? To view the Best Buys and learn the tricks to watch out for, read Take A Break From Rip-off Rates.

Check out the cracking cards in our Credit Card centre!

6. Join a baby-sitting circle

The cost of childcare comes as a shock to many new parents, which is why joining a baby-sitting circle makes sense. By getting together with a few friends and exchanging baby-sitting favours, you could save £30 per evening out.

7. Claim all State benefits

As soon as your baby is born, submit a claim for Child Benefit, which is a tax-free benefit currently worth £17.45 a week for the first child and £11.70 for other children. Note that Child Benefit is a universal benefit which is not means-tested, so every parent is entitled to claim it, regardless of their personal financial circumstances.

Also, you should check with your local benefits office or HM Revenue & Customs to see if you are entitled to claim Working Tax Credit and Child Tax Credit. Nine out of ten families are entitled to these Tax Credits, and only the wealthiest households are excluded, so don't miss out on this valuable help towards childcare costs.

8. Use real nappies

Real nappies, which are reusable, cotton or washable nappies, are easy to use and wash, and are better for your baby and the environment. What's more, cloth nappies cost far less, at under £200 for 2½ years, compared to £920 for disposables, which is a saving of £24 a month.

9. Give your child a financial head-start

Once your claim for Child Benefit has been processed, you'll receive a £250 voucher (£500 for low-income families) to be invested for your child in his/her Child Trust Fund (CTF). The beauty of a CTF is that it's a tax shelter into which a child's parents, grandparents, godparents, other relatives and friends can contribute up to £1,200 a year on his/her behalf. Over eighteen years, this can add up to a serious nest egg, as I explained here.

Visit the Fool's Saving for Children centre!

10. Make your own purées

Baby food is expensive, plus it's often not as healthy and tasty as home-made alternatives. Armed with a hand blender, you can quickly turn soft fruit such as apples, mangoes, peaches, pears, plums and strawberries into convenient meals for little ones. Eat your heart out, Annabel Karmel!

11. Claim childcare vouchers

When both our children were at a private nursery, my wife and I were spending around £1,300 a month on childcare. Hence, we were very grateful that her employer provided her with childcare vouchers. The first £55 a week of childcare vouchers come free of income tax and National Insurance contributions, which saves my wife a tidy £1,173 a year in tax. Hurrah!

12. Become a second-hand saver

Feeding, clothing and looking after a baby or young child is seriously expensive, and that's before daft parents start dressing them in 'designer' gear! Frankly, buying everything brand-new is completely barmy, because babies and toddlers don't care how expensive their clothes are or where they came from.

Hence, don't be afraid to borrow or buy second-hand basics or accept hand-me-down items from family and friends. Also, shop around online: eBay is particularly good for low-cost baby gear. In addition, a 'wanted' message on the notice boards at local nurseries and schools can yield rich pickings. Finally, once you've finished with something (especially maternity clothing, which is often good as new), sell it on again, via eBay or local notice boards.

That's all for now from this tired but happy father of two!

More: Use the Fool to compare credit cards, compare personal loans, compare savings accounts and compare mortgages!