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How To Cut The Cost Of Having A Baby

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By Jane Baker | 20 March 2008

Recent research reveals the cost of raising a child runs to £8,859* every single year. That's more than £186,000 from the day your little bundle of joy arrives until he or she flies the nest at 21. I know that must sound like a pretty overwhelming figure for any new or soon-to-be parent. But before you fly into a blind panic, there are ways you can - and should - get financial help.

So, here's a rundown of all the state benefits you could be entitled to as a parent:

Statutory Maternity Pay

If you're an employee and you're leaving work to have a baby you'll be entitled to at least 52 weeks maternity leave. Statutory Maternity Pay (SMP) during maternity leave lasts for a total of 39 weeks. SMP provides 90% of your average weekly earnings for the first six weeks followed by a maximum of £112.75 per week for the remaining 33 weeks. You'll need to pay tax and national insurance as if SMP was your salary.

Your employer may well offer maternity pay which is more generous than SMP, so make sure you check this in your contract or with your HR department.

If you don't qualify for SMP you may be able to claim Maternity Allowance which provides similar benefits. For information on Statutory Paternity Pay for fathers visit here.

Child Benefit

Child Benefit isn't means-tested which means you'll be eligible regardless of your income as long as you're bringing up a child under the age of 16. You'll receive a tax-free payment of £18.80 per week for your eldest child and £12.55 per week for each additional child.

You should claim as soon as your child is born using the claim form you receive in your ‘Bounty Pack' from the hospital. Otherwise you can complete the form online at the HM Revenue & Customs website here.

Child Tax Credit

This is a means-tested benefit for parents and those responsible for a child under 16. The actual payment you'll receive is dependent on your annual household income. As long as it is no more than £58,175 - or £66,350 if you have a child under the age of one - then you could benefit. Child Tax Credits are essentially made up of two elements:

  • A family element - this is paid to any family with a least one child and is worth up to £545**
  • A child element - this is paid for each child in your family and is worth up to £2,085**

Working Tax Credit

Working Tax Credit is a payment to top-up the earnings of low-paid working people. Parents must work for 16 hours or more a week to qualify. Credits are based on your household income and circumstances such as other benefits you may be receiving. The benefit includes a childcare element, where you could get back up to 80% of your childcare costs based on a maximum of £175 per week for one child or £300 for two or more children.

Child Trust Fund

All children born on or after 1 September 2002 are eligible for a Child Trust Fund (CTF). The government will provide a voucher of £250 - or £500 for low income families - which can be invested in a CTF where it will grow over the long-term tax-free. Your child will then receive a further payment of £250 or £500 on their seventh birthday.

The CTF - which can be held in cash or, if you prefer, shares - can be topped-up each year with an extra £1,200 payable by parents, other family members or friends. Your child can't get their hands on the cash until they turn 18.

The CTF is designed to give children a financial head start so make sure you claim and invest your CTF voucher. Research suggests university education could cost almost £33,000 for a three-year degree course. Invest your child's CTF wisely and it could cover a significant chunk of that bill.  

For more information on CTFs take a look at Make The Most Of Your Child Trust Fund and Parents: Make 10% A Year.

Help for low income families

You may be able to get financial assistance through a Sure Start Maternity Grant. This is a payment if £500 which doesn't have to be repaid. To be eligible you or your partner must be receiving one of the following:

  • Income-based Jobseeker's Allowance
  • Income Support
  • Pension Credit
  • Child Tax Credit at a rate higher than the family element
  • Working Tax Credit where a disabled worker is included in the assessment

You can claim at any time between 11 weeks before your due date and up until three months after your baby has been born. To claim, fill in an SF100 Sure Start form available from your local Jobcentre Plus.

For more practical help on how to prepare your finances for the arrival of your baby, take a look at Twelve Top Tips For Families.

*= The annual Cost of a Child survey from LV= (formerly Liverpool Victoria). December 2007.

**= Rates for the 2008-2009 tax year

Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool.

At 20:51 on March 20 2008, Raasu said:

From the title I thought this would be about tips on how to reduce the amount you spend on your baby. For example, breast rather than bottle feeding, using real nappies, avoiding packaged baby food, using a baby carrier rather than a buggy, searching out special coupons for baby milk etc. But the article, disappointingly, is all about claiming benefits, which is cutting your own costs by loading them onto other people. Why not write an article which is actually about how to cut the cost of having your baby? That would be really useful for any parents-to-be.

At 11:47 on March 21 2008, hungary said:

When I had my children, I only breastfed, used real nappies (they lasted 3 children and then they were passed on to friends!), used a sling and baby carrier, asked for a food blender so I could make my own baby food, bought second hand clothes, and had the kids in bed. I must have saved thousands a year! And hard work it was not; only when I had to hand wash the nappies and didn't have a dryer. The article also fails to mention that if you are self-employed on a low income there is no such thing as Statutory Maternity Pay, Maternity Allowance etc.

At 16:23 on March 21 2008, philippasutton said:

I thought that Which? magazine had done a test which showed that if you use machines to wash and dry the traditional nappies, then the cost of running the machines pretty much balances out the cost of disposable nappies.

My tips for cost cutting:

start early on with a blank refusal to spend money on status symbols - for yourself or your child. No Nike trainers. Learn to resist pester power.

Don't be afraid to ask your parents, friends etc to give you what you need, not the pretty-but-useless stuff. You can discourage well-meaning grandparents from giving them sweets laden with undesirable additives while you're at it

Try using public transport, rather than the "car everywhere" solution. Not always possible, but most kids won't die if they are taken to school on a bus, or even have to walk. More ecologically friendly, less petrol purchasing, and gives you more time for the other possibilities.

Most of all: think for yourself. Don't let others tell you what you need, including well-meaning people like me! Sometimes you have to do things the expensive way - don't let yourself be burdened with guilt whether you decide to make them Do Without (which doesn't hurt) or Just Give In (which won't spoil them irreparably if not done too often).

At 07:50 on March 24 2008, mimote1 said:

I did most of the above and made big savings. If you do want to have all the baby stuff my other top tip would be to look out for your local National Childbirth Trust (NCT) nearly new sales. You can buy everything from cots, prams, washable nappies, toys and all the clothes you could ever want for your children up to about 7 years old. Not only is everything a fraction of the price but the money raised goes partly to this worthy charity. Also when you also have used all your items you can put then back in for resale too and often get most of your money back !

At 08:36 on March 24 2008, cazziesp4 said:

Join your local Freecycle group (Yahoo! Groups but you can join even if you don't have a Yahoo account)and some families maybe entitled to a Maternity Grant to help with buying things for your baby. We were suprised to be granted the £500. No harm in filling out the form. If you don't ask you don't get.

At 09:23 on March 24 2008, cheeseboard said:

Hungary's comments are not quite right. If you are self employed and on a low income, that doesnt rule you out of claiming statutory maternity pay. You are also eligible for Working Tax Credits and Child Tax Credits whilst being self employed. Look on direct.gov.uk for the eligibility criteria. I talked to my accountant who put me straight!!

At 11:48 on March 24 2008, FalseName said:

I don't know if it was Which? that compared the cost of nappies, as mentioned above, but I remember that the costs of washing assumed a boil wash and tumble drying; a much cooler wash using Ecoballs (instead of detergent) and letting the wind dry the nappies is much cheaper!

At 14:37 on March 24 2008, sticklebrick said:

I totally agree with Raasu.
My husband and I are in our mid-30s and thinking of having a first child.
We have a mortgage on an 2 bed ex-council property (we were never council tenants)- which cost around the £300k mark.

We earn just above the limits that would allow us to have access to any benefits, and it is going to be a real struggle for my husband to pay the mortgage on his own while I am on maternity leave. Luckily we have maxed out our ISA's and have some savings but we will be back to square one again - and with childcare costs on top of that it's unlikely we will be back in a situation I consider to be financially safe (ie enough savings to cover for 3-6 months if my husband was to be very ill or lose his job)

I really annoys me to see all the girls on the council estate I live on having babies left, right and centre which WE are paying through the nose in taxes for - when we are wondering is we can actually afford a child at all.

I was hoping this article would offer some advice for those of us who don't qualify for scrounging off the State...

At 18:10 on March 24 2008, feztrim said:

I can understand the resentment brewing.I have four daughters,breast fed them all for two years each,used real nappies for 3 of them,then out of desperation bought pampers for the 4th.My husband was working all the hours avaliable...we hardly saw each other...this was in the early 80's.I got no extra government help..apart from child benefit.He was out of work twice in that time,eventually ,because the girls were old enough to look after the youngest I managed to get a job.Meantime my marriage broke down,he lost yet another job...brother and father died,got no relief from work about this.Husband still unemployed and getting nothing for signing on. all I get is 18.80 a week for my youngest
My wage is 13,000 a year if I am lucky

At 22:24 on March 24 2008, sjt2203 said:

My fiance and I are planning to have a baby in the next year or two, but keep putting it off until we are in a safe financial situation to do so. I think if we carry on thinking like that we will never get around to having children! I am working full time and am worried that I will have to go back to work sooner than I would like to after having the baby due to having only one income to pay the bills with. But then we would have to pay childcare costs anyway. D'oh!

At 08:41 on March 25 2008, gbaines said:

In response to sjt2203: Our parents and grandparents brought kids up on a fraction of what we have available. Its all about having the right expectations and cutting your cloth accordingly. As a parent with 2 young kids, I can vouch that the positive impact of having kids will far outweigh any financial "hardship" you might perceive. Just get on with it!

At 09:33 on March 25 2008, billyboy121 said:

Gbaines, I was just about to make the same point, completely agree with you - my gran was one of 12, grandfather one of 14 - babies are expensive in terms of the big things like cot, pram, car seat (if lucky enough to have a car), clothes, nappies but much of this you can get cheaply if you look. Also, re sticklebrick's comment, don't envy those people on the estates living off benefits, in many cases they'll never be lucky enough to know anything else and it's not much of a life at the end of the day.

At 13:35 on March 25 2008, timmithemad said:

For completeness: The nappy test included all pollution (manufacture, shipping, disposal of nappy and contents) was done by the government and included the following assumptions:

1. You boil wash
2. You tumble dry on high
3. You iron your nappies
4. Washables are only used for 1 child and then thrown into landfill
5. Babies using real nappies urinate and defactate twice the volume of babies in disposables (really, not joking, it assumes that they are chaged twice as often in one part and then assumes that the acerage contents per nappy is the same in another part).

At 14:38 on March 25 2008, muffindell said:

I agree with sticklebrick, why should anyone be given a hand out for having children? After all the government doesn't force anyone to have them. Certainly give parents child benefits in the form of tokens redeemable against kids clothes and shoes, but not a cash handout to go down the pub, to buy cigarettes etc If you choose to have kids, realise it's not cheap, don't expect to have handouts, support them out of your own income. The Government should switch priorities and support the aged in the way they support single parents now, they are the ones who are near the end of their life and are unable to work for a living, unlike young single (or partnered for that matter) adults who should be able to fend for themselves.

At 13:24 on March 26 2008, helen77 said:

I actually found this article VERY usefull!! When I had my firstborn I didn't even bother to look into what benefits we may be entitled to cos I thought being married and owning our own home would write them off... however I have since found out we were entitled to a lot more benefits and lost out on them for months cos we didn't apply... I resent those who term it "scrounging off the state" - yes, maybe it is when you've never paid any taxes into the system (forgeiners/teenage singletons!) but both me and hubby have for YEARS and our parents before us - all of which was being used at the time to pay benefits to familes etc then - now it is our turn and I don't feel bad at all about applying for benefits which I am honestly eligable to get at this expensive time in our lives... it won't be long before kids are at school and we're both working full-time again and paying taxes into the system for the next lot of young families!! Don't get me wrong I really do resent those who 'scrounge' benefits either thru lying/cheating the system or after having paid nothing into it themselves but please don't brand honest working families with that same old brush!!!

At 13:54 on March 26 2008, Gavrielli said:

If your electricity provider meters you on a day rate and a cheaper night rate...do your laundry/dishwashing in the cheap period.

I found my night rate is about a fifth of the day rate cost.

At 13:57 on March 26 2008, Gavrielli said:

BTW - Although there are a lot of baby related costs, the article does not seem to consider *possible* baby related savings (gadzooks)...I mean savings/money not spent by virtue of the baby being around. Ex-smoking parents who cut down or stop. Same for drinking...cutting out to pub and cinema as much. Just a thought...

At 08:57 on April 02 2008, Spacetraveller said:

Bit late to comment on this article. But I thought helen77 should know that as a 'foreigner' I pay all the taxes that my colleagues at work do, and am entitled to nothing. Its a clause in my visa, that I cannot claim any assistance or benefits and pay the same tax that everyone else does. So when we do have children, my Scottish husband may be able to claim some assistance on our behalf but not me. Fair enough since I still do benefit from wider civic amenities and the NHS. But as an active part of this economy (since I earn, spend and pay taxes) I think people should reassess their assumptions that foreigners are just here to take and not put back anything.

At 17:31 on April 02 2008, helen77 said:

Just a reply to "Spacetraveller" - I did not mean to cause offence but after I'd posted I somehow knew that by using the term "foreigner" in this PC world we live in now I prob would.... please read my post carefully again and see that I refer only to those foreigners (and British!) people that have NEVER paid taxes - that's what my whole point was if you read it - I resent those who've never paid into the system only to drain it for most of their non-working lives! You clearly don't fall into this category.

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