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How to cope with the financial pressures of having a baby by Sarah Pennells,
author of ‘Financial Bliss’


It is often said that if parents worked out how expensive having a child would be, they would never take the plunge. Thankfully, few seem to do the sums, or if they do, they do not let it put them off.

Estimates of the cost of looking after a child until they reach eighteen vary widely. One investment company reckoned it was £43,000, or £46 a week. Although many parents would probably complain that their children become more financially demanding as they get older, it is the first few months and years that can put real pressure on family budgets.

That is because you have to pay out for all those baby-related extras at a time when money can be really tight.  Your joint income may fall by 25% or more if you take maternity leave. Money commitments that were manageable before you were planning a family may put a strain on the budget now. And if you do not find it easy to manage your own money – either in your own right or as a couple – it could be a difficult time.

It is not just the fact that you have less money that can cause problems. Even if your pregnancy is quite straightforward there will be times when you feel exhausted and may suffer from morning (or afternoon!) sickness. And at times like that you are less able to cope with things that normally would not have been an issue.

Denise Knowles, a relationship counsellor at Relate, says that the pressures of having a baby can easily trigger conflicts over money. “Having a baby can be a very confusing and conflicting time. You have less money, but there are all kinds of things to buy for your new baby.” Some mothers-to-be who are used to earning their own money find it difficult when they have no money of their own and have to rely on their husbands or partners financially.

This change in status within the relationship can mean that resentment builds and what starts off as a financial difficulty can become a relationship problem. In that case, the best advice is to try and talk: try and make sure that you you’re your conversations focused on the particular money worry you have. Work out what is really bothering you and whether it could be resolved relatively easily. Perhaps the partner who has stopped working does not like the idea of having to account for every penny they spend, so one solution could be for them to be given some of their ‘own’ money every month to spend as they choose. Or maybe you are worried that you or your partner will find it difficult to manage on your lower income.

Mother with baby

Other problems can develop around work. The new mum may want her partner or husband to take a different job; either one that pays more or one that gives them more time to help at home, or they may feel annoyed that their partner is never there to help.

Often worry over debts can trigger the arguments. You will not be able to cushion yourselves from the financial impact of having a baby completely, but taking some simple steps should improve your position. Whatever you do, do not ignore the problem as it will not sort itself out.

If you owe money through personal loans or credit cards, try and cut down your spending before the maternity leave kicks in. Use the money you save to increase your debt repayments and, if possible, switch your loans to a more competitive rate and your credit cards to a 0% deal. 

Some banks charge a redemption penalty on loans if you repay them early, so check the small print of the loan agreement or contact the lender if you are in any doubt. There are plenty of financial comparison web sites that will give you details of loans and interest rates; just bear in mind that the interest rate that lenders quote in their adverts is not one they have to offer every applicant, so you may not qualify for the advertised interest rate, particularly if your credit history is not very good.

If you are moving your credit card balance to a 0% deal, watch out for balance transfer fees, which can be up to 3% of the amount you move. Whilst you will not have to pay interest on the balance, the transfer fee is not interest-free. 

If you do not know where your money is going, try keeping a spending diary for a while.  The idea is very simple: you write down what you spend, when you spent it and what you spent it on. It works best the longer you keep it (because then you include more of your irregular spending, such as presents and holidays). Just the act of keeping a record of your spending is often enough to show you where savings can be made.

But if it does not do the trick, you should draw up a budget. This means working out how much you have coming in every month and how much you spend on things like rent or mortgage, food, gas, electricity etc. If you need to make cutbacks, see if you can save money by switching your energy supplier or your mobile phone company. And practice your bargain hunting skills! Check out shopping comparison sites like pricerunner or kelkoo, try supermarkets for baby clothes and eBay or the recycling network freecycle  for other items.

If money is really tight and you have a flexible mortgage, you may be able to make underpayments on your loan - where you pay less than the full monthly amount - or take a payment break (where you miss payments for a few months). Not all flexible mortgages allow these and some will only let you underpay your loan once you have built up a reserve through overpayments.  Payment breaks or reduced payments can give your finances valuable breathing space, but you will be charged interest on payments you have missed, so it is best kept as a short-term solution.

Make use of help that is available, whether it is support from friends, freebies from supermarkets and nappy manufacturers (you can normally sign up for these online) or state benefits. You cannot claim child benefit until you have registered your baby’s birth, but you should receive an application form in your ‘bounty pack’. Child benefit is worth £18.10 a week for your first child and £12.10 a week for any other children.

Once you have started claiming child benefit, you will be sent a voucher for £250 (or £500 if you are on a low income) so you can open a child trust fund (CTF) for your child. It is a special account for children where money can be paid into a bank account, or invested in shares. When your child reaches 18, they can cash it in and there will be no tax to pay on the proceeds of the account. The tricky part is deciding which type of account to open and many parents have complained that they are given too much information and not enough advice.

However, if you cannot decide which type of trust fund account to open, the government will open one for you (after 12 months).  My advice is to have a think about whether you would prefer a savings account or one that invests in shares, and open it as soon as possible. You can always switch to a different company or different type of account if you feel you have made the wrong choice, but at least this way you are in control. Then, all you have to do is to encourage friends and family to pay Christmas and birthday money into the CTF (they can pay in up to £1200 a year between them).

Most parents are also entitled to claim child tax credit, although this benefit has come in for a lot of criticism for the way the claims process works. I would still advise you to apply if you think you are eligible though, but be prepared to follow your application up. In simple terms, you are entitled to receive child tax credit if you earn less than £66350 as a household (for the first year of your child’s life only, the limits go down by around £6000 after that).

The child tax credit is awarded for the full tax year (i.e. from April to April), but if your circumstances change during that year (perhaps because you have received a pay rise), you must inform Revenue and Customs as soon as possible. Working out how much you may get is very complicated, but it can add up to several hundred pounds a year or more, which is not something many families can afford to turn down.

Financial Bliss Read more in Financial Bliss by Sarah  Pennells  
ISBN:  9780273715047     £9.99



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