Business

Our little darlings are strangling us financially

NEW BORN: The cost of raising a child from birth to 18 is now £160,692 for a couple and £193,801 for a single parent or guardian
Michael Kennedy

THEY say that one part of loving our children is wanting to strangle the little . . . darlings.

Well, the fact is that in the current climate it seems to be our children who are strangling us – financially speaking.

According to the Child Poverty Action Group, the cost of raising a child (excluding housing and childcare) from birth to 18 is now £160,692 for a couple and £193,801 for a single parent or guardian.

We wouldn't wish our children away, of course, but there's no harm in being aware of the situation that we as parents face.

New research shows that only around half of parents can make their income stretch to the end of the month, compared to two-thirds of those with no children to feed. A quarter of parents worry about their debts, compared to one-eighth of non-parents. And it's going to get worse.

The experts predict that this time next year, only one in 12 parents will have a few quid left over at the end of the month, compared to one in five non-parents, while if you look only at parents on average incomes, it falls to just one per cent.

And, of course, the burden of the debts that parents carry will become heavier with the anticipated rise in interest rates.

Parents are also far less likely to have built up savings or pensions, or have adequate insurances in place to protect their family financially against unexpected setbacks.

Bottom line: parents are much less financially resilient than non-parents, right across the board.

Are you a parent? If so, do you recognise yourself in the mirror we've held up here?

The key to battling through the coming years is to put together a balanced and comprehensive financial plan.

Here are just a few tips from the many we could suggest to you.

If you are just about to become parents, try to prepare by tightening your belt now and paying down any short-term debts you have, starting with the most expensive debts: credit cards, store cards, and other high-interest debts.

Try to build up a ‘safety buffer' equal to three to six months of essential expenses, remembering that your expenses will sky rocket once little junior arrives.

Decide if one of you wants to take time off work to raise your child in the early years. If not, compare the costs of childcare options. The difference between a nursery and a childminder can be considerable.

Some help may be available for childcare, but Northern Ireland has its own specific rules. Check nidirect.gov.uk to see what government allowances are available.

Bear your own needs in mind as well – in particular, try not to put your pension saving on the back burner. If you do, you will have an enormous amount of ground to make up later, and you'll have missed out on the growth those missed pension savings could have had.

Make a will and keep it up to date. You may wish to name guardians for your children, in case the worst were to happen to you both. Think about life insurance, so that your family would be provided for after your death, and consider critical illness insurance, in case you find yourself losing your income through heart attack, stroke, or some other serious illness.

None of this is very pleasant, but it's always a good strategy to stop for one second and consider all the worst case scenarios.

Once that's done, you can put the documents away in a drawer, and all you need to do is to chat to us once a year, to see that all's on track, and if it's not, tweak your financial plan as your situation changes.

It's certainly a better option than walking in the dark, with no financial plan at all.

:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com.