Welcoming a new member of your family into the world is one of the most exciting points in your life, so it’s important to get all the financial admin out of the way before they arrive. The average cost of raising a child in the UK to adulthood is £202,660, which works out to £11,250 a year so having a plan for expenses and income can save you future stress and frustration.
All employed parents are entitled to some form of compensation but being aware of any income changes with paternity and maternity leave will help you stay on top of your finances. Here is how you can manage your income and expenses in preparation for parental leave.
What to expect during paternity leave?
Paternity leave is a period of planned absence that is taken by fathers so they can spend time with their newborns. A father is typically entitled to either one or two weeks of paid paternity leave, providing they meet the eligibility criteria. The rate of Statutory Paternity Pay is the lowest of 90 percent of your average weekly earnings and is paid by their employers.
How to prepare for parental leave
1. Create a Budget
You need to be realistic when planning a budget for your leave and turn your attention to your outgoing monthly payments to get a broader picture of how far your income can go. By setting a clear parental leave finance goal, you can track your spending to ensure you’re operating within your predetermined budget and identify where you can make cuts.
2. Save in Advance
While having a baby is a life-changing experience, it dramatically impacts your finances. As soon as you plan to have a baby or fall pregnant, it is best to start saving long before their arrival. Putting money aside every month or improving your credit score to become eligible for a loan can help you get everything you need sustainably and responsibly.
3. Review Employee Benefits
Having a solid understanding of the benefits you are entitled on parental leave could provide some financial relief or flexibility. Many employers make parental leave an enjoyable experience for their teams by offering perks such as flexible hours, remote working or even childcare support.
4. Build an Emergency Fund
Having an emergency fund is good practice even if you’re not due to be new parents but it becomes even more vital with children. Aim to have a substantial emergency fund as you approach your parental leave so you have a comfortable safety-net in case any financial surprises should come your way.
5. Explore Childcare Costs
Childcare costs can take up a large portion of a family budget and exploring the different expenses will help you prepare in good time. Will your child need to go to a childminder or a play group when you return to work? If so, shopping around for the most competitive price while you’re on leave can save you stress in the future.