The cost of starting a family in your 40s
Are you starting a family later in life? You're not alone. The birth rate among women aged over 30 has been rising steadily over several years, with the biggest jump among women over 40.
The number of women in their 40s having a baby has almost quadrupled over the past 30 years, according to figures from the Office for National Statistics. In 1982, there were 7,466 births in England and Wales to women aged 40 or more. Latest figures show that by 2013 the figure had soared to 29,158.
Yet while starting a family at any age is a happy occasion, a new baby can have big financial implications in later life, even if you've got plenty of spare cash. After all, you're taking on new responsibilities just as you're hitting your peak earning years, and when you have a limited time period before retirement.
There are several considerations, some of which might be worth discussing with a financial adviser if you're unsure what action to take.
Consider your career
It can be a shock suddenly taking time off from work to have a baby if you've spent decades building your career. "You may be giving up a bigger salary if you take time off to look after your baby when you're in your late 30s or early 40s," says Sarah Pennells from financial website SavvyWoman.co.uk.
If your employer offers a good maternity package, you might be cushioned from the financial blow but you could be stuck on statutory maternity pay (SMP) of around £138 a week after six weeks.
On the UK average salary of £23,889 a new mum only getting SMP loses 60% of her gross income while on maternity leave. The proportion rises to 65% on a salary of £30,000, 70% for £40,000 and 74% for £50,000.
If you're established in your career, the solution may be to consider asking for flexible working, job share or to go part-time, says Pennells.
However, any sudden drop in income needs some forward planning, adds Kusal Ariyawansa, chartered financial planner at IFA Appleton Gerrard. "Hopefully, you'll have some savings in place to cover times when you're short but if not, start slotting away money now, ideally before the baby's born, if you don't have plenty in place." Keep these in cash, so they're easily accessible, either in easy-access Isas or savings accounts.
The cost of IVF and ways to pay
One in every 50 babies born in the UK is the result of IVF, and you're more likely to need this treatment if you're trying to conceive when you're older.
Three rounds should be offered to all women under the age of 40 with 'unexplained infertility', provided they've been trying to conceive for two years, and one round should be offered to most women aged 40 to 42. However, whether NHS funding for IVF is available depends on where you live, with some regional clinical commissioning groups (CCGs) limiting treatment to younger women.
The majority of IVF treatment is funded privately but this is expensive, at between £6,000 and £15,000 (at some London clinics) for each cycle. This price may or may not include other costs such as consultations, counselling and drugs, so remember to check the fine print before you sign up. Some will offer a reduced rate if you sign up for more than one cycle.
Anyone being treated privately needs to meet the particular clinic's eligibility criteria, which will include several factors such as your age and circumstances. Clinics vary in what they offer, who they will treat and at what price, so search for the one that meets your needs and budget.
Additional expenses you need to consider include time off work and the cost of travelling to and from appointments. Remember, there is no legal right to time off work for fertility treatment.
The reality for most couples is that they'll have to borrow the money. You could opt for credit cards with 0% introductory periods on purchases, or personal loans are another option for larger spends, as rates tend to be lower the more you borrow. You could borrow for several rounds of IVF in one go, rather than taking out a new loan for each cycle.
Alternatively, talk to your mortgage lender about remortgaging, as this can be a cheap way of raising extra cash. But whichever option you choose, make sure you can afford repayments. You don't want spiralling debt to be another stress when you're undergoing fertility treatment.
Take out life insurance
It's a fact that isn't pleasant but if you start a family when you're older, there's statistically more chance of suffering a serious illness before your children are financially independent. This makes it particularly vital to get the right cover in place to protect your family.
"If you're unlucky enough to not reach a ripe old age, you want to ensure the new arrival doesn't suffer financially because of this," stresses Blair Cann, senior partner at IFA M Thurlow & Co.
Put life cover in place ideally to meet several years' worth of salary, all debts including your mortgage and some childcare expenses and education costs. After all, the average cost of bringing up a child is more than £225,000, according to the Centre for Economic and Business Research.
If you're self-employed, the stakes are higher if you cannot work because of illness or disability. You could consider income protection insurance to pay out a tax-free income after a few months. A broker that can search the market, such as Lifesearch.co.uk, is a good starting point.
Draw up a will
Of course, nobody wants to think about the possibility of not being around to see your kids grow up.
However, it's vital to write a will that states who should be guardians for your children in the event you can't take care of them. Sit down and discuss this with your partner, as it's incredibly important should the unthinkable happen.
If you don't make a legal note of this, a judge makes the decision for you. "After all, your own parents may be less able to look after your children if you need them to as they approach old age," says Pennells.
Make savings a priority
Among the biggest challenges with having children later in life is saving money for education costs and your retirement at the same time.
"At the time when you'll probably be thinking about retirement, your children might be thinking about going to university if you had them in your 40s," says Jaskarn Pawar, chartered financial planner at IFA Investor Profile. Yet earnings can slump quite dramatically at retirement. "The result is that older parents might have to work for longer before they can afford to retire," warns Pawar.
Many parents want to help their children get a deposit together to buy their first property but you may be retired or nearing retirement when they want to climb the first rung. This makes saving towards their future as early as possible even more important. "You can build up a nest egg from the word go to pay out to the child some money at say 18, either to put towards university or a property deposit," says Cann. A Junior Isa is a good option for children's savings.
As a general rule, though, you should make your retirement savings the number-one priority. While you can borrow for other expenses, you can't borrow money for retirement. With proper planning, you can take care of your children financially while making sure you have a sound plan to take care of yourself and your partner, too.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
Changing mortgages without moving home. Property owners chiefly remortgage to get a better deal but some do so to release equity in their homes or to finance home improvements, the costs of which are added to the new mortgage. Even though you’re not moving house, you still need to engage solicitors, conveyancing and the new lender will require the property to be surveyed and valued.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.
Income protection insurance
If you can’t work in the event of sickness or illness, income protection insurance aims to give you an income, with the amount of income set by you up to 75% of your gross (before tax) income with the premiums varying by how much of your salary you want to cover, as well as your age and health and when you want to start receive any payouts. Any payouts from income protection insurance are tax-free and usually continue until you recover, reach your selected pension age or the period of cover specified in the policy comes to an end. Income protection insurance does not cover redundancy but you can buy it as a bolt-on.