Cost of raising a child outstrips wage growth
The cost of raising a child has risen twice as fast as the average British income, leaving the UK as one of the most expensive countries in the world to raise a family.
According to research collated by KidStart, a shopping club for families, the real cost of raising a child (once inflation has been accounted for) has risen by 11% since 2003.
Meanwhile, the average cost of raising a child has increased by 55% in that time but the average income has risen by only 25%.
This means parents on the average UK single income of £21,473 a year could spend half of their income on their child, compared to 38% in 2003. The global average for percentage of income spent on raising a child is 13%.
Support and advice
Julian Robson, chief executive at KidStart, said: "With the recent cut in child benefit, parents will need all the support and advice they can get to help make their money go further and combat the rise in living costs."
The news comes at the same time Investec Wealth & Investment released figures showing more and more grandparents are gifting money to their grandchildren instead of their children.
According to research, 2.1 million British grandparents are providing financial support to their grandchildren, to the tune of £2,500 a year.
Nick Gartland, senior financial planning director at Investec Wealth & Investment, said: "We have seen many cases where a grandparent's son or daughter has lost their job and they have had to provide significant financial help to ensure their grandchildren don't lose out.
"Many grandparents are also conscious of the impact of inheritance tax and believe it makes more sense to see the younger generation benefiting from their assets during their lifetime."
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).