Brits spend £35,000 on their children by their fifth birthday
Parents in the UK spend, on average, £35,000 on their kids by the time they reach five years old, a new study has revealed.
Insurer Aviva asked more than 2,000 parents how much they spend on essentials and indulgences for their kids aged 0 to five and found they spend, on average, £7,026 a year - or £696 a month. This equates to a whopping £28 billion spent on the UK's four million under-fives.
The £35,000 parents spend in five years includes the cost of basics such as nappies and milk formula and extras such as toys and baby ballet classes. Babysitting and childcare costs topped the list of expenses at £95 a month (£1,140 a year), followed by essential baby/child equipment at £62.30 a month (£747.60 a year) and clothes, which cost £58 a month (£674.40 a year).
The cost of raising a child to age five varies widely across the UK, with parents in London paying the most at £894.30 a month (£10,731.60 a year) – more than double paid by parents in Wales and the North West (£4,900.80 and £5,182.80 a year respectively).
Peer pressure plays a part in parents' willingness to splash out on their young children. One in five (18%) admits they splash out to keep up with other parents, and more than a third (36%) of parents say they know of other parents who like to boast about how much they spend on their kids. However, most parents don't give in to their kids' demands, with only 14% admitting they buy things they don't need just to pander to their children's whims.
Despite the high cost of providing for their infant, more than half (52%) of parents are looking to their children's financial future by opening a savings account in their child's name. And more than a third (37%) have opened a junior Isa or Child Trust Fund. Looking even further ahead, 8% of the parents who took part in the survey have started saving for a house deposit for their children and the same amount of parents are saving towards their child going to university.
However, parents are not doing enough to protect their children in the event of their deaths: while 42% of parents of 0 to five-year-olds have taken out life insurance, only one in five has made a will.
Commenting on the findings, Louise Colley, protection director for Aviva, said: "As every parent knows, having children can be an expensive business but it's incredible to see how this stacks up over the years. This is why it's so important for parents to consider how they might cover the cost of raising a child if they were to unexpectedly lose an income through illness or, even worse, bereavement.
"It's reassuring to see that four out of 10 parents with under fives have taken out life insurance, but we'd encourage the remaining six in 10 to consider the 'what ifs' and take steps to protect their loved ones' futures. Aviva is offering a year of free life cover worth £15,000 per child, per parent, for parents who register before their child's fourth birthday, so this is a fantastic simple way to get some peace of mind, knowing that some cover is in place."
How much you can spend on raising a child to age five
|Essentials/activities||Monthly costs||Annual costs|
|Essential baby/child equipment||£62.30||£747.60|
|Leisure/family trips out||£56.20||£674.40|
|Extra holiday costs||£55.90||£670.80|
|Toys and games||£53.30||£639.60|
|Special foods for children/formula||£41.90||£502.80|
|Equipment for school/pre-school||£39.10||£469.20|
|Classes for children (soccer, baby ballet)||£38.80||£465.60|
|Entertainment (DVDs, books, tablets, etc)||£37.30||£447.60|
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).
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 type of derivative often lumped together with options, but slightly different. The original derivative was a future used by farmers to set the price of their produce in advance before they sowed the seeds so that after the harvest, crops would be sold at the pre-agreed price no matter what the movements of the market. So a future is a contract to buy or sell a fixed quantity of a particular commodity, currency or security (share, bond) for delivery at a fixed date in the future for a fixed price. At the end of a futures contract, the holder is obliged to pay or receive the difference between the price set in the contract and the market price on the expiry date, which can generate massive profits or vast losses.