The cost of kids
We all know that kids are expensive, but have you ever stopped to think just how much they cost? According to figures from LV=, raising a child to age 21 will set today's parents back a staggering £180,137. Working out at a monthly sum of £715, this is enough to clear a £96,000 mortgage fixed at 6.75% or to build up a pension fund worth £256,000.
The friendly society found that the costs were so huge that eight out of 10 parents have put some of their own plans on hold to pay for their children. These include holidays, career changes and financial planning for themselves.
It's not surprising. The bills start mounting up before they've even put in an appearance. Taking vitamins such as folic acid and selenium to prepare for conception will set you back around £15 a month. And, once you are in peak condition, you can pay another £15 for a pregnancy kit to find out whether you are expecting.
Pregnancy itself will cost you, too. According to figures from Pregnancy & Birth, expectant mums spend around £50 on baby books, £48 a week on healthy food and vitamins and £200 on maternity wear. Add in all the additional costs of things like special seat belts for your car and stretch-mark cream, and a nine-month pregnancy will set you back more than £2,000.
Plumping for a private birth will push costs much higher. For instance, a private midwife will cost between £4,000 and £5,000, according to Private Healthcare UK. And a delivery at the celebrity London hospital, the Portland, will cost up to £10,000.
No stopping the costs
Whether you go private or NHS, once they're born, the costs really start to rocket. LV= puts a figure of £7,867 on the first year alone, with this money going on everything from toys and clothes to babysitting and food. It doesn't get any cheaper when all the baby baths, carriers and prams are packed away. By the time junior hits six, annual expenditure increases to £9,468, and this is only beaten when they head off to university and parents can be expected to fork out an average of £12,153 a year.
Before university, key areas of expenditure are childcare, food, clothing and holidays. But even relatively low-budget items such as pocket money can prove costly. Figures from Halifax's annual Pocket Money Survey found that the average amount a child receives is £8.20 a week, rising to £11.71 for London children.
Even the tooth fairy will be after her share of your hard-earned cash. Research by The Children's Mutual found that the average tooth has a price tag of £1.05, making the tooth fairy worth a sweet £20 billion. Children living in London and the South-East benefit most, receiving an average of £1.14 a tooth, which makes their teeth worth £22.80. Conversely, with an average price of 95p, Welsh children find their smiles are worth just £19.
But two areas of expenditure are significantly bigger than others - childcare, at £49,092, and education, at £46,778, of which £32,478 will be swallowed up by a three-year university course. Alarmingly, the cost of university education is escalating dramatically. In the last year it has risen by 26%, due to the increase in university tuition fees introduced in 2006.
Putting a child through a private school will bump the costs up even further. Figures from the Independent Schools Directory show that it costs an average of £71,050 as a day pupil and £201,500 if the child boards. It's highly unlikely you'll be able to give up supporting your child financially when they reach 21, either. Escalating student debt, currently standing at just under £20,000, means that more and more children are delaying their first steps into adult life.
For instance, the average first-time buyer is now 33, up from 31 in 1995, and a growing number of them are getting their deposit together by moving back in with their parents or asking them for financial assistance.
Although the costs are enough to deter some people from becoming parents, every year nearly 670,000 babies are born in the UK. For many of these parents, there are a number of ways to reduce household expenditure so there is more money to spend on the new arrival.
Possibly the biggest saving can be made on the mortgage. Switching to a cheaper deal can save you hundreds of pounds, especially if you are on a lender's standard variable rate.
Even if you've already got a good deal, you might want to review your mortgage to make it more suitable to your new financial circumstances. A mortgage that allows payment holidays can help when cash is short, or you could extend the term to reduce the monthly repayment. However, with each option you would end up paying more in interest over the term of the mortgage. Depending on the deal you pick, you may need to pay fees to remortgage, but it may be a price worth paying for reduced monthly mortgage payments.
As well as your mortgage, it's worth reviewing other areas of your finances to trim costs. If you're paying interest on a credit card, look to switch to a lower rate or zero-rate card.
Likewise, it's worth shopping around for cheaper deals on your insurance. Moneywise offers users a comparison service to find the best car, health and home insurance for your needs.
You can also shave money off the cost of your utilities. Comparison sites allow you to compare the cost of gas, electricity, telephony and even broadband, so you can be sure you have the best deals, freeing up more money to help with the growing price of raising a family.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.