Parents are racking up £2,700 in debt as they struggle to make ends meet while on maternity or paternity leave.
More than 300,000 parents are using credit to meet costs as they take time off work to care for their newborns, according to research by credit report provider Noddle.
One in four parents is having to rely on credit during maternity or paternity leave, that’s despite the fact that 53% of parents have set aside £3,000 in savings in advance of taking leave.
Parents are underestimating the costs of caring for a new baby while on a reduced income by as much as £500 a month.
Jacqueline Dewey, managing director at Noddle, says: “Having a child can be one of the most exciting, joyful times in our lives but, financially speaking, it can be tough.
“Parents have to try to factor in all of the costs of caring for a new baby such as nappies, clothes, toys and equipment, all while on a reduced income.”
Of the 1,004 parents Noddle polled, some 53% of parents say they were anxious during their leave and more than a third felt unprepared for the costs involved in parenthood.
Meanwhile, 35% of parents end up returning to work earlier than they had planned to because of money worries and 48% have to stick to a strict budget to keep costs under control. Others rely on their overdraft or take a second job to make some extra income.
Noddle says as well as setting a budget and saving, parents-to-be should speak to other people who already have children to find out what they might need to buy and how much they may have to spend.
Parents should also be sure to claim allowances, tax credits and child benefits they may be entitled to and register for the NHS Maternity Exemption Certificate for free prescriptions and dental care.
Ms Dewey adds: “Preparing to go on parental leave is a really busy time, but it’s important to do as much budgeting as possible to help reduce any financial anxiety.
“Using credit can be a good short-term solution, but it should be managed correctly or could affect your credit score and potentially your ability to get credit for larger items as your family grows, such as a new home or bigger car.”