Financial Preparations for Starting a Family

- by Elizabeth Redfern
Full Guide to Managing Family Finances – Chapter 2

Are you ready to start a family? Have you thought about the financial side of things? This chapter explores different mistakes that people commonly make when starting a family, and how to avoid them. Remember, early planning is the key, so don’t wait until you are in difficulties to take a serious look at your financial situation.

Cashfloat explores whether you are financially ready to start a family

Starting a Family

Starting a family is one of the most momentous events in the life of a young couple and it can change every aspect of financial stability. Having been free from responsibility, except for each other for an extended period, once a baby comes along it is a game changer. Not only do you have to pay for rent, food and transport, but there is also a looming list of potential money spending necessities that are going to go on for many many years.

Although you don’t need to be financially comfortable to start a family, it is essential that you budget for it. In this article, Cashfloat explores financial considerations you must take into account before starting your family.

Budget for the New Baby

Budgeting is essential for young couples who are thinking about starting a family. Once you understand exactly how much is coming in and going out every month, you can find ways to cut costs that will accommodate the extras needed when you bring your new baby home.

Creating a budget before the baby is born will help you to know exactly how much income you have and how much you spend every month on bills and other expenses. Use a budget planner that is available online or use the traditional method using a pen and paper to note down your income and expenditure. You can also do some research into how much it will cost for everything you will need for the baby. (Read our post on how to spend less than £2000 on your baby.)

Start Cutting Down Before Having a Baby

Many people underestimate the true costs of having and raising a child, although there are some benefits available from the government.

If you know that your income is going to be curtailed after the baby is born you should try to cut down on your expenditure as soon as possible. Split your expenses into essential and non-essential sections and then see where you can make savings.

For example, there are some simple ways to cut down on shopping by looking for two for one offers or shopping at a cut-price store. Buying foods in season will always be cheaper than buying expensive foreign fruits in the winter and taking advantage of special offers for toiletries and cleaning products is still worthwhile.

If you tend to spend quite a lot on non essentials like an expensive latte every morning or a gym membership that is not used to the full, you can make some simple savings by substituting a flask of coffee to take to work and by using the local park for a run.

Unfortunately, many couples overestimate the amount of money they have at their disposal and this can lead to a big shock once they turn into a family.

The cost of raising a child until 21 is more than £200,000 according to Cashfloat

Consider the upfront and ongoing costs of having a baby

Here are a few examples of upfront baby costs you need to consider:

  • Pram/Buggy
  • Cot and mattress
  • Car seat
  • Baby essentials – e.g. nappies, bottles, clothes etc.
  • High-chair
  • Childcare

It is easy to get carried away with buying cute clothes, fancy changing tables and enticing baby trends, etc. However, it is important that you shop for your baby with a budget. A budget will put the temptation of attractive baby luxuries into perspective. Believe me, your baby will not know the difference and your bank account will thank you for it later.

Many second-hand shops and websites sell baby furniture for a considerably lower price. You should also wait for sales before buying the most expensive baby items, like a pram and cot.

Top Tip:
Keep the boxes sold with the baby furniture! It will help you sell your equipment on once your baby outgrows it.

Friends and family will want to give presents so ask for larger clothes as well as newborn sizes and don’t be afraid of taking second-hand items which may have only been worn once or twice. There are endless tips for new parents on websites like Mumsnet so take advantage of the information on the Internet, and you can soon cut the costs of starting a family.

Research Parental Leave and Government Benefits

New parents are entitled to paid parental leave but for some this is not enough to live. Your partner might also be eligible for joint leave but it depends on how long you have each been working and how much you are paid. You can read all about maternity and paternity leave and pay on the government’s website.

In short, maternity leave is as follows:

  • After birth the new mother must take off 2 weeks (or 4 weeks if you work in a factory)
  • 90% of your average weekly earnings (before tax) for the first 6 weeks
  • £145.18 or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks
  • Unpaid leave until 52 weeks

£500 Grant to Those Eligible

You may be able to receive a one-off £500 grant after you have your first baby (or for multiple births when it is not your first child.) You can find out if you are eligible here.

It is very possible that you may not be able to manage on £145.18 a week financially. It is important to consider the length of your maternity leave and how it is financially going to affect you.

Prioritise Your Debt

One of the biggest mistakes that you can make when starting a family is incurring too much debt. If your overall take-home salary is going to be reduced for an extended period then getting rid of as much debt as possible before your baby is born is the ideal target to aim for. Once overall debts including mortgage or rent, personal loans and credit cards take up more than 30% of your salary, you will find it difficult to manage. This is especially true once you have to buy all the extras that come with a little one.

Borrowing money to buy a car may look like an easy option but you are just paying interest for something that is depreciating in value. So, keep your car for as long as it is viable, i.e. until repair costs outweigh the benefits of a new loan. If possible save some money towards a new car so that your overall borrowing is reduced.

Set up a savings account

One good way to make savings is to put aside a set amount each month into a separate account that is designed to cover the extras you will need for your new baby. Regular savings account with a fixed interest rate would be a good option and some accounts can run for six months as well as the yearly fixed rates usually on offer. Also, choose an account with a passbook instead of a card; this will remove any temptation to dip into the savings pot. After the baby is born, keep this savings account and continue saving for your child’s future.

Life and Home Insurance

Furthermore, now that you are planning to start a family, it is time to take your responsibility for your children to the next level. There is one essential financial element of life that should never be ignored yet often is, and that is insurance to cover the mortgage and the possibility of the death of a partner. You should also consider what would happen should you become too ill to work and how your family would cope with bills, so take out adequate ill health and disability policies. Add in the fact that the house also needs to be insured for both the building and the contents and you can see that insurance is to be ignored at your peril.

Planning your retirement

If you haven’t done so already, now would be a good time to start saving for a pension. If you can max out your contributions towards your pension while you are still young, you will reap the rewards with a healthy pension instead of relying on the small state pension that will probably be available in 30 years.


Most couples will make some financial mistakes, and some will find it hard to adjust to the more restricted lifestyle that being a parent inevitably brings. Being conscious of what those mistakes can help you to avoid becoming financially derailed and taking out short term loans with a direct lender when your baby is born.

Family finances - Cashfloat
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About The Author
Elizabeth Redfern
Elizabeth Redfern is a born and bred Londoner who loves the city life. She is a proud chocoholic who enjoys reading, jogging and eating - especially chocolate! Elizabeth attained a first class degree in Mathematics but chose to make a career out of her real passion, writing. She has published many poems and short stories, but decided to join the Cashfloat educational channel writing team because she is passionate about helping people take care of their finances leaving them free to enjoy the finer points of life - most notably (in her opinion), chocolate!
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