How to prepare financially for becoming a parent as we approach peak birthday season: Sarah Coles

I recently analysed ONS births data from the past 30 years and discovered that September 26 is the most common day to be born – with an average of 1,927 births on the day each year. In fact, all of the top ten most common birthdays are in the second half of September, and the busiest individual day for births over the last 30 years was 27 September 2012, with 2,383 births.

This owes a great deal to people spending more time together over the Christmas holiday. Some of it also comes down to the fact that the oldest in the school year have a significant head-start on their peers, because they have had longer to prepare, so they tend to perform better academically. Some parents may have tried to time the birth to give their children the best possible start at school.

Whatever the reason, it means tens of thousands of families will have a new addition in the next few weeks. If you’re set to become a parent, the challenge will be enormous, so you have the most work to do. It starts with a new, tighter budget. When you have children, money will need to be stretched further. One of you may work fewer hours or need to pay for childcare, and then you have all the costs of the newborn on top. It’s a good idea to draw up a much leaner budget for this period, so you can cover the cost of the essentials, without running up debts.

If you can, try to start working to this budget before the baby comes along, so you have the chance to pay down expensive short-term debts and build your savings before your income falls and expenses rise.

It’s also worth investigating all the help that might be available. Make sure you claim child benefit, because it’s worth £1,407 a year for your first child and £931 a year for each child after that. If a parent earns over £60,000, at least some of it has to be paid back through the high-income child benefit charge, but it’s still worth making the claim and repaying a chunk of it. If they make over £80,000, instead of claiming it and paying it all back, they can claim it but opt not to receive the payments. This is important because claiming the benefit entitles a non-working parent to National Insurance credits that count towards their state pension. You need 35 years of contributions to build the right to the full state pension, so every year matters.

Parents with children aged between nine months and school age can also get 30 hours of free childcare for 38 weeks of the year. To qualify, you need to earn at least the minimum wage for 16 hours a week, and no more than £100,000. However, you need to apply for this care in plenty of time before term starts, and sign into your account every three months to confirm you’re still eligible.

You may also be able to get tax-free childcare, where for every £100 paid into a specific online account, the government will add £25 – up to £2,000 a year per child. Money in the account should then be used to pay for approved childcare. Children must be aged 11 or under, both parents must be working for at least 16 hours per week, and neither parent can earn adjusted net income of £100,000 or more. On top of that, there may be support available through Universal Credit, which can cover 85% of childcare costs.

It may feel difficult to think 18 years ahead, especially during the expensive early years, but one of the golden rules of family finances is that it’s always cheaper to plan ahead, and save or invest towards a goal, than it is to pay for things as you go along – or borrow. Try to consider life’s expensive milestones as far ahead as possible, so your savings and investments can do some of the work for you.

Finally, it’s easy for children to absorb any extra cash in your budget, but they’ll never stop being expensive, so it’s vital you keep an eye on your own needs too. If one of you stops work for caring responsibilities, or cuts back their hours, it’s important to have a conversation as a couple to consider how you can still keep up pension contributions, so your retirement income stays on track.

If you’re a grandparent, or part of the wider family, it’s worth considering what help you can offer. When the children are young, it can be particularly difficult to keep your head above water financially, let alone plan for the future, so this is where families can make a world of difference.

One of the most valuable things they can offer is help with childcare. If the child is under 12, the grandparents are under state pension age, and they have fewer than 35 years of National Insurance contributions, they may be able to boost their state pension at the same time. If the parent is working and paying National Insurance they won’t need their National Insurance credit, so they can complete a form and sign it over to the grandparent.

Not every grandparent wants to commit to childcare, but some may be prepared to help build a nest egg for the child’s future. When money is tight in the early years, it can be hard for parents to spare any cash to invest for children, so it can make an enormous difference if grandparents are able to pay into the child’s Junior ISA for a period. It’s a brilliant way to build a fund to help them start adult life, and if they make regular gifts from their surplus income, it could also help them cut a potential inheritance tax bill too.

If you’re the grandparent, it’s difficult to help your offspring stay on track through this period of their lives. It pays to offer any help and advice you can, but you also need to be prepared for them to make mistakes. It doesn’t matter if you put all the effort into making sure they were the oldest and smartest in their year, new parents are never perfect, so it can also make an enormous difference to know you’re there to help if the finances go awry.

Property prices

Figures out this week from Lloyds revealed that average house prices fell in the year to August – the first annual fall for almost three years. They’re only down 0.4% in a year, which is hardly a seismic shift, but a gradual change in direction like this can still ring alarm bells.

The reason that property prices aren’t falling further is that sellers are refusing to cut their asking prices and buyers are biding their time, so properties are starting to sit around on the market for longer and mortgage approvals have dropped. If the market grinds to a halt and prices remain depressed, it will make life even tougher because more buyers are likely to sit tight.

For now, the problem seems to be focused on the South of England, and the Northern regions are still seeing growth. What remains to be seen is whether a few more months of this will see contagion set in, as buyers lose confidence around the UK.