It's no secret that having a child drains your bank balance. The expenses involved in caring for a child are far-reaching and don't end when they turn 18. A child is a lifelong responsibility and you have to be financially prepared for this.
There's more to a baby's expenses than the immediate needs of nappies, formula and clothing. In the long run, there will be larger expenditures that you should consider.
The most obvious and possibly the most important factor is education. The average independent school education costs £11,457 per year, while a tertiary education costs an average of £8,354 annually on tuition fees alone. You need to devise a long-term plan to help you afford your child's education.
After education is covered, housing is another area where your child, once grown, will need your help. The cost of housing makes it difficult for first-time buyers to get into the market and children often turn to their parents for assistance.
As any financial advisor would tell you, the earlier you put together a financial plan for your child the better. At the first thoughts or signs of pregnancy you need to be considering this. When you initially seek Clearblue Advice regarding your pregnancy, you should also speak to your bank regarding setting up a long-term financial plan.
What better way to care for your child than to set them up for life?
There are a range of options to choose from and you need to be well-informed on each to make the right decision for you.
The Government's Child Trust Fund initiative has been scrapped, but alternative options exist.
If you have a monetary sum or asset you can put aside for your child's future, starting a Parental Trust is a secure option. The child must be under 18-years old have and never been married or in a civil partnership to benefit from the trust. With this style of saving, you also have to decide how much of the trust the child will have access to. This could be the entire fund, just the income or a discretionary amount given as intermittent payments. There is even an option to open an account where you can add income on behalf of your child.
Junior Individual Savings Account (Isa)
You could also open a Junior Isa. You can choose between a cash or stocks and shares account, which your child can't access until they are 18-years old. This option enables you to save substantially on tax, therefore increasing your return.
Self-Invested Personal Pension (Sipp)
Setting up a Sipp for your child is one choice. They won't be able to access the money until they are at least 55-years old, but knowing their retirement is set up for them gives them much more financial flexibility when they're younger.
Financial stability is a privilege and having a secure plan offers you peace of mind when your world is turned upside down by pregnancy.
Your ‘baby plan' may fall out of the window as soon as the baby arrives, but your long-term financial plans will be organised for the future.