Keeping on Top of the Family Finances

It'll come as no surprise to learn that having a baby brings with it some big changes to the way you manage your finances.

Obviously, you'll be paying for one more person - and they cost a lot more than their small size would suggest - but there will also be a lot of financial assistance that you're entitled to.

A lot of new parents worry about how their finances will be affected by a new addition to the family, but as long as you're careful it might not be anywhere near as hard as it may seem right now. Here are a few tips for staying in control of your money.

Creating a New Budget

You'll have a whole range of new costs to consider when your baby arrives. Baby food, nappies and clothes are just a few examples, and you may be surprised at just how fast these things get used up.

If you already live by a budget, it's time to make a few changes to it, and if you don't, now's the time to start. A budget helps you ensure that you always put enough money aside for bills and other essentials, and helps you work out how much you can afford to spend on other things. Without a budget, it's easy to overspend, which could land you in debt.

Start by noting down your total monthly income, followed by all your regular outgoings (including non-essentials). In your case, this will include things like baby food and nappies, but don't forget your other costs - bills, TV subscriptions, etc. The more you write down now, the easier it'll be to keep track during the month. Deduct the total cost of your essential outgoings from your take-home income, and what's left is safe to spend as you wish.

If at any point you find you're close to spending more than you earn, do what you can to cut back on a few non-essentials and then re-assess your budget.

Saving

Even though your costs will be higher than they used to be, it's still important to keep a regular savings account going, as long as you can afford it.

As well as providing security in the long term, savings also protect you against unexpected costs, and as such could save you from getting into debt if you run into an emergency. This is all the more important now you have another person to look after.

The more you can afford to save, the better, but you should obviously keep some money in your current account each month to deal with smaller costs.

Checking your Entitlements

Having a child opens you up to a range of benefits and tax credits designed to help you with the cost of parenthood. A few examples include:

Child Benefit - currently available to parents with children under the age of 16, paid on a per-child basis. This currently comes to £20.30 a week for your first child and £13.40 for any children after that.

Child Tax Credits - additional support for parents who are bringing up children, regardless of whether they are currently working.

Childcare Vouchers - offered by a number of employers to help with the cost of childcare. You can get vouchers in return for a reduction in pay called a 'salary sacrifice'. However, claiming these vouchers may affect the amount of tax credits you can receive, so you'll need to take this into account and see which benefits would help you the most.

October 2010

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