Saving for a New Family
It is estimated that the cost of bringing up a child during the first five years of life is £46,695. With this in mind, here are some top tips for new families on a budget.
When starting a new family one of the most important things to do is to devise a realistic budget. It is a good idea, initially, to save the money that you would have otherwise spent on booze, going to the gym etc when you are pregnant.
This extra money will come in handy once the baby is born or when the Statutory Maternity Pay sets in.
When setting up your budget, it is also a good idea to look into the benefits you are entitled to claim.
All families are entitled to Child Benefit, and this will also trigger off the delivery of a £250 Child Trust Fund (CTF) voucher from the government that you invest on behalf of your child.
What is a CTF?The Child Trust Fund (CTF) was introduced by the Government in April 2005 as a long-term savings account for children and under this initiative children born on - or after - the 1 September 2002 were eligible to receive £250 for their parents to invest on their behalf, or £500 for lower income families.
A CTF can be invested in one of three ways, depending on how much risk the parents wish to take - stakeholder, non-stakeholder shares and non-stakeholder savings.
Once the voucher has been invested, parents and relatives can top up the account to a maximum of £1,200 per year.
Children have a personal tax allowance which means that they will not pay tax on the first £5,225 of income and the first £9,200 of capital gains in the current tax year (2007/08). However, if you as the parent decide to open a savings account or invest money on behalf of your child, only the first £100 of interest earned or income received each year is considered as belonging to the child, making it taxable against your earnings. With a CTF, this rule doesn't apply as the accounts can be topped up t £1,200 per year tax-free.
The rules on when you can top up a CTF are fairly relaxed. While you can set up a regular monthly or annual standing order to pay into the account, ad hoc contributions are also possible, with minimum single contributions ranging from just £1 to £500, depending on the account.
Other Savings That You Can MakeMany highstreet stores, such as Boots and Mothercare, offer rewards to customers. For example, a points scheme that can be collected and then redeemed in store for products.
It is a good thing to take advantage of these because you will no doubt be buying a lot of baby-related items and these points will clock up really fast.
Babies make for very expensive little bundles of joy - even the basics can cost a small fortune. The good news is that a little savvy shopping can save you a lot of money. Check out the internet for cut-price equipment. You could also try putting up a request with details of things you would like to buy on your company's notice board or at the nursery.
And finally, make use of internet sites such as ebay and clear out your wardrobe once the baby arrives. Most maternity wear is good as new due to the fact that it has only been worn over a short period of time. During the pregnancy, ask friends and family if they have any old maternity clothes at the back of the wardrobes or stashed away in the loft/attic.