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Having a baby and your finances: seven top tips

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23/04/2018
We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be entitled to the state pension, but if you’re planning to have a baby, here are the things you should consider.

1) Find out how much maternity/paternity pay you will get

As long as you’ve been working for your company for 26 weeks by the time you give birth and earn more than £95 a week you will be entitled to statutory maternity or paternity pay (SMP), but this won’t cover your whole salary. Companies only have to pay 90% of your average gross weekly earnings for six weeks, followed by 33 weeks at the lower of £123 a week or 90% of your weekly pay. The self-employed are also entitled to a government allowance.

Some more generous employers may add a little on top – you’ll need to contact your HR department to find the exact details or check your contract.

2) Make a will

This is crucially important, particularly if you are not married. If you have a baby, particularly if you give up work, you need to make sure your partner’s life insurance, share of the house and any death in service benefit would come to you if they die. Making a will is straightforward, not usually expensive (c. £150) and vitally important in ensuring your child is properly protected.

3) Don’t lose track of your pension(s)

Lisa Lloyd, wealth planner at Sanlam UK, says: “If you’re the person taking a career break, I’m guessing that the last thing on your mind is your pension. It’s so easy to lose track of them – especially if you’ve had several employers over the years. Now is a good time to consolidate, pulling them into one place such as a personal pension. This is easier to do than you think.

“Just because you’re not working, doesn’t mean you can’t save into a pension. If your partner is a high earner, it makes sense for them to pay into a pension on your behalf. They can invest up to £3,600 a year, inclusive of tax relief.  This is especially beneficial if the earner is nearing their annual pension allowance (usually £40,000) or is in tapered allowance territory (where their annual allowance reduces the higher their salary is).”

4) Life and critical illness cover

Lloyd says it’s easy to think that the person staying at home looking after the kids doesn’t need life cover because they’re not earning a salary. “What most people forget is that their role has a currency, and if they were to be ill or die, then it would cost money to pay someone else to carry out those duties. For childcare, that can amount to a lot – around £25,000 per year, per child. In comparison, the cost is invaluable to insure and protect you and your family, against a critical illness or death. In my opinion, that’s worth every penny.”

5) Budget to live on one salary

Childcare costs are high and returning to work is not always easy. Previously sympathetic employers can turn nasty (make sure you know your rights). As such – where possible – budget to live on one salary, at least for a short period of time.

6) Know the benefits you can receive

If you are at least 25 weeks pregnant you can claim a one-off, tax-free ‘Health in Pregnancy Grant’ of £190 from the government. There are also other benefits available, such as free dental care.

7) Get saving…

…for you, for the baby, for the future. Children are expensive and you may find that you are not in a position to earn the same amount. You’re going to need a nest-egg. So think twice before buying the expensive Bugaboo pram, and consider university fees instead.

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