Cost of childcare a major deterrent
The cost is approximately £6,500 per year for the average UK household, with grandparents playing an important role in keeping costs low. Over 47% of respondents said the high cost of childcare is putting them off having more children.
Parents are cutting back on the amount of days they work to lower their childcare costs. Almost 40% of respondents had cut back their working hours in the last five years due to the cost of childcare. This applies to more than double the number of women (49%) than men (22%)
Over 71% of respondents rely heavily on extended family as the main source of childcare – particularly grandparents.
The expense of childcare is a turn-off, but many parents still underestimate the cost of raising a young child. The report showed the average estimate was £131,400, however it is actually closer to £199,000, according to the NatWest ‘cost of raising a child’ calculator. If parents hope to send their child to university or private school, the costs will be even higher.
There remains poor awareness of government schemes designed to help with childcare costs. Only around half (47%) were aware of the new Tax-Free Childcare Scheme, which could save them up to £2,000 per year. Parents could also save £6,384 per year, per child, though the 30 hours of free childcare provided by the government.
Cash is still king for those saving for their children. While parents save an average of 14% of household income, most of this still goes into cash savings: 64% are putting their money into savings accounts, followed by cash ISAs (37%), stocks & shares ISAs (18%), pensions (13%), unit trust funds (9%), direct investment in stocks (7%) and direct investment in bonds (4%). The reliance on cash may mean that savings aren’t sufficiently protected against inflation.
Svenja Keller, head of wealth planning at Killik & Co, said: “We believe in planning ahead – of setting aside small amounts and doing so regularly. That way, parents benefit from the power of compounding on their savings and investments. Start small, start early and seek advice – this is a mantra all parents should keep in mind.”
Related: See YourMoney.com’s video on How and why to set up an ISA and/or pension for your child.