7 important financial tasks you will want to do when having a baby
Posted onHaving a baby can be one of the most important and rewarding milestones in your life. That’s why there can be no better time to sort out your finances, to ensure there aren’t any bumps in the road.
If you’re expecting a child soon, getting your finances under control can give you one less thing to worry about. Read on for seven financial tasks you should do when having a baby.
1. Explore your protection options
According to a report by insurer Royal London, starting a family is one of the most common triggers for getting financial protection, and for good reason. Having protection in place can be one of the best ways to safeguard your finances and give you invaluable peace of mind.
If disaster were to strike, such as either you or your partner being made redundant, having financial protection in place can help you to minimise the impact that the disruption would have on your life.
For example, if the worst should happen and your partner passes away, this may put you in a difficult financial situation. This is where Family Income Benefit, a type of life insurance, can help as it would pay you a monthly tax-free income so that you could continue to support yourself and your child.
There are many types of protection to choose from, so if you want to protect yourself but aren’t sure which is right for you, you may benefit from speaking to a financial adviser.
2. Consider a budgeting strategy
Whilst having a baby is wonderful, you may need to consider the impact that a child will have on your household finances, and plan accordingly.
According to a report by insurer LV, published in the Times, the average cost of looking after a baby for the first 12 months is £6,000 – equivalent to £500 per month.
This can be a substantial increase in living costs for many people, so if you want to ensure that your finances can absorb it, you may want to create a household budget.
3. Find out how much maternity pay you’re entitled to
If you’ve been working at your company for at least six months, you should be entitled to maternity leave and maternity pay.
Typically, your company will pay you Statutory Maternity Pay at 90% of your average weekly earnings for the first six weeks. After this, you will get £151.20, or 90% of your weekly earnings (whichever is lower) for the next 33 weeks.
You can use the Maternity Pay calculator on the government website to find out how much pay you could get whilst on leave.
Some companies have their own maternity schemes, so it’s important to check your company’s policies with HR. Bear in mind that some employers may require you to pay back some of the money if you choose not to return to work.
4. Take advantage of government support
When your baby has arrived, it’s time to claim Child Benefit. You can apply at any time after your child has been born, but the government typically only backdates payments by three months so it’s best to get your application in as soon as possible.
In the 2020/21 tax year you can claim £21.05 per week for your first child and £13.95 per week for other children. Head to the government website to find further details and apply for Child Benefit.
Bear in mind that you may have to pay back some of your Child Benefit in tax if either you or your partner have an individual income of more than £50,000.
5. Consider opening a Junior ISA
One of the best ways you can help to prepare for your child’s future is by opening a Junior ISA on their behalf. This can be a great way to build a tax-free nest-egg for your child which they can access when they turn 18.
In the 2020/21 tax year you can pay up to £9,000 into a Junior ISA.
There are two types of Junior ISA. The first is the cash Junior ISA, in which the money is held in cash and you will receive all your interest free of tax. The second is a Stocks and Shares Junior ISA, where your money is invested instead, and you do not pay Dividend or Capital Gains Tax on the returns.
Note that, with a Stocks and Shares ISA, the value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
If you are unsure about which option is best for you, you may want to speak to a financial adviser who can help you to make an informed decision.
6. Make or update your will
Nobody likes to dwell on their own mortality, but if you’re having a child, it can be a good time to update your will. If you don’t already have a will, this can be a good opportunity to make one.
A report published by Which? found that more than half of Brits don’t have a valid will, despite the risks this may pose. For example, if you were to pass away without having a will in place, there is no guarantee that your child would be cared for by the people you want.
Having a will in place can be a good way to get peace of mind, allowing you to rest easy in the knowledge that if you were to pass away, your child would be cared for by the person you nominate.
7. Speak to a financial planner
Parenthood can be one of the most rewarding experiences a person can have. However, as we’ve seen, there are many financial implications to consider. When you’re caring for a child, money issues are probably the last thing you want to think about, which is why you should consider speaking to a financial planner.
Working with a planner can help you to make informed decisions. They will help you make plans for your child’s future, work with you to develop your own financial plan, and make sure your family are fully protected.
Get in touch
Black Swan are delighted to be working with MyBump2Baby as the preferred financial adviser for their London based clients.
We’re here to provide financial advice and peace of mind to all MyBump2Baby clients at this important time of their lives. If we can help you with any financial issues or queries, please email us at enquiries@blackswanfp.co.uk to find out how we can help.
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