Expecting a baby can be a time of excitement and trepidation in almost equal measure. As the bump grows, the time of uncertainty draws ever nearer. Will you ever get a good night's sleep again? Is there space in your home for an extra person? And just how are you going to afford all this?
The cost of raising a child is a much-debated topic. Surveys regularly put the price of the first year alone in the thousands – although some manage to get started for far less. So often, the lists of baby "essentials" you come across as you prepare for your baby's arrival contain items that you can easily manage without, or that you can borrow or buy secondhand for a fraction of the brand new price.
There are lots of choices that will determine how much it ends up costing. Here's a guide to some of the things you should take into account.
Maternity and paternity leave
New mothers in the UK are entitled to 52 weeks maternity leave – although you don't have to take it all. The first two weeks after birth are compulsory, though, or four weeks if you work in a factory.
Statutory maternity pay is usually 90% of your average pre-tax weekly earnings for the first six weeks, then the lower of £135.45 or 90% of your weekly pay for the following 33 weeks. This is the minimum, but some employers offer a better deal. If you don't qualify for statutory maternity pay, you may qualify for maternity allowance, paid at the lower of £135.45 or 90% of your weekly pay for 39 weeks. Statutory paternity pay is set at the same rate.
During the first 26 weeks, known as ordinary leave, it's your right to return to your old job with the same terms and conditions. In the second 26 weeks, known as additional leave, your employer is required to offer you either the same job or a different role with the same terms and conditions.
Statutory paternity leave can include one to two weeks taken within the first 56 days after the birth, plus 26 weeks "additional leave", which can currently only be taken if the mother returns to work before she has used hers up.
Proposals announced in November 2012 could see parents choosing to share the care of their baby differently, with the father able to take a greater role. The plan is meant to allow parents more flexibility in how they mix and match' their leave over the first twelve months after birth so that parents could take leave in turns, or at the same time, provided that they take no more than 52 weeks combined in total. The government plans to legislate in 2013 and introduce changes to flexible parental leave in 2015.
Childcare costs
It is on return to work that many parents feel the real financial impact of starting a family. According to the Daycare Trust, the average annual cost of childcare alone for a child under the age of two rose to £5,103 in 2012, based on 25 hours' care a week. The costs do reduce over time – children aged three and four (or two in some cases) qualify for 15 hours free early education, 38 weeks a year.
Some employers operate childcare voucher schemes to help pay with childcare, which offer up to £55 each week free from tax and National Insurance if you pay basic rate tax, less if you are a higher or additional rate taxpayer.
You might also qualify for Child Tax Credit. The amount you could receive depends on your income, among other factors. You may find that you are financially better off applying for child tax credits and not joining your employer's childcare voucher scheme, as the vouchers can reduce the amount of tax credit you can receive. There is a calculator on the HMRC's website, which helps you work out whether you are better off with or without childcare vouchers.
Then there is child benefit. This used to be paid for every child, but the rules changed in January. If both parents earn less than £50,000 (even if the total income is more than that amount), they will continue to receive child benefit at £20.30 a week for the eldest child, and £13.40 a week for subsequent children.
From 7 January 2013, families where at least one partner earns more than £50,000 will have to repay some or all of their child benefit.
The HMRC's child benefit tax calculator allows you to work out how much tax a partner earning more than £50,000 will have to pay. The deadline for opting out of child benefit was 6 January, but those who still want to opt out rather than be billed at the end of the tax year still can. However, they will have to register for self-assessment before October to work out how much of the benefit already received they will need to repay through tax in January 2014.
Parental rights and responsibilities
Unmarried fathers do not have automatic responsibilities and rights regarding their children – the rights fall with the mother. In order to have parental rights and responsibilities, they must jointly register the birth of the child with the mother, or put in place a parental responsibility agreement with the mother, or get a parental responsibility order from a court. However, if parents split up, both have financial responsibility for their children, whether the parents were married or not.
Savings accounts
When the new baby arrives, you might find friends and family members want to offer money as gifts, and you will probably want to start saving a little for his or her future too. There are a number of specialist children's accounts on the market that you can open and manage on your child's behalf. Some will pay very little interest, while others, for example regular saver's accounts, may be more competitive. As ever, it's a question of hunting around to find the best accounts available.
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