How to cope with the cost of raising a family: 6 hints & tips


Small BeginningsA new report has revealed the cost of raising a child to age 21 has soared to £222,458, and what’s more, in 10 years’ time, the figure will have risen to a staggering £350,000 per child. For the average family that’s more than half a million pounds spent on, amongst other things, childcare, food, clothing, and education.

The job of making ends meet has been made even tougher for some families who have lost their Child Benefit as a result of recent changes.

In the face of these huge sums we’d offer some relief with our six hints and tops to help you cope with the cost of raising a family. We also asked our Twitter follows for their thoughts, which elicited some interesting responses.

For example, whilst we have looked at things from a practical perspective, Ex Dragon’s Den panelist Rachel Elnaugh, approached the question from a different angle:

Twitter Rachel Elnaugh

Whilst you mull over “thriving” instead of “coping”, here are our six practical hints and tips to help parents improve their finances.

1. Use childcare vouchers

Figures from the Daycare Trust show that the cost of childcare actually gets cheaper the older your children are. The average cost of looking after a child, under the age of two, for 25 hours per week, is £103, however once your child turns three they are entitled to 15 hours free care.

Using childcare vouchers can help reduce the cost of the care you do need to pay for. Childcare vouchers are bought via your pay packet, crucially before tax is deducted, effectively giving you tax relief on some of your childcare costs. Your employer may already run a childcare voucher scheme, if they do then join it, if they don’t persuade them to set one up; the savings to you could amount to hundreds of pounds each year.

2. Working tax credits

For parents with low incomes working tax credits can offer another source of financial support.
As with all means tested benefits the actual amount you are entitled to depends on your individual circumstances. A typical family with two children will be able to claim working tax credits with a household income up to £32,200. However, both parents need to be working for at least 16 hours per week, or in the case of a single parent family the mother or father must be working for at least 16 hours.

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If you think you are eligible to claim you can use the working tax credit calculator on the HMRC website.

3. Child benefit

The new child benefit rules came into effect this month. Broadly speaking, the changes mean that if one member of your household has income of above £60,000 per year, the benefit is lost. If a member of your household has income of between £50,000 and £60,000 then the benefit is reduced.

However, it’s more complicated than that. Unless you have opted out the benefit actually continues to be paid to you, but will be clawed back via a tax charge paid though the self-assessment system.

Not only will this mean an estimated 500,000 more people have to complete tax returns, it also means that some people will get a nasty shock when they calculate their tax, having spent the child benefit, only to find they were never actually entitled to it in the first place,

Check now whether you will have your child benefit clawed back and avoid a nasty shock when your tax bill lands on your doormat.

4. Save for future expenses

There are some costs associated with raising a child, such as clothing and food, which must be paid for on day to day or month by month basis. However, there are others which might be years away, particularly those associated university.

Including tuition fees and living expenses the cost of a typical university course can run into tens of thousands of pounds and many parents want to do what they can to reduce the amount of debt their student children run up and then have to repay when they start working.

Most of us would struggle to fund the cost of university from earnings, it’s therefore crucial to save or invest to meet these costs and to start as soon as possible. Using ISAs (Individual Savings Accounts) will help your savings and investments grow tax efficiently; it also helps to start with a goal in mind. How much do you need to fund? Remember to factor in inflation and interest or growth, and then use a savings calculator, such as the one on our website, to work out how much money you need to put aside each month to hit your goal.

Click here to visit the Investment Sense savings calculator

5. Prepare for the unexpected

As much as no one likes to think about such things, ill health would mean your ability to meet the costs of bringing up a child could be severely impaired. An early death of you or your partner would also clearly have a devastating effect on the family finances.

Protecting your children’s financial future against you becoming ill, or suffering an untimely death, is just as important as saving and investing.

All parents should have sufficient protection in place, whether that’s life cover, critical illness cover or income replacement, to ensure that their family does not suffer should the unexpected happen. The cost of buying such protection is likely to be less than you think, the cost of not having it could be huge.

6. Budget carefully

For whatever reason, perhaps lack of time, perceived lack of time (which is an entirely different thing!), or simply the ‘not wanting to know’ factor, this is something which many of us don’t do.

But it’s so important as is putting money aside to meet your goals, Bridget Greenwood aka @BridgetFSM on Twitter said:


Bridget continued: “Boring as it sounds – make a budget. There’s something magical about writing something down, and looking at it regularly. You’ll find yourself noticing ways to save on bills, if you’re looking to find enough money for that family holiday you all want to take in the school holidays – put down a monthly amount that you need to save. You’ll suddenly start to find ways to add a little extra income to make up the difference.”

This point was taken up on Twitter by Independent Financial Adviser, Patrick Bryan, who said:

Twitter Patrick Bryan

Claiming, saving, planning and budgeting

To effectively cope with the costs of bringing up a child it really is a case of claiming everything you are entitled to from the state (remember not to claim the child benefit though if you will have to pay it all back!), saving each month to help meet the long term costs, keeping a tight budget and planning, not only on a day to day basis, but also how you will cope if the unexpected happens.

Our team of Independent Financial Advisers in Nottingham are experienced helping families plan their finances. If would like advice on your savings or investments call one of our IFAs today on 0115 933 8433, alternatively enquire online or email

For all our practical advice, we’ll leave you with our favourite Twitter thought from Scott Gallacher, aka @IFALeicester who simply said:

Twitter IFA Leicester