Having children can be expensive. To avoid getting stressed out about how much everything costs, it's a good idea to be practical and work out a budget to help you cope with the costs of a family.

Even the most careful parent will find they have less available cash than they had before having a baby. New babies are particularly expensive as their requirements include nappies, equipment and clothing. One estimate indicates it costs on average £20,000 to bring up a child for the first five years and a total of £50,000 to care for a child up to 17. However, this amount will vary depending on your finances and what you choose to buy for your baby.

In the first year you will need to buy essential equipment but deciding what you really need - and what you don't - can help. People may give you presents for your new baby and if they ask what you need, do tell them. It's important to remember that while all children need to be fed, changed, kept warm, safe and loved, it is not essential for your child to have the latest of everything. This will not make her happier or you a better parent. To help you enjoy your life as a family and manage your money, it's a good idea to budget.

Making a budget

Budgeting shows you how much money you have, so you know what you can afford to spend. It enables you to see what is coming in and going out and when.
  • A budget helps make money stretch. It enables you to work out what you need, what you can afford and, if necessary, what steps you can take to get your family out of debt.
  • It can stop you making costly impulsive buys.
  • Budgeting can also help prevent you running up debts to the point where you can no longer pay your monthly bills.
  • It will help to reduce your stress levels.
  • It means that you and your partner will both know how much is available to spend and what you can spend it on.

Basic steps to budgeting

  • Work out what you earn. From that you can calculate how much you can spend each month without going into debt. Put a little aside for emergencies and if there is any extra, try to save it. It's a good idea to work out a budget together.
  • If you are both employed you should know what you earn each month from your pay slips. Remember, however, that if you are on maternity leave you will receive less than your normal wage for some of the time. If either you or your partner plans to go back to work part-time, then your income will also reduce accordingly. If one of you stays at home, that person will not be earning at all.
  • If you plan to go back to work, you will need childcare. This takes, on average, a third of a family's wage. Include the cost of childcare in your budget to work out what you can afford.
  • Work out what spending is vital each month. This includes mortgage or rent payments, gas and electricity bills and council tax bills if you are a home-owner. Then there's your TV licence, the cost of running and taxing a car, or taking the bus or train to work, your landline and/or mobile phone bills and so on. If you are on a low income you may well be entitled to certain benefits. If you shop around you may be able to lower the cost of your gas, telephone and electricity bills and even your mortgage payment.
  • You also need to work out how much you spend weekly or monthly on food and drink.
  • Keep a note of exactly how much you spend on non-essentials each day. An easy way to do this is to keep a notebook with you and write down everything you spend, from a drink in the pub to snacks. These little bits here and there could add up to quite a large amount of money over a week or a month. Try to list as many categories as you can, such as food, clothing, travel and a section called other. Try to keep the other section as small as possible, as this will make it far easier for you to see exactly where your money is going.
  • Make sure that your spending isn't higher than your income, or you will end up in serious debt. Work out what you can afford to spend and then make cutbacks if necessary. If you are in a relationship, it's important that you both agree on how much to spend.

You may find these 2 calculators from the financial services authority helpful:
Financial healthcheck
Welcome to your Debt Test

Last updated: 29th October 2007 at 12:10:59