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Having a baby – the financial considerations

Dec 22, 2014

Having a baby is a big step especially when you are also looking to move or buy your first home. If you are looking to extend your family then here are some financial considerations to bear in mind.

Child Benefit - Child benefit is no longer available to all families, if either you or your partner earns more than £50,000 you might not be eligible for some or all of the benefit. In 2014 child benefit is £20.50 per week for your eldest child and £13.55 for other children. It’s paid into your bank account every four weeks. 

Many mortgage suppliers will consider child benefit payments as an income when applying for a mortgage, check with your lender.

Maternity Pay/Leave - Statutory maternity pay (SMP) is the minimum amount of maternity pay an employer has to offer. Many employers offer more and you will need to check your contract to see what you are entitled to but generally SMP is paid for up to 39 weeks:

  • For the first six weeks you get 90% of your average weekly earnings (before tax). 
  • For the next 33 weeks you get £138.18 or 90% of your average weekly earnings (whichever is lower).

Being on maternity leave will make a difference to your ability to apply for a mortgage – if you are on maternity leave some lenders will take your SMP as your current wage while others may take into account your full wage if proof of return to work is supplied.

Paternity Pay/Leave - The statutory weekly rate of Ordinary Paternity Pay and Additional Paternity Pay is £138.18, or 90% of your average weekly earnings (whichever is lower). Any money you get is paid in the same way as your wages (eg monthly or weekly). Tax and National Insurance will be deducted.

Fathers are entitled to 1 or 2 weeks paid Ordinary Paternity Leave OR up to 26 weeks’ paid Additional Paternity Leave - but only if the mother or co-adopter returns to work.

Childcare Costs - While every family is different and child care cost will differ depending on whether parents return to work or stay at home, The Family and Childcare Trust's annual report from 2014 claims that the average fees for one child in part-time nursery and another in an after-school club are £7,549 per year and full-time childcare costs for a family with a two-year-old and a five-year-old child are estimated at £11,700 a year. 

Lenders will take into account the extra cost of having children and any childcare costs you pay will be used in your application for a mortgage and taken into account regarding your affordability.

Life Insurance - When children come along it becomes even more important to make sure your loved ones are looked after if anything happens to you – life insurance, a will and testament and critical illness cover are some of the insurances and documents you can get in place to make sure you protect those you love if something happens to you.

Children’s Savings Account - Once your child is born you may want to set up a savings account in their name, somewhere you can pay into monthly or deposit cash gifts into at special times of the year. From regular savers to junior ISAs there are a range of accounts so do your research and find out the best account for you and your family. 

These are just a few financial considerations to think about before starting a family but if you need more information on any child benefits or family credits you may be entitled too then visit the government website

If you are thinking of a getting a mortgage and wonder what you can afford then contact a member of the Teachers Building Society mortgage team on 0800 378 669.

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