As a new parent, you’ve probably got a whole list of questions you wanted answered – most of which will be variations of “When will my baby sleep through?!”. The answer to which, unfortunately, is something along the lines of “How long is a piece of string?”.
But, when it comes to questions about protecting your financial security, the answers are, thankfully, a little less ambiguous.
A little disclaimer before we get into it, however: everybody’s financial situation is different so the answers to the following questions will require a bit of personal interpretation.
Some parents might be fairly secure in their finances, whilst others might have to penny pinch – depending on where you are on this spectrum, your reading of the financial options available to you will differ.
Hopefully we’ve made ourselves clear – now for some answers to those burning questions.
1. How do we ensure we don’t overspend?
This is a big one, particularly in the short term when you’re adapting to a smaller income and higher outgoings. It’ll come as no surprise to you that babies don’t come cheap – in the first year alone, you can spend anywhere up to £12,000[1].
But it is possible to do it ‘on the cheap’, to some extent. In fact, many parents believe that they end up spending more money than they need to do during those first years.
In an Ergobaby survey[2], more than a third (36%) of new parents think there is too much pressure out there to buy ‘stuff’ for your new baby that you don’t really need.
As a result, more than a quarter (26%) found their baby’s birth year to be the most expensive year of their life.
To keep costs down and protect yourself against overspending, speak to parents who’ve learned the hard way to understand which purchases are essential and which are superfluous. If you don’t know any parents, online forums like Reddit are a font of knowledge.
Platforms like Facebook Marketplace and Vinted, where you can buy pre-loved items, can really help to keep costs down too.
2. What types of insurance might I need as a new parent?
When you have a baby, you and your partner have new responsibilities and dependents. It can feel like a lot to bear and some parents choose to invest in insurance to lighten the load a little.
Insurance protects you for those life events which can catch you by surprise and make you financially vulnerable.
For example, if you or your partner are prevented from working for health reasons, you could struggle to pay the bills and put your family under intense pressure – the last thing you want when you are trying to care for a new baby.
There’s an insurance product for that exact situation, plus some other less-than-ideal circumstances you might find yourself in. Here are some of your options:
Critical illness cover – this can be added to your life insurance or bought as a standalone policy. It offers financial protection in the form of a one-off payment if you were to become seriously ill or injured.
Income protection insurance – replaces your regular income if you are sick or injured and unable to work. Depending on the policy, you could also cover periods of unemployment, for example, if you’re made redundant.
Private health insurance – while you and your family may be entitled to NHS care, a private health insurance policy could cover the costs of private treatment with the added benefit of shorter waiting times.
Life insurance – a type of policy that protects your loved ones with financial support if you die. It can help minimise the financial impact that your death could have on your family and offer peace of mind to those you care about most.
3. Is now a good time to buy life insurance?
There’s a strange juxtaposition between having to contemplate your own death right at the moment you bring new life into the world. We get that.
It might explain why just 27% of first-time parents take out life insurance to protect themselves and their new arrival[3]. Or perhaps it’s the extra costs that come with having a child which puts life cover at the bottom of the list.
However, life insurance becomes valuable protection when you have children because it can ensure the financial perseverance of your new family in the event of you or your partner dying.
If you have young children, you don’t need reminding how much it costs to provide for them – there’s childcare costs, school uniforms, weekend activities... the list goes on. If you were to sit down and tot it all up, you’d probably be shocked at the sum of being a parent.
It obviously goes without saying that you don’t want your children to have to lose out if your family income was to be slashed in the worst circumstances.
4. How much life insurance cover do I need?
If this is the first time you’ve taken out life insurance, you won’t have any reference point for what represents adequate cover. You can take out a policy with a lump sum payout well into six figures. But the higher the level of cover, the higher your premiums.
To help guide you on how much life insurance cover you need, think about:
● Your mortgage
● Childcare costs
● Loss of earnings
● Monthly outgoings
● Educational costs (school uniforms, school trips etc.)
● Other costs involved with bringing up a child (clothes, food, toys, activities)
However, we appreciate it’s not always easy to crunch the numbers and put a figure on the payout that you need. That’s where our experts at QuoteSearch can provide some guidance, advising you based on other parents in a similar financial position.
5. Joint or single life insurance policies – which is best?
If you and your partner are both fit and healthy, you might consider a joint life insurance policy, based on the probability that you’re unlikely to both die at the same time.
This is life cover with the names of both parents on the contract. Then, if either parent were to die, the surviving partner would receive a payout and the policy would end.
Joint policies can work out cheaper than two single policies, plus there’s less paperwork to think about. But if both parents die at the same time, only one payment is made.
To help you decide whether to proceed with single or joint life cover, you might want to run some quotes.
At QuoteSearch, we’re independent and FCA regulated, so you can proceed with trust. Even if you don’t follow through on a quote, your information will be securely stored, and is never shared without your permission.
To read more about life & health insurance, click here.
[1] https://www.citizensadvice.org.uk/debt-and-money/budgeting/budgeting/work-out-your-budget/
[2] https://ergobaby.co.uk/blog/uk-study-reveals-how-much-first-time-parents-are-spending-on-baby-gear/
[3] https://www.aviva.com/newsroom/news-releases/2020/01/uk-first-time-parents-fail-to-financially-protect-their-families/#