Becoming a new parent can be daunting. As well as having to get to grips with being responsible for a little human, you need to think about taking the necessary steps to protect your family financially.
It’s normal to have these concerns, particularly at the moment when the economic climate is less than certain (to put it lightly).
If you’re fretting about providing for your family now and in the future, you’re not alone. In the latest Young Women’s Trust annual report[1], entitled ‘Just Getting By’, 52% of the young women surveyed – and 44% of the men – said they’re ‘filled with dread’ when they think about their household finances.
Financial worries are even more pronounced in young mothers, with 75% of single mums and 65% of mums who are joint parents saying that it’s a ‘real struggle’ to make their cash last until the end of the month.
New parents are looking for ways to protect their family both in the short term and the long term. So, what are the options for doing just that?
Learn how to budget
For most new parents, they really have to think carefully about how they’re managing money. Bringing a child into the world isn’t cheap, and if you or your partner has taken some extended time off work to care for your baby, you’re often having to balance higher outgoings with less income.
In the first year of having a baby, it can cost you anywhere up to £12,000, studies suggest[2]. And it only gets more expensive from there. In the UK, the cost to send a child under the age of two to nursery is £263 a week full-time or £138 a week part-time.
Free childcare doesn’t usually kick in until your child is three years old (unless you’re eligible for free childcare from the age of two).
So, in the first weeks and months of having a child, you need to learn how to budget so that you don’t find yourself in a precarious position where outgoings surpass income.
Knowing that you have a solid budget planner to fall back on each month will give you the confidence and peace of mind that you're in control of your money, while providing some protection against any unexpected costs like a busted boiler or poorly pet.
There are lots of great tools out there to help you with budgeting, such as Mint.
Protect your income
Everybody relies on their income to some extent – but when there’s only one full wage coming into the household, as is the case for most new parents, you’re entirely dependent on it.
How would you pay your bills if you or your partner couldn’t work? It probably doesn’t bear thinking about. If you don’t want to have to consider that prospect, you might want to take out an insurance product called income protection.
It does what it says on the tin. If you or your partner are out of work for an extended period of time, income protection cover will help you continue to meet your regular financial commitments.
It provides a monthly income, tax-free, if you’re forced to stop work for health reasons. It’s not just for people working in dangerous industries whose health might be at greater risk; it covers all those unforeseen events that you can’t prepare for.
Income protection covers most injuries and health conditions, so long as you’re medically signed off from working. But don’t expect 100% of your salary to be covered – typically payouts are 50%-70% of earnings.
Policies are available to both people in employment and those who are self-employed. But if you become unemployed whilst the policy is active, your cover will be paused.
You can either take out short-term cover – for example, you could take out a three-year policy which provides protection up until the point at which you’re entitled to free childcare. Or you can get income protection in place for the rest of your working life.
Insure your life
Lots of people hold off taking out life insurance until they become a parent – only to find that they now have more outgoings than ever and need to tighten their belt rather than add new expenses.
But life cover, particularly if you’re young and relatively fit and healthy, is often cheaper than many people expect it to be – and provides protection in the worst of circumstances.
We know it's a bit of a morbid thought to imagine not being around for your children. But you don’t have to think about it in those terms if you don’t want to. In purely monetary terms, you’re protecting the financial security of your loved ones. See it as yet another selfless act – you quickly get used to doing those as a parent…
Life cover comes in all shapes and sizes – here are your options:
● Decreasing term insurance – designed specifically for mortgages, a decreasing term policy provides cover for the length of your mortgage, with the payout tapering off over time to reflect the outstanding debt.
● Level term life insurance – this kind of policy covers you for a set amount of time such as five, 10 or 25 years. You might want to match the term to your children hitting adulthood!
● Joint life insurance – covers both you and your partner, with the surviving partner receiving a lump sum payout which can be used to pay off the mortgage or support family expenses.
● Single life insurance – if you are a solo parent, you have the option of taking out single life insurance which covers just one person.
● Critical illness cover – some insurers offer critical illness cover as an add-on to your policy that pays out if you become too ill or disabled to work. You can also add on children's cover, which pays out if your child is diagnosed with a serious condition.
Get protection today
As a new parent, you’re craving some certainty. At a time of great uncertainty, you want to protect yourself against all that can go wrong.
While you can’t shelter yourself from all that life has to throw at you and your family, taking the above steps will provide a decent level of financial protection.
As things settle down a bit and you find yourself with a bit more money in your pocket, you can think about savings products.
Here at QuoteSearch, our experts are ready to provide you with a great deal on income protection and/or life insurance. We don’t have any favourite suppliers – the quotes that you see are comprehensive and competitive.
To compare your free life insurance quotes from leading providers, click here.
[1] https://www.youngwomenstrust.org/media-centre/annual-survey-report-2022/
[2] https://www.citizensadvice.org.uk/debt-and-money/budgeting/budgeting/work-out-your-budget/