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The Costs of Starting a Family

Starting a family is an exciting and fulfilling time in a couple's life, but it comes with a host of new worries and financial obligations. While the months of pregnancy might be spent purchasing Babygros and the most high-tech, roadworthy buggy on the market, your new financial commitments don't stop at the door of Mothercare.

You'll also have to consider the lifetime costs of raising a child, and start making preparations for those expenses now: opening savings accounts to save for their education and taking out a life insurance policy to ensure they will be provided for if you should die.

While buying financial products might not be as soul-melting as selecting a crib, and may involve an uncomfortable reckoning with your own mortality just as you're bringing a new life into the world, it's just, if not more important, than purchasing all those bottles and socket covers.

Initial costs of having a child

Newborns require both constant care and feeding and a lot of kit, from rocking chairs to bottles. In the first few months of your baby's life, the expenses will come thick and fast. Costs for nappies, clothing, food (and feeding equipment), and toys and furniture all add up. Insurer Liverpool Victoria has estimated that the cost of the first year of a child's life soars to £11,498.

Lifetime costs of raising a child

So after you get through all the sleepless nights and expenses of the first year, how much does it cost to raise that toddling kid to university age? Estimates vary, but let's just say that little bundle you brought home from the hospital is a very expensive proposition.

According to the Child Poverty Action Group (CPAG), the cost of raising a child from birth to 18(including childcare and housing costs) £150,753 for a couple and £183,335 for a single parent. Full-time childcare is among the most burdensome expenses, running at £80,000 over the course of a childhood.

A study conducted by the Centre of Economic and Business Research (CEBR) for the insurer Liverpool Victoria suggests the costs are even steeper: £229,251 to raise a child from birth to age 21, from the maternity ward to university graduation. This includes average expenses of:

  • education: £74,319
  • childcare and babysitting: £67,586
  • food: £19,517
  • clothing: £10,942
  • hobbies and toys: £9,377

None of these calculations account for the life insurance policy you'll likely want to take out when you become a parent and pay for monthly until the term expires. If you take out a life insurance policy for yourself at the average age of first parenthood (first time mothers are an average of 28.8 years old; all fathers average 33.4 years old), on a 20-year term, you'll pay £204.96 a year, or £4,099.20 over your kid's childhood.

Let's just hope they're grateful.

What this means for your life insurance

If you or your partner were to die, would the surviving parent be able to meet the staggering costs of raising a child alone? How would you provide for the child, to the tune of £150,00 to £225,000, if you both were to tragically die? Life insurance can meet these expenses after death, and spare you some sleepless nights in life, but you'll need to make sure you're taking out enough coverage, especially as your family grows.

When considering the value of your life insurance policy (the sum insured) you'll want to account for the total cost of raising a child to adulthood, possibly multiplied by the number of children you have. If you have more children, you may want to extend coverage. Some insurers will allow you to add additional coverage to your policy without further applications or underwriting as your life circumstances change, but be aware that you'll pay higher premiums for it. It's always worth comparing life insurance policies online to find out how much it'll actually cost you to get the cover you need.