I have a confession to make: like most financial journalists I don’t always practise what I preach. Despite having spent more than a decade writing about money matters, I can still make a few schoolgirl howlers when it comes to my own finances.
Here is a case in point. After the birth of my second daughter I completely forgot that you had to register to receive child benefit, and as a result I lost at least two months’ worth of payments. As I result there was a delay with getting my Child Trust Fund voucher, worth £250, to invest on her behalf. And, while I am getting this off my chest, I might as well admit than somewhere in a house upturned by nappies, laundry, sterilising equipment and some early sibling rivalry, I then managed to lose the damn voucher. Further delays ensued while I applied to HM Revenue for a replacement. All in all I guess I missed out on nine months of strong stock market growth. It is said that cobblers children go barefoot, and so it seems that the offspring of personal finance hacks do not always get the best fiscal start in life.
So, not surprisingly, I was pleased to learn of latest initiative from the Financial Service Authority, which will see all new parents receive a comprehensive money guide. This will be distributed through midwives, so all pregnant mothers will be given the chance to get to grips with the financial realities of having a baby. The Parents’ Guide to Money will cover child benefit, child tax credits the child trust fund as well as more general information on saving and budgeting.
In my view it certainly makes a lot more sense to tackle these issues in pregnancy, rather than waiting until the baby is born. As any new parent will testify, the first few months are a maelstrom of emotion and sleep deprivation; not the ideal conditions in which to take in complex information on whether you qualify for the childcare component of the working tax credit. And if my own experience is anything to go by, most expectant women will devour any information about pregnancy, childbirth, and childcare. I think this would even stretch to a few home truths about baby finances.
This guide also comes with a CD-Rom which contains a few nifty calculators, enabling parents to input their own earnings to see whether they qualify for help through the tax credit system. It also explains, of course, how to apply for this state help. These calculators also enable people to work out their own household budget; this can be particularly useful for new parents, whose income may fluctuate significantly in the first few years.
For example, working mums may find they initially get paid 90 per cent of their earnings for the first few months of maternity leave followed by statutory maternity pay (which will be £112.75 a week from April 6 this year). After this some mums may return to work, while others have the option of taking a further six months unpaid leave. Of course, many mothers who do return to the workplace will do so on a part-time basis, but then also have to meet childcare costs. Fortunately all of these permutations can be factored into these calculators, both for budgeting purposes and to see how your entitlement to state benefits may change.
As a quick reminder I thought it would be worth quickly summarising the main financial assistance available to parents.
- All parents, regardless of income receive the universal Child Benefit. This is payable at £18.10 a week for the first child, then £12.10 a week for every subsequent child. Applications have to be with HM Revenue & Customs following the birth of a child; with late applications, payments can only be backdated for a maximum of 3 months.
- All parents also receive a £250 child trust fund voucher. Parents can top up these funds, tax-free up to a maximum of £1,200. This can be invested in a cash or equity fund. There are a range of Government-backed "stakeholder" accounts, which have maximum charges. These invest in equities initially but gradually move money into safer cash and bond funds as the child approaches it 16th birthday.
- It is not just parents on low incomes who can apply for extra help through the tax credit system. Help is available to working parents who earn a combined income of up to £58,000 a year, this rises to £66,000 a year for those with a child under a year old. Those that fall into this category will be eligible for the Child Tax Credit. But remember these are means-tested benefits so if your income chages – for example if you go back to work full-time or get a pay rise you do need to inform HM Revenue & Customs immediately. If not you may be liable at a later date for repaying an overpayments.
By EMMA SIMON