The True Cost of Having Kids
26th April 2018
They say you can't put a price on the experience of bringing new life into the world and watching it grow. Well, it turns out you can. It's higher than you'd think, and it's only getting higher.
According to a study by the Centre of Economic and Business Research (CEBR), the costs involved in raising a child to the age of 21 are rocketing. Back in 2003, the estimates ran to about £141,000. That's not exactly pocket change. However, raising that same child in 2018 would cost a massive 63% more. That's up around £230,000! In fact, the figure's gone up by £2,000 in the last year alone.
Over 60% of those bills come in the form of childcare and education. More than £67,000 of it gets blown on babysitting and nursery fees alone. That's per child, by the way. Basically, it's never been so expensive to raise children, and the strain is starting to show. 20% of the mothers in the study had needed to go back to work early just to make ends meet. If you lump the ones who took on extra work into that figure, you're closer to half! In fact, the costs are worrying enough that they're starting to reduce family sizes overall. Around 10% of parents are delaying having a second child because of the financial pressure it places on them.
These are all national averages, of course. There's a lot of variation depending on where you live. Predictably, London's one of the most expensive places to have kids. Yorkshire children are pretty much a bargain, by comparison. It's worth noting, though, that the higher London figures are still a lower percentage of people's average income. Londoners are spending about 25% of their pay on childcare. In the North East, that statistic hits 31%, even though the bills are actually lower.
So, what are we supposed to do about it – stop having kids altogether? That probably sounds pretty tempting when you've already got a few scrabbling about the place, drawing on things they shouldn't with permanent markers. There are a few less drastic things you can do to ease the pressure, though. One of them is to take advantage of the Specified Adult Childcare Scheme. This system is designed to shoulder some of the burden of childcare for people who have to scale back their jobs to do it. They've been around since 2011, and they make things a lot easier when you're offloading the kids onto family members for a few hours so you can work. Family members taking care of a relative's child can claim a Class 3 National Insurance credit so they don't lose out on their State Pension. It's worth about £231 per year, which doesn't sound like much, but it stops you from developing gaps in your NI history.
Of course, if you're in work yourself, there are always the Childcare Voucher and Tax-Free Childcare schemes to fall back on. The older voucher system lets you take up to £55 of your weekly wages as Childcare Vouchers - the up-side being that you won't pay NI on them. That scheme's in the process of being replaced, though. The new Tax-Free Childcare system can net you up to £2,000 a year per child, by topping up what you're spending on their care. For every £8 you pay into your Tax-Free Childcare account, the government adds another £2.
If you're taking on extra work or finding additional ways to meet your costs, keep in mind that the taxman will be interested in what you're doing. Even selling your possessions online can be considered business income if you do enough of it. That means paying tax on the money, and using the Self Assessment Tax Return system to file your returns. RIFT has a specialist service designed to take care of exactly this, so get in touch if you think you might be affected.
The other obvious thing to do is make sure you're not paying too much tax each year. Many of RIFT's clients use their tax refunds to pay for childcare costs, baby clothes and so on. Again, get in touch to see how we can help you claim back thousands in overpaid tax from HMRC.
RIFT is, first and foremost, a family business. We understand the challenges you're facing, because we've faced them all ourselves. Raising children will always be a difficult journey – but when you're part of the RIFT family, you'll never have to make that journey alone. You can trust us, we've been claiming tax rebates and filing tax returns since 1999, so we know what we're talking about.