Tuesday 11 January 2011 by Helen

With the Birth Announcement of a new baby comes a lot of expense! Some of this money-spending can be avoided, or reduced. Here are some of the most common new parent pitfalls.

Just before I go any further, a little quote - "The most fertile source of insight is hindsight." (Morris Kline)


1 -   Life Insurance for Baby

Callous as this might sound, Life Insurance is only really deemed worthwhile if the person’s death would cause financial hardship.  An insurer might well dress it up as a smart security measure, with the 'it's better to be safe than sorry' line. Insurers have been criticised for playing on the fears of parents. There are other options, such as having a rider on your own Life Insurance policy. This can then be converted into a whole life insurance policy when they turn 18.

2 -  Spending too much on baby costs

Overjoyed parents naturally want their baby to have everything they could possible ever need (and more!)  Unfortunately, this does often lead to overspending. Research shows that the higher the income, the more expensive the costs of raising a child. In other words, the more money parents have at their disposal; the more they are likely to spend, spend, spend. A lot of parents admit that the majority of money was spent in the early years of their child's life. So to cut unecessary costs, it’s all about devising a spending plan, keeping track of purchases, and accepting those hand-me-downs!

3 –  Opening a savings account in a child’s name

The reasoning behind opening an account in a child’s name is likely to be that the earnings and income in that account will get taxed at a child’s lower tax rate. However, as soon as they turn 18, they have instant access to that account. That’s 18 years of savings they have their mitts on! This might not be a problem, but parents no longer have rights to or control over those funds. At the end of the day, it’s very easy to transfer funds to your child’s account. That way you can transfer the right amount at the right time.

What the veterans of parenthood have to say...

I’ve spoken to a few parents, whose children have long flown the nest, and asked them one question – ‘If you could go back to your first few weeks of being a parent, what baby or child purchases would you stop yourself from buying?’

Here were some of the responses...


“That latest ‘your baby’s life will be incomplete without one of these’ wonder-toy. In our case it was an overpriced toy car. It was the £2.50 one with a wheel missing that never left his side.”


“Too many toys fullstop.”


“Lots of cute all in one suits when she was first born. They only ended up fitting for a couple of months!”


“More than one pushchair or buggy. Guarantee you, one becomes a favourite, or is easier to push etc and the other just gathers dust.”

 

If anyone else has any tips on new baby spending - what to buy and what not to buy, then please leave your comments...

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