22nd January 2015
The cost of raising a child in the UK from birth until the age of 21 has accelerated at a speed almost double that of inflation over the last 12 years.
As a result parents are now looking at a total bill of £229,251, marking an overall increase of 63% since 2003 according to the annual ‘Cost of a Child’ report from insurer LV=.
The analysis found that parents are spending less on food, hobbies and toys for their children but these savings are being eclipsed by huge increases in the cost of education and childcare.
The report revealed that these two areas alone now account for 62% or £141,905 of all the costs involved in raising a child.
Childcare is one of the biggest drains on family finances, at £67,586 on average. The cost of childcare varies across the UK with childcare costs in London typically £81,276 – 20% higher than the national average.
The bulk of this cost is incurred in the first four years of a child’s life and parents with children aged under three can expect to fork out more than a quarter, or 27% of their household income to meet the cost of nursery fees.
Although London has the highest nursery charges in the country, higher salaries means fees account for a smaller percentage, at 25% of these families’ household income.
Education costs are the biggest expense for parents. Parents face an education bill for £74,319 on average for non-fee paying schools – a sum that has climbed 128% since LV= commissioned the first report in 2003, with parents with children at fee paying day schools paying an additional £129,030.
But rising costs are not just hitting parents’ pockets, but also impacting on the size of families. Recent figures from ONS predict that by the year 2022, half of all UK families will have just one child. Echoing this, the report reveals that one in 10 parents admit that they are postponing having any more children due to financial concerns.
Faced with soaring costs, four in 10 parents, or 44%, have made reductions to their routine spending over the past year in order to make ends meet. Parents are making cuts on essential spending such as clothes, at 39%, and spending on leisure and recreational activities has also fallen by 27%.
Simultaneously, parents are adopting a more thrifty approach when it comes to shopping. Almost two thirds admit to buying lower cost items in the last year, while almost half regularly use vouchers and discount codes.
Recent cuts to Child Benefit mean that a family’s household earned income now needs to go further than before. Yet, despite this, just a third of households have thought about what they would do if they lost their income due to accident or illness. As just one in five, or 21% of parents have an insurance policy that would cover their income or provide them with a lump sum if they were unable to work for a prolonged period of time, many families could find themselves in financial difficulty if they suddenly lost their regular wage.
Commenting on the findings, Myles Rix, managing director of protection at LV= said: “Having children has never been more expensive and, with costs such as childcare and education continuing to rise, for many families across the UK this is set to remain a pressure point. No parent wants their child to go without and given a significant chunk of a family’s income is spent on children, it is important that parents take steps to secure their household’s financial future.
“We would urge parents to ensure that their family has a valuable safety net such as income protection in place. If the unexpected were to happen and either parent became unable to work, this type of insurance would provide a family with financial security at a time when they need it most.”