Easy ways to baby budget
When you're budgeting for your new baby, here’s the important thing to remember: budgeting isn’t about not spending. It’s about being smarter with your spending, so you’ve got more money to focus on things that are important. And with a new baby on the way, that’s what matters.
Published: 02 June 2023
Budgeting for maternity or paternity leave
Budgeting for maternity or paternity leave brings its own challenges. Your income is likely to get lower and your expenses will increase, which can feel understandably daunting.
But before you panic, this doesn’t need to be as scary as it sounds. You may not be able to do much about the money you’re going to have coming in, but you can do something about the money you’ve got going out.
Tips to help you budget for a baby
We’ve put together some handy tips to help you help get your finances in shape before your little one’s arrival:
1. Take stock of your current situation
Find out exactly what you have going out and what you have coming in, this will help you work out where you can reduce your expenses to prepare for any essential baby costs. It will also help you see how much you can afford to put aside to manage your change in income during your maternity or paternity leave.
2. Check your entitlements
Our financial support for new parents guide will get you up to speed on your entitlements from both the government and your employer. This will give you a better idea of how much you’re going to need to cover the shortfall when you’re not working.
3. Create a maternity or paternity leave budget
Once you’ve found out what you’re entitled to, it’s a good idea to create a budget which outlines your new income and the essentials you’ll need to pay for during this period. Our guide on clever budgeting techniques could give you some inspiration to get started.
It’s important to think about how your pay will change, but also how your spending habits will change.
4. Think about your debts
If you have an outstanding credit card balance, try to clear as much as possible before your income drops, or at least make sure you’re on the best deal possible. There are lots of 0% interest credit cards out there. So have a think about how these could benefit you.
If you’re planning to move house during your maternity or paternity leave, you’ll need to take into account how your reduced income will impact the amount you can borrow, so it’s worthwhile thinking about this as soon as possible.
Most mortgage providers will consider requests for a mortgage holiday, though you'll generally need to have made a certain amount of consecutive monthly payments first. This isn’t for everyone, as interest still accrues which can then affect the amount you pay back over the term.
5. If you can, start saving now
When your baby comes along, you’ll want money to be the last thing on your mind. Setting a savings goal during your pregnancy will help you adjust to changes in income during maternity or paternity leave.
People often ask, “How much do I have to save before I have a baby?” in reality, there is no hard and fast rule as to how much you should save as it depends on how much you can afford to save and how much your salary will change.
Think about setting up a separate savings account with a direct debit that leaves your account on the day you're paid. If the money isn’t in your account, you’re much less likely to be tempted.
6. Be a smarter shopper
Even on the tightest budget, you’ll still have to spend sometimes, especially with all the costs of a new arrival to factor in.
But when you do spend, make it work for you. Many banks now offer cards that give you reward points when you use them.
You can ringfence your shopping budget easily with Clubcard Pay+, helping you to be more mindful with your spending. It even rounds up most of your purchases to the nearest £1 and puts the difference in a separate savings account for you to use on a rainy day. Great if you find it hard to put a bit aside each month.
You’ll also collect extra Clubcard points when spending in and out of Tesco. Your points can be turned into vouchers which you can use in Tesco to put towards some of the items you need the most for your little one from nappies and wipes to clothes and baby food.
Tesco Clubcard Pay+ is available to Tesco Clubcard members who are resident in the UK and aged 18 or over. Accounts are subject to status. Minimum spend and exclusions apply when collecting points. Exclusions also apply to Round Up.
7. Think long term
Whilst there’s a lot to get ready before your new baby arrives, you might be thinking about how to support them financially in the long run too.
If you’re able to keep a little aside each month, then it might be worth opening a savings account to help you save towards your child’s future. There are a few different types available depending on your needs and how you want to manage your savings. One option is a Junior Cash ISA which lets you put money aside over a long period of time. The money you save belongs to the child and they can withdraw it when they turn 18, handy for those big moments as they’re growing up.
Any child under age 18 who doesn’t have a Child Trust Fund and who is resident in the UK. Anyone with parental responsibility for a child can open a Junior ISA.