Parents tend to have less resilience than their child-less counterparts when it comes to everything from savings and debt, to how much cash they have left at the end of the month. And this isn’t just the case for lower earners, higher earning parents also have some worrying gaps in their resilience too.
January 2023 figures from our savings and resilience tool show that parents are less likely to have an emergency cash buffer – that’s at least three months’ worth of essential expenses in an account they can easily access for emergencies.
We found that 79% of couples without kids have this, compared to 65% of couples with children – and 53% of single people without children have enough emergency savings, compared to 25% of single parents.
They’re also less likely to have enough cash left at the end of the month to be resilient – that’s at least 7% of take-home income. Just under half of couples living on their own pass the threshold, compared to just a third of couples with kids. Singletons generally have less cash left over, because they’re wrestling with bills on their own. However, while 14% of single people without kids have enough wiggle room, this figure is much lower for single parents.
Parents are also more likely to be concerned about their debt levels too.
It’s hardly surprising that when it comes to overall resilience, parents struggle. 69% of couples without children score ‘good’ or ‘great’ for overall resilience, compared to 53% of couples with children. And while 28% of singletons without children score ‘good’ or ‘great’, this falls to just 9% of single parents.
Just how well you can withstand the cost of kids depends on how much you earn. Even at the top end, parents pay the price for having children.
The highest-earning parents have some real gaps in their resilience. Only 61% have enough cash left over at the end of the month, just 36% have enough life cover, and only 8% can be confident about the future affordability of their debts.
However, when you look at the middle fifth of earners, the differences are even more striking. Middle earners with children are less than half as likely as non-parents to have enough emergency savings. Fewer than one in six have enough life cover and less than a quarter can be confident that their debts will remain affordable.
5 tips for new parents
1. Start as soon as possible
You’re going to need to manage on a tighter budget when the child arrives, and you’re coping with either a career break or childcare – or a bit of both.
It makes sense to draw up a new budget before the child arrives, then use the cash you free up in order to pay down expensive short-term debts and build up any savings you can.
More on controlling your debts
2. See what help is available from the government
You won’t get child benefit automatically – you need to apply for it. If you or your partner earn £50,000 or over, you’ll have to pay at least some of it back through the High Income Child Benefit Tax Charge, and if you earn £60,000 or more, you’ll repay it all.
However, it’s still worth registering for the benefit, even if you opt out of payments. This means that if one of the parents doesn’t work while the child is under 12, they’ll get National Insurance credits that will count towards their State Pension.
From three years old, children will also get 30 hours of free childcare, as long as their parents work more than 16 hours a week and earn less than £100,000. From April 2024, working parents of two-year-olds will also get 15 free hours. Then from September 2024 that will be extended to all children aged nine months and over, and from September 2025 it will be increased to 30 hours.
If you’re on a low income, you might also get childcare payments through either tax credit or universal credit. You might also be able to use tax-free childcare, so for every £8 you spend on childcare, the government will top it up by £2.
3. Protect your family
Make sure your will is up to date – including establishing guardians if something was to happen to both parents.
Make sure you have enough life insurance, so they’re financially cared for if you pass away, and check sick pay. If it’s not very generous, you could consider income protection, which can provide cash for you and your family if you’re not able to work for a period.
You also need to revisit your emergency savings. We should all have a savings safety net of three to six months’ worth of essential expenses in savings we can access easily while we’re working, in case of nasty surprises. When you have children, your essential expenses will increase, so you need to build your nest bigger.
More on protecting your family
4. Set up a Junior ISA for gifts
If family and friends want to buy a present to celebrate your child’s birth – or for birthdays or celebrations – you can ask them to pay into the Junior ISA (JISA), and help build up a nest egg they can access when they turn 18.
You can choose between a Cash or Stocks and Shares JISA. Parents might worry about investing, because they see it as too risky. However, over an 18 year timescale investing has tended to offer far more potential for growth than cash savings. Unlike the security of cash, all investments will go up and down in value, so your child could get back less than invested.
5. Don’t neglect your own needs
Children can easily soak up all the cash available, but it’s vital to keep your own needs in mind too.
If you put your savings and long-term investments on hold, you’ll have an enormous amount of ground to make up later – particularly when it comes to pensions.
8 ways to make the most of your pension
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