The £218,000 cost of having a child

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Having a child can be one of the most rewarding things you do with your life – and one of the most expensive. Luckily, there are a few financial benefits to parenthood.

However much we love our children, the business of procreation can get costly. By his or her 21st birthday, the average child costs its parents £218,024, according to the Cost of a Child Report from insurance company LV=.

This figure equates to £10,382 a year, £865 a month and £28.44 a day. Childcare and education are the largest expenses for parents – totaling £71,780 and £62,099.

In addition, you will spend £9,248 on hobbies and toys for your little darling. In addition, the average child receives a massive £4,337 in pocket money before the age of 21 – who says kids are spoiled?

However, it isn’t all doom and gloom for parents’ bank balances. As well as tax-free savings, being a parent may give you access to some of the most competitive products on the market.

Life after Child Trust Funds

While the government’s decision to abolish Child Trust Funds probably came as a disappointment to many parents, there may be some consolation in the form of junior ISAs.

Launched last year, these allow parents and other adults to save up to £3,600 tax free on a child’s behalf in each tax year.

Like their adult equivalents, junior ISAs come in two incarnations. Cash ISAs are similar to conventional savings accounts but any interest isn’t subject to tax. Stocks and shares ISAs allow savers to invest in various markets without paying tax on the interest.

Although the money held in these accounts belongs to the child, he or she can’t make a withdrawal until the age of 18.

Family-friendly products

Parents who want to save for a child aged under 16 could consider Halifax’s Children’s Regular Saver, which pays 6% gross AER for one year.

Customers can deposit between £10 and £100 into the account each month – although withdrawals aren’t permitted unless the account is closed.

With the Lloyds TSB Young Savers account, children receive 3% gross AER on amounts between £1 and £20,000. However, an adult maintains full control of the account until the child reaches the age of 16.

While these two accounts offer attractive rates to children, parents themselves could benefit from Norwich and Peterborough Building Society’s Family Regular Saver.

During the first year, this account pays 5% gross AER (including a 3% bonus) to those who deposit between £1 and £250 each month.

However, the rate drops to 2% if the saver fails to make a deposit in any month and only one withdrawal is permitted.

In order to qualify, parents must have a child up to the age of 16 or 18 if the child is in full-time education.

Money management for kids

With the average parent shelling out more than £4,000 in pocket money, Brits are pretty generous with their kids.

Being overly generous, however, may prove counterproductive. If a child has spent his or her entire pocket money half-way through the week, providing another handout is unlikely to teach your offspring about self discipline.

Allowing children to open bank and savings accounts encourages them to think seriously about budgeting. Furthermore, they’ll be better equipped for the complexities of handling their money in adulthood.

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**

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