How To Cut The Cost Of Having A Baby

Having a baby can cost a small fortune. Here's how to make sure you get all the financial help you're entitled to.

Recent research reveals the cost of raising a child runs to £8,859* every single year. That's more than £186,000 from the day your little bundle of joy arrives until he or she flies the nest at 21. I know that must sound like a pretty overwhelming figure for any new or soon-to-be parent. But before you fly into a blind panic, there are ways you can - and should - get financial help.

So, here's a rundown of all the state benefits you could be entitled to as a parent:

Statutory Maternity Pay

If you're an employee and you're leaving work to have a baby you'll be entitled to at least 52 weeks maternity leave. Statutory Maternity Pay (SMP) during maternity leave lasts for a total of 39 weeks. SMP provides 90% of your average weekly earnings for the first six weeks followed by a maximum of £112.75 per week for the remaining 33 weeks. You'll need to pay tax and national insurance as if SMP was your salary.

Your employer may well offer maternity pay which is more generous than SMP, so make sure you check this in your contract or with your HR department.

If you don't qualify for SMP you may be able to claim Maternity Allowance which provides similar benefits. For information on Statutory Paternity Pay for fathers visit here.

Child Benefit

Child Benefit isn't means-tested which means you'll be eligible regardless of your income as long as you're bringing up a child under the age of 16. You'll receive a tax-free payment of £18.80 per week for your eldest child and £12.55 per week for each additional child.

You should claim as soon as your child is born using the claim form you receive in your ‘Bounty Pack' from the hospital. Otherwise you can complete the form online at the HM Revenue & Customs website here.

Child Tax Credit

This is a means-tested benefit for parents and those responsible for a child under 16. The actual payment you'll receive is dependent on your annual household income. As long as it is no more than £58,175 - or £66,350 if you have a child under the age of one - then you could benefit. Child Tax Credits are essentially made up of two elements:

• A family element - this is paid to any family with a least one child and is worth up to £545**
• A child element - this is paid for each child in your family and is worth up to £2,085**

Working Tax Credit

Working Tax Credit is a payment to top-up the earnings of low-paid working people. Parents must work for 16 hours or more a week to qualify. Credits are based on your household income and circumstances such as other benefits you may be receiving. The benefit includes a childcare element, where you could get back up to 80% of your childcare costs based on a maximum of £175 per week for one child or £300 for two or more children.

Child Trust Fund

All children born on or after 1 September 2002 are eligible for a Child Trust Fund (CTF). The government will provide a voucher of £250 - or £500 for low income families - which can be invested in a CTF where it will grow over the long-term tax-free. Your child will then receive a further payment of £250 or £500 on their seventh birthday.

The CTF - which can be held in cash or, if you prefer, shares - can be topped-up each year with an extra £1,200 payable by parents, other family members or friends. Your child can't get their hands on the cash until they turn 18.

The CTF is designed to give children a financial head start so make sure you claim and invest your CTF voucher. Research suggests university education could cost almost £33,000 for a three-year degree course. Invest your child's CTF wisely and it could cover a significant chunk of that bill.  

For more information on CTFs take a look at Make The Most Of Your Child Trust Fund and Parents: Make 10% A Year.

Help for low income families

You may be able to get financial assistance through a Sure Start Maternity Grant. This is a payment if £500 which doesn't have to be repaid. To be eligible you or your partner must be receiving one of the following:

• Income-based Jobseeker's Allowance
• Income Support
• Pension Credit
• Child Tax Credit at a rate higher than the family element
• Working Tax Credit where a disabled worker is included in the assessment

You can claim at any time between 11 weeks before your due date and up until three months after your baby has been born. To claim, fill in an SF100 Sure Start form available from your local Jobcentre Plus.

For more practical help on how to prepare your finances for the arrival of your baby, take a look at Twelve Top Tips For Families.

*= The annual Cost of a Child survey from LV= (formerly Liverpool Victoria). December 2007.

**= Rates for the 2008-2009 tax year