In Episode 3 of Your Real Money Stories podcast, our anonymous interviewee talks about what it takes to be financially prepared for parenthood. While children are undeniably expensive, most people will qualify for some government support. Our Real Money Correspondent, Laura Whateley, rounds up what's on offer
Many parents have been hard hit by the pandemic. Half of those with young children have been struggling to make ends meet and are twice as likely as those without children to say they are running out of money, according to a survey in 2020 by the Fawcett Society, and the Women's Budget Group.
Many women in particular are finding it difficult to work and earn while also homeschooling children, and there is a debate raging about whether companies are being reasonable in expecting staff to keep working all hours, trying to dial into video calls while their toddler demands a snack.
There is government help available for families, but unless you know about it, you might miss out on a much-needed boost to your finances. Here's what you should be looking out for.
When you're pregnant
Government benefits start when you are pregnant, you are entitled to free NHS dental care and free prescriptions when expecting and for a year after you give birth.
When your child arrives
You also have a legal entitlement to pay after you've become a parent through giving birth, by surrogacy or by adopting a child.
There are different options depending on your work status.
Mothers who are employees and have been with their company for at least 26 weeks will receive maternity pay, which must be at least 90 per cent of your pre-tax earnings for the first six weeks after your baby arrives or you adopt, and £151.20 a week for the following 33 weeks. You may get more money from your employer, but you mustn't receive less. You can take up to 52 weeks off work, but 13 of those will be unpaid, unless your employer offers you something different.
If you are self-employed or not eligible for maternity pay from your employer, you can claim statutory maternity allowance. This is £151.20 a week for up to 38 weeks. If your partner is the one giving birth you can claim paternity pay, also £151.20 a week, and you're entitled to two weeks off, plus days for antenatal appointments.
Shared parental leave
Shared parental pay offers you the chance to split paid leave to look after your child. So, for example the mother could take off the first six weeks at 90 per cent pay, then go back to work, at which point the mother's partner could claim pay of at least £151.20 a week for the remaining 33 weeks. Again, some companies will offer more generous shared parental pay, but they cannot be less generous. You can both take shared parental pay and leave, but this means you'll only get £151.20 a week, unless your employer offers more. Or, as more choose to do, the mother can claim maternity pay, which is usually more generous, and the partner can claim shared parental leave pay.
If you're adopting
The rules if you are adopting are a bit different. To look in to how what financial support you're eligible for, head to the government website: https://www.gov.uk/browse/childcare-parenting/fostering-adoption-surrogacy
As soon as you become a parent you can start claiming child benefit, £21.05 a week for your eldest child, and £13.95 a week for each child after that. This is paid every four weeks until they turn 16, or until they are 20 if they continue in education studying for A-Levels or go on to college.
Child benefit is reduced if you or your partner earn £50,000 and it is stopped completely when you earn £60,000 or more. You may still claim the benefit, but you have to repay it in tax. Many people whose salary is above the threshold therefore don't bother to claim it. But be aware that child benefit gives you national insurance credits, and these count towards your state pension.
You need a certain number of credits to claim a state pension. This can catch out those, usually women, who don't work while they are bringing up children if their partners earn above the threshold.
If your partner is a high earner make sure you understand how not claiming child benefit might cost you in retirement. There's more information here: https://www.gov.uk/child-benefit-tax-charge
When you start using childcare
If you (and your partner if you have one) work earning at least £139 a week, but no more than £100,000 individually, make sure you pay for your childcare via the tax-free scheme. It is lucrative, offering you up to £2,000 a year per child aged 11 or younger. If your child is disabled you can claim up to £4,000 a year until they are age 16.
You pay into your online childcare account, and for every £8 added you get a £2 top up from the government. This money can be used to pay for nursery, after school or holiday clubs, or one-on-one care, such as a nanny. Apply at childcarechoices.gov.uk.
You can claim up to 15 hours a week of free childcare for your two-year-old from a list of registered childcare providers, including nurseries and childminders, if you claim certain benefits, including universal credit, or if your child claims disability allowance or has special educational needs.
For three- and four-year-olds
All families, where both parents work (or just you if you are a single parent household) are entitled to up to 30 hours a week free childcare from the term beginning after your child turns three for up to 38 weeks of the year. Each of you must earn at least £139 a week and no more than £100,000 a year. Some childcare providers will allow you to claim fewer hours per week but stretch them over 52 weeks.
If you or your partner are not working you can still claim 15 hours a week, though you're entitled to 30 hours a week if that's because you have other caring responsibilities or you are on maternity, paternity or parental leave.
Childcare during Covid
If your income has dipped or you're not working because you have been furloughed or you are claiming the Self Employment Income Support Scheme grant you should still be able to claim your free 30 hours a week childcare, plus tax-free childcare for any child under 12. At the time of writing, nurseries are still open in England and Wales for children under school age.
Furlough for parents
The Job Retention Scheme runs until the end of April 2021 and offers those who are unable to work, up to 80 per cent of their normal salary, up to a maximum of £2,500 a month. This might be topped up by your employer. Parents may be furloughed because they have to look after or homeschool children, but they don't have to be. Frustratingly for many, your employer is allowed to turn down your request. The government has asked companies to furlough parents who are in this predicament, but they have not legally compelled them to do so. Employees can be furloughed for a minimum of seven days, and you can also be furloughed part time, working some days, enabling you to share childcare responsibilities with a partner. If you want to request furlough for childcare reasons the organisation Pregnant Then Screwed has created a useful template letter.
Self Employment Income Support Scheme (SEISS) grant
If, like many parents trying to juggle flexible work and childcare, you are self-employed, you can claim some money for lost earnings during the pandemic. The third SEISS grant covers any financial impact to your business between 1 November and 29 January 2021, and you need to declare that you reasonably believe during this period Covid created a "significant reduction in your profits".
The grant is a one-off payment in your bank account worth 80 per cent of your average monthly trading profits, up to a maximum of £7,500. You need to have been self-employed and filled out a self-assessment return for 2018-2019, earning less than £50,000. The deadline for applications is January 29 and you can apply online.
There will be a fourth grant for the period of February, March and April. Details are yet to be released but there is hope that this time people who claimed in the tax year 2019-2020 might be included, too.
Tax-free savings for children
Isas are accounts where any money earned in interest or investment return is tax-free. If you want to save for your children, you could consider a Junior Isa. You can put aside up to £9,000 a year (for the tax year 2020-2021), other relatives such as grandparents can also top it up. This can be in cash or in stocks and shares. When your child turns 18 the account turns into an adult Isa, where, again, any returns made are tax-free (depending on their personal tax circumstances). It's good to be aware that this means the money will be in their name when they turn 18, which could be a risk if you have different ideas from them about how the savings should be spent!
Sarah’s Real Money Story: a tale of two relationships
Zopa customer Sarah shares what she’s learned from the two very different relationships that have shaped her Real Money Story