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The cost of raising a child tops £200,000

23rd February 2010 Print

For the first time, parents are likely to have to shell out more than £201,000 on raising a child from birth to the age of 21, according to a survey from LV=. This equates to £9,610 a year, £800 a month or £26 a day.

The survey by the UK's largest friendly society shows that the cost of raising a child has increased by 4 per cent since the previous survey in January last year, and is up 43 per cent over the seven years since the survey began in 2003. Childcare and education remain the biggest expenditures, costing parents a mammoth £54,696 and £52,881 respectively over their child's lifetime.

Mike Rogers, LV= Group Chief Executive, said: "For the first time since this report began, the cost of raising just one child has topped £200,000. Every parent will know how expensive it can be to raise a little one, and as parents, we know we don't begrudge a single penny of it. But I suspect many new and prospective mums and dads will be a little shocked to see the potential financial burden ahead of them."

Cut backs still on the family agenda

77 per cent of parents say they have had to cut back on family expenditure as a result of the ongoing economic situation. However, the data suggests that this ‘tighten your belt' syndrome could be slightly on the wane, as last year's research showed that marginally more - 81 per cent - of parents said they were having to do the same then. Holidays and fun days out have been hardest hit, with 49 per cent of parents saying they've had to forego spending in these areas. The ‘make do and mend' mentality is beginning to show itself too, with 49 per cent saying they've reduced their spending on clothes.

When it comes to cutting back, parents have remained largely consistent with where they'll attempt to make savings:

Savings - 36 per cent  (down from 42 per cent last year)                       
Furniture & furnishings - 36 per cent (38 per cent last year)      
Food - 32 per cent (35 per cent last year)   

Stretching budgets?

The study shows that parents are still keen to make their budgets stretch as far as possible, with 70 per cent opting for lower cost items and supermarket ‘value' goods, a drop from 79 per cent on the same research last year. A third of parents (31 per cent) are buying second hand items to help make ends meet, with 37 per cent selling unwanted items through eBay, other online sites, via their local newspaper, or car boot sales, to raise money.

Families could be leaving themselves financially exposed

The need to make the family finances go further has taken its toll on the amount parents are likely to save for the future. Just over one in three say they've had to reduce the amount they save on a regular basis (35 per cent). A further 19 per cent have had to cancel or review their insurance products and income protection cover to help with family budgeting. This is down from 23 per cent who said the same at the start of 2009. It is alarming due to the long term implications this could have should there be a dramatic change in the family's circumstances.

Mike Rogers continues: "It's always tempting to look at short-term measures when trying to save money. Whilst it may seem that cancelling insurance policies or protection plans is a good way of stretching the family budget, it's really important to keep the bigger picture in mind, to ensure your family's financial security would be protected if a parent was suddenly unable to work due to accident, illness or unexpected job loss."

Childcare costs dominate family budgets - but levelling off

LV='s findings show that childcare costs remain the biggest single drain on the family's resources, and could cost as much as £54,696 for one child between the ages of six months and 16 for  a typical household where both parents are working. This includes nursery fees, after school clubs and holiday clubs. However, this cost represents a rise of just 1.6 per cent on the same figure in January 2009, the lowest rise of any category, suggesting childcare costs could be levelling out across the board.

Pocket money creeping back up ... but some children are aware of mum and dad's financial pressures

The amount of pocket money a child receives has crept up by almost 5 per cent this year to £4,338, having fallen from £5,469 in 2007. However, LV='s study shows that just over one in eight parents (13 per cent) reported being specifically asked for less pocket money by their children, suggesting the need to maximise the family's finances is being felt by more than just mum and dad.

When do children cost the most?

The cost of raising a child peaks during the university years (age 18-21), when parents could face having to pay out a staggering £13,677 a year. But parents of toddlers are likely to find themselves significantly out of pocket too, as between the ages of 1 and 4, a child costs around £13,014 per year. New parents also face a £9,152 bill during the first twelve months of a child's life.

The breakdown of parental spending by the different years of a child's life is as follows:

1st year - £9,152
Years 1 to 4 - £52,055 (£13,014 a year for these years)
Years 5 to 10 - £54,171 (£9,029 a year)
Years 11 to 17 - £45,399 (£6,486 a year)
Years 18 to 21 - £41,031 (£13,677 a year)

Raising children across the UK

Perhaps unsurprisingly, parents in outer London face the biggest cost in raising a child: an eye-watering £220,769. Yorkshire and Humber is the cheapest place (replacing last year's cheapest region, the West Midlands) at £177,706.

Mike Rogers continues: "In an environment where everyone's feeling the strain, it's more important than ever to try and save a little and often as it can all add up over the long-term. We'd advise parents to start saving as early as possible, and to consider adding a layer of income protection that would provide for them and their family if their circumstances dramatically changed for the worst. Protection doesn't have to be expensive and in many cases, it could turn out to be one of the best investments you'll ever make."