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Are you pregnant and worried that you’ll fall into unmanageable debt? Read our blog, it’ll tell you how to prepare financially for the big arrival and what to do if you’re already on a debt solution.
Becoming a parent is definitely one of the most amazing things that can happen to anyone. You can’t be blamed though, if in the midst of all that joy, you find yourself worrying about money. Expectant mums may find that they take a pay cut when they are on maternity leave and may have to find the money to cover childcare costs when they do return to work.
Managing your finances with a new baby may seem like a scary prospect however, as with most things in life, preparation is the most important thing. If you prepare then there’s no reason that having a baby should mean that you’re constantly worrying about money or that you fall into unmanageable debt. In this article we’re going to have a look at the ways that you can budget for a baby to avoid falling into debt and also how to deal with any existing debt or debt plans that you may already have.
In part one of this blog we're going to have a look at the basics of preparing for a baby, including looking at your budget, planning ahead and how maternity pay works.
Budgets and babies
It makes sense to take a good look at your budget before your baby arrives (although if your baby is here don’t worry, it’s never too late). Have a look at the budget planner from The Money Advice Service, it’ll give you a complete overview of your finances and if there is a problem, you’ll be able to see where you’re over-spending or whether you might need help.
You will probably find that there’s going to be more money leaving your account over the next few months than normal, prams, cribs, clothes and nappies, will take up a chunk of your income that before might have gone elsewhere or be put away in savings. This is perfectly natural for anyone expecting a baby, so try not to get too worried about it – being able to see exactly what’s coming in and going out with the budget planner should make you feel a lot more in control of the situation.
Make a list of all the new items that you think your little one will need and then how much they cost. If you’re not sure, use this Baby Calculator. Bear in mind that there may be ways to cut down on the cost of these things; you could always ask family whether they have anything that they don’t need anymore; or have a look at some sites where you can get great quality second-hand stuff – Which has a really useful list of all the places you can have a look.
Start planning ahead and saving
If you really try and cut back on spending and put some money aside for when the baby gets here, we guarantee you’ll thank yourself later. Even if it’s just small amount each week that would cover the smaller baby expenses like nappies and wipes, it will probably help a great deal.
If you’re working up to your maternity leave at the moment try to take advantage of these months while you’re working before the baby arrives and save extra hard. This is especially important if you are going to be trying to survive on Statutory Maternity Pay for an extended period, if you think that you may only return to work part time, or if you expect to have to pay for childcare.
How does maternity pay and maternity leave work?
If you’re currently in work and stay with that job throughout your pregnancy then you won’t be just left to fend for yourself when the baby comes. As you probably already know, you will be entitled to maternity pay and maternity leave.
So, according to the law, you’re allowed 52 weeks off work when you have a baby, but this is split up into two 26 week periods. You don’t have to take the full 52 weeks off, but you do have to take two weeks off after the birth of your baby and that rises to four weeks if you work in a factory.
Statutory Maternity Pay (SMP is the maternity pay that everyone is entitled to) lasts for up to 39 weeks. For the first six weeks you’d get 90% of your average weekly earnings before tax is deducted. Then for the next 33 weeks, you’d either get 90% of your average weekly earnings or £139.58 – which one you get just depends on which one is lower. You still pay tax and national insurance on your maternity pay as normal.
You’ll normally start getting your SMP when you go on your leave, but if you need time off work for an illness that is related to your pregnancy you’ll start getting it at that time instead.
It’s worth noting that there are certain criteria that you have to fulfil before you’re eligible for SMP. You have to:
• have given the correct notice period
• earn at least £112 per week on average
• provide proof that you’re pregnant
• have worked continuously for the employer in question for 26 weeks minimum by the time you reach the 15th week before the week you expect your baby to be born
If you give your employer the correct notice period, which is 28 days before your due date, they are entitled to ask for your request for SMP in writing and you’ll also need to give them proof that you’re pregnant, which you can get from your doctor or midwife. They then have 28 days to write back to you confirming how your statutory maternity pay will work.
Of course, many companies have their own maternity pay schemes, and you could end up being paid more than the statutory amount. Make sure to check your contract thoroughly so that you understand your employer’s policy on this. Whatever the contract says, they are not allowed to pay your less than the amount you’d be getting in statutory pay. Just be careful though because some companies make you pay back anything over the statutory amount if you decide not to go back to work.
That's enough to be getting on with. Tomorrow we'll have a look at the help available to you when you're expecting and when you've had your baby, and also how you might be able to boost your income.
by Christine WalshBack to blog home