The average cost of raising a child has risen to £222,458 according to research just published by life insurance company, LV=. The cost, which covers the period from birth to the age of 21, includes education, although not the cost of private school which would add a further £100k-£200k depending on whether the child boards.
The survey breaks down the cost by age and spending category. The university years are, not surprisingly, the most expensive and also the area in which costs have risen most sharply. The introduction and increasing cost of University tuition fees means parents pay on average 124% more for their child’s education than they did 10 years ago. The university stage, from 18 to 21, costs on average £17,459 a year. The second most costly stage is the pre-school period where the increasing cost of childcare means parents are paying 61% more than they did in 2003, with the cost now averaging £14,505 for a child from 1 until 4.
In these tough economic times, with living costs rising faster than income, many parents are being forced to look at their budgets, making cutbacks where they can. The survey revealed cutting back on luxuries, looking at cheaper ways of managing the basics and boosting income by selling belongings online or at car boot sales are now popular choices amongst families. More alarmingly though, savings and insurances have also been hit, with 40% of parents having to reduce the amount of income they save for emergencies and 26% of families having to cancel or review insurance policies to save money.
An expert review of protection options could result not only in monetary savings, but also more appropriate cover for actual needs.
Family Income Benefit for example is a low cost insurance that provides an annual income for a specified period of time in the event of the death of a parent. The amount of income required each year to cover costs, like education, can be specified as well as the time frame it is needed for - until a child reaches 21 for example. For less than £10 a month a first time parent aged 29 could buy family income benefit to provide an income of £10,000 a year until their child reached 21. The income would be index liked to rise in line with inflation.
Ultimately the important thing is to have some cover in place. Whilst it might be tempting to think life insurance is an expense you could cut completely, it could turn out to be a false economy if the unexpected were to happen.