This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
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Investments can go up and down in value, so its possible to get get back less than invested. Pension, ISA and tax rules apply and benefits depend on personal circumstances.
Full podcast episode transcript
0:01 Susannah Streeter: Hello and welcome to Switch Your Money On from Hargreaves Lansdown with me, Susannah Streeter, Head of Money and Markets.
0:14 Sarah Coles: And me, Sarah Coles, Head of Personal Finance.
0:16 Susannah Streeter: So, we're focusing on the cost of kids, aren't we, in this episode, Sarah? I know how pricey they can be. Today is actually my 16-year-old’s birthday and I've spent a fair few pounds, certainly, on presents for him. But it's not just, of course, the birthdays, it's all the childcare, it's all the trips, it's the uniforms, it's everything all the way through the year, pocket money, of course, partly one of the reasons why I'm quite excited he's turned 16 and can go and get a job. But overall, it does impact households' financial resilience, doesn't it? And it means you do have to invest quite a lot more if you're planning to have children in the future.
0:56 Sarah Coles: Yeah, so if you look at where we are in the year, you're not actually the only person facing a really expensive time with birthdays because actually seven of the top ten birthdays are in September. Do you know I think there’s a lot of parents absolutely desperately trying to make sure their children are the oldest in the year. I'm not sure if that was your plan.
1:11 Susannah Streeter: But I think you're absolutely right. Overall, having kids costs a huge amount of money. So, we do a piece of research called the HL Savings and Resilience Barometer and we look at the overall cost of kids. So, on average, families with kids will spend £3,869 more every year, and that's on the bare necessities than those without.
1:28 Sarah Coles: Not trips to the Wave, which is what I've forked out for today.
1:31 Susannah Streeter: Exactly, not including things like mobile phones and all the other things that teenagers will force you to spend money on. But over 18 years, so if you assume 3% inflation, this could add up to around – now wait for it, it's a huge figure – £90,000. So it's a vast sum of cash that parents really need to be able to find, and as result of that they're less likely to have enough cash at the end of the month, enough emergency savings or enough life insurance than non-parents and they're also more worried about debt. So, there is a huge amount of planning you need to do before you have kids.
1:59 Sarah Coles: There certainly is and I would probably say I didn't quite do enough planning and I have three children and it's been a pretty stark realisation but certainly you can catch up with yourself I think as you go along and realise just how much you need to put aside, but it is worth taking the time, certainly to do all of that admin and forward planning.
2:21 Susannah Streeter: Yes, I mean we always say there's never a good time to have kids and if you ever do the maths no one can ever afford them so clearly you know it's an ideal world situation but if you know that you're planning to have children then it makes a lot of sense to do that budgeting because you know that when you have kids you are gonna have to spend a little bit less on, you know yourself, you're gonna have to budget for things like childcare so actually starting that bit earlier, doing it before you have the kids you can build up a bit of a buffer, you can pay off some expensive debts and you've got those emergency savings to fall back on.
2:46 Sarah Coles: One of the big areas you've got to look at before you have kids is actually with something we really easily overlook and that's the protection that you should really have in place for your kids. So, one of the things that we look at is, you know, think about wills. Are your wills up to date? Do they include all your children? And one of those things to consider is guardians. So, if something was to happen to both parents, who would look after your kids and talk to the guardians first ‘cause that's a huge amount to take on. You also need to look at life insurance. Often people will think about making sure that their liabilities are paid, so things like the mortgage but they'll forget about the cost of bringing kids up to the age of 16 or whenever your kids feel ready to be adults and it's really important to factor that in. Even if one of you normally looks after the kids, for example, just bear in mind that if that person was to pass away, somebody else would have to look after the kids. That is a cost. It's not just because someone doesn't work. It doesn't mean they don't need life insurance. And you also need to look at your sick pay and to consider something like income protection, which will pay out if you're too sick in order to work, and revisit your emergency savings ‘cause of course as your expenses go up, your safety net needs to grow as well, because it needs to cover more expenses.
3:44 Susannah Streeter: And also, when you do go on maternity leave, your pay shrinks dramatically. I certainly have experienced that, having gone through three mat leaves and there can be this temptation to stop certain payments going out of your account. Obviously, you know that's fine if you're stopping a streaming service or extra direct debits for a gym that you're not going to use but when it comes to pensions, it is super important that you keep that going. And let's bring in Helen Morrissey now, our Head of Retirement Analysis at HL. Not everybody does that though, do they Helen? Some people just think, right, okay, the pension payments have gotta go. Those extra payments I'm making every single month.
4:25 Helen Morrissey: Yeah, you're absolutely right, Susannah. So, you know, it's very easy when you are bringing a new life into the world that retirement feels like a very, very long way away. However, what I would say is that it's so important, wherever possible, not to stop your pension contributions as a new parent. So, if you are entitled to statutory maternity pay, then do pay your pension contributions. Now, obviously, they will decrease, as your pay does, as you go through that maternity leave. However, as long as you continue to contribute, your employer needs to continue to maintain their contributions at the same level as it was pre-maternity leave. So, this is a great way to keep up those pension contributions while you're away from work on mat leave.
Now, even better, if your workplace pension is set up under a salary sacrifice arrangement, then your employer continues to pay in the entire pension contribution. So that's the same level as it was pre-maternity leave. The only thing that they would stop doing is if your pay was to dip below minimum wage during that period, that would be the only thing that would stop them. But you know, it's really important to realise that there are some easier ways of maintaining those pension contributions. Though I will say money in a pension isn't usually accessible until at least the age of 55. That is gonna go up to age of 57 in 2028.
5:50 Susannah Streeter: So I guess it's not just the maternity leave bit that you need to worry about as well, there's obviously what happens after you've had kids and if one of you wants to work part-time, that's gonna have an implication. I guess the temptation there is to think, well I probably can't afford to pay into my pension at that point.
6:03 Helen Morrissey: Yes, absolutely and one of the big issues that's being discussed in the industry is the whole gender pension gap. You know it might not surprise you that women by enlarge retire on far less than men and one of the big reasons for this is, as you say, women either don't return to the workforce after having children or if they do they return on a part-time basis which means that they're on less money and so they've got less to contribute. Now what I would say is that there are some things that you can do about it and one of the things is that if you have a spouse, a non-earning spouse, you can actually contribute up to £2,880 per year to their pension and that will be topped up by the government through tax relief to £3,600 and that can be a really, really great way of maintaining your partner's pension contributions while they're out of the workforce if you've already used your own allowances for your own pension saving.
It's also worth saying that even if they continue to work, so as you say, on a part-time basis or whatever, you can still contribute to their pension as long as you don't exceed their annual allowance. So, it's a really interesting way of maybe using some extra money if you have it spare to boost your partner's pension provision.
7:20 Sarah Coles: You're talking there about having money spare. I think for some people that's probably a bit of a dream. I think actually sometimes what families are doing are looking for help elsewhere. So, things like child benefit. But you don't automatically get your child benefit, do you? You need to apply for it.
7:33 Helen Morrissey: Yes, you do need to apply for it and I think what a lot of people don't recognise is that it's really important to claim child benefit because as long as you claim it you will get National Insurance credits towards your state pension. Now there's various reasons why people don't claim it and they don't actually realise that they might be accumulating gaps in their state pension record which you know will come back and bite them ‘cause they'll get less state pension.
So one of the key ones was the introduction of the high-income child benefit charge and the way that this works is that you would get your child benefit but if either you or your partner earned more than 60,000 a year you would start having to pay some of this child benefit back on your self-assessment tax form and the way it worked is that if you earned 80,000 or more you'd have to repay all of it. So, this led a lot of people to say, “Well why am I getting this child benefit and then repaying it?’ I just won't claim child benefit. But what they didn't realise is that by not claiming it, they weren't getting the National Insurance credits towards their state pension.
Now, the government did recognise this. There is now a form that you can tick where you say, I want the National Insurance credits that go with child benefit, but I don't want the child benefits so it's still worth registering for that benefit, even if you do opt out of the payments. National Insurance credits to the age of, you know, your child's age of 12 will count towards that state pension, which is really, really important.
9:02 Sarah Coles: That's really useful and something a lot of people don't know, as you say. I mean, obviously, the other big benefit of child benefit is getting the money, and that is a really big part for people. You know, it is worth knowing that there is other help out there as well. So, for example, if you're on a low income, you may get childcare payments through tax credit or through Universal Credit. There's also something that's known as a tax-free childcare account. So that's something, basically, you've got this account, you can use it to spend on approved registered childcare. Now, the clever way it works is all you've got to do, put £8 in, the government will add another £2. So, you can do that up to £500 every three months, which is basically up to a total of £2,000 for each child. So, it's sort of the equivalent of getting your tax back if you're a basic rate taxpayer ’cause it's done through these accounts. It is worth saying, to qualify, you both need to be working and earning at least the equivalent of minimum wage for 16 hours a week, and both parents need to earn less than £100,000. And that's one of the cliff edges in the system that can really catch people out if they make more than £ 100,000.
There is some good news as well in terms of childcare. So, working parents with children aged between nine months and two years, so at the moment they get 15 hours of free childcare a week, and for older preschool children they get 30 hours, which is rising to 30 hours across the board from September. Now, there are some families who’ll get support, but these are sort of limited numbers of hours, and if they need more help, they might lean on their grandparents a bit. So, I think one of the issues then is the grandparents are giving help, they probably can't necessarily work at the same time, but there is still an opportunity for them to do something for their own future by helping, isn't there?
10:34 Helen Morrissey: Absolutely. So again, this is a really little-known benefit. I think that more and more people need to be taking advantage of this. So when a parent is receiving child benefit for a child under the age of 12, they'll automatically get that National Insurance credit towards their state pension but if they've gone back to work and they're paying National Insurance, they don't need it so they can actually sign a form that gives it to the grandparent who is offering care.
So just a bit of a recap, to get the full new state pension you need 35 years’ worth of National Insurance credits. So, if a grandparent hasn't yet hit this threshold and is under state pension age and is looking after your child, then it will boost their state pension.
11:16 Sarah Coles: So, everyone's a winner. That's fantastic. But of course, help from grandparents often doesn't stop there. So especially during those really expensive early years, parents might think they can't really afford to put anything away for their child's future and that's often where we see grandparents really step in, and that includes things like the junior ISA. So, they can make regular payments into a junior ISA and over 18 years that can build to a really substantial nest egg. Although it's worth noting that money won't be available until the child is 18, at which time it's theirs to manage. Now that's actually something that my kids are going through at the moment, and it's actually been a really rewarding and interesting time helping them make their first investment decisions, although I have to say it hasn't been entirely stress-free. Also, if grandparents are worried about inheritance tax, it can help. So, making gifts during your lifetime is one really useful way of bringing down the total value of your estate if you're worried about breaching the inheritance tax thresholds. Plus of course, parents are always busy. Grandparents may be not always quite so busy, so maybe they have the time to do that teaching about investments that I was talking about, to sort of help encourage children to engage with it, to talk about maybe the companies within each fund that they're investing in and really understand a little bit more about it, get a bit more excited about it and then by the time they get to 18 they will feel connected to that money and be making sensible decisions with it.
12:28 Helen Morrissey: And I'm also gonna say though, is that there's always a pensions angle in all of this as well.
12:33 Sarah Coles: Always.
12:33 Helen Morrissey: Always, always Sarah. So what I would say is, you know, you're talking there about junior ISAs and how amazing they can be, let me talk to you about the junior SIP and this is a great way of starting children on their retirement saving journey early. So, you know, you can really get their planning off to a flying start. So just like with a non-working spouse, you can contribute up to £2,880 per year into the junior SIP of a young loved one and the government will top that up to £3,600 per year through tax relief and that's a great way of getting them started early on their pension saving, given a time to grow over the years, it's a gift that they may well thank you for.
13:16 Sarah Coles: Yes I guess it's one of those things that's difficult for grandparents always to be on board with this until you explain the benefits because they're never going to see the moment when those kids take full advantage of it, but I guess it's all part about sort of showing the kids as the money is growing and just showing them how much difference it's making for their future.
13:31 Helen Morrissey: Absolutely, and I think if they can see that as they're growing up, by the time they come to be auto-enrolled in their own workplace, they're gonna have that extra knowledge and it can lead to them taking so much more ownership, not just if they’re retirement planning but more widely.
13:46 Sarah Coles: So, we're now getting to the exciting stage of the podcast, the stat of the week. So, I just want to give you a little bit of background before we crack on with this, because there's been a really interesting phenomenon in how late we leave having kids. So actually, over a period of time, parents have been getting older and older. So, in the year 2023 to 2024, the biggest rise in having kids was for mothers aged 35 to 39. Now there's a bunch of things you need to think about. Obviously, I immediately go into planning mode. One of the big areas where people put money into their pension is when the kids have left home and they've got that empty nest. If you're having kids later, you might not get that empty-nest period, so that is something to consider. Also, you know, if you're trading up your property when you have kids, if you’re doing that later in life, then obviously you've gotta think about how am I gonna pay my mortgage off? And finally, if you want to downsize in retirement and you've still got kids living with you, you're gonna be hard pushed to get into that one-bedroom, two-bedroom home if you've still got kids staying in the extra bedroom.
But there was another striking figure in the data and that's what the stat of the week is all about. So, one age group of men, the number of fathers was up over 14%. So, here's my big question, what was this age group? Was it 50 to 54, was it 55 to 60 or was it over 60? So, Helen, I'll ask you first.
14:54 Helen Morrissey: Okay, do you know what I'm gonna go for the oldest. I'm gonna say over 60s actually.
15:00 Sarah Coles: Oh, that’s interesting. And Susannah?
15:02 Susannah Streeter: I actually think it's 50 to 54.
15:05 Sarah Coles: Ah well, you are wrong, but Helen was right. So, there were actually more than a thousand babies born to dads over the age of 60 in 2023, 2024. So that is quite an impressive number of older men having kids. Although obviously it raises the question of just quite how old those grandparents are when they're gonna be giving you childcare help.
15:23 Susannah Streeter: Certainly is. I think it might be the other way round. Before we go, we should say that this was recorded on the 8th of August 2025, and all information was correct at the time of recording.
15:33 Sarah Coles: Nothing in this podcast is personal advice, you should seek advice if you're not sure what's right for you.
15:37 Susannah Streeter: The government offers a free impartial service, pension-wise, to help you understand your retirement options.
15:42 Sarah Coles: Investments rise and fall in value so the child could get back less than invested. Pension, ISA, and tax rules can change, and benefits will depend on personal circumstances. So, all that's left is for us to thank Helen Morrissey for being here and our producer, Elizabeth Hodson.
15:54 Susannah Streeter: Thank you so much for listening. We will be back again soon. Goodbye.
15:57 Sarah Coles: Goodbye.
15:57 Helen Morrissey: Goodbye.