Clare Stinton, senior personal finance analyst, Hargreaves Lansdown
“They say a baby changes everything - that includes your finances. In 2025 the estimated cost of raising a child was £250,000 for a couple and £290,000 for a single parent. That’s the price tag of a mortgage. And just like a mortgage, it’s a long-term commitment.
The financial impact of children starts with buying all the baby gear; then it’s the extras on the shopping list you need to budget for, not to mention nursery fees, and the impact on your future earnings.
Before your bundle of joy makes their debut, reviewing and organising your finances can put you in a much stronger position financially. And tackling these discussions before the baby arrives is far easier than trying to figure it out on three to four hours sleep.
Five baby steps to boost your family’s financial resilience:
1. Prepare for that drop in income
For many, maternity and paternity leave comes with a plunge in pay - at the exact time that expenses are rising. So, step one is understanding what you’re entitled to - does your employer offer enhanced maternity or paternity on top of the statutory minimum? Statutory Maternity Pay (SMP) is paid for up to 39 weeks, 90% of your average weekly earnings for the first 6 weeks, then for the remainder, you’ll receive the lower of £194.32 per week or 90% of your weekly pay.
Next, revisit your household finances to understand if your budget can absorb new costs - have you got the headroom to add nappies to the weekly shop? It may be that you’ve always split bills 50/50, will this continue? And is it fair if one partner’s income drops?
2. Review your emergency fund
A change in your everyday costs should also prompt you to review your emergency fund. Will the money you have tucked away still cover 3-6 months of essential spending?
Where you feel comfortable sitting on the 3-6 months spectrum may also change once you have a tiny new member of the family.
3. Build your baby buffer
Building a parental leave pot - or ‘fun fund’ - a pot that both partners contribute to before the baby arrives, can give the parent taking time off work a little more independence when their income drops. If you’re both used to earning your own money, this might help maintain that balance.
Where you keep your savings really matters. Inflation-beating interest rates are available, so parking your cash in a top paying account can help your hard-earned money retain its value until you’re ready to spend it. This usually means looking beyond your current account and shopping around. As a rule of thumb, review your savings at least once a year, every six months if you can - to make sure it’s still working hard. HL’s Active Savings can help you keep on top of the best rates in the market, as well as act as a dashboard to view your savings in different pots in one place.
4. Keep powering up your pension
Don’t drop or pause your pension contributions. Keeping up contributions during maternity leave can be a gamechanger for your retirement outlook. Why? The power of compounding. The earlier you pay money into your pension; the sooner you can start earning returns on past returns and grow your pot.
It may also cost you less than you expect. During paid maternity leave employers are generally required to maintain pension contributions. Your personal contributions will decrease in line with any drop in income; however, your employer contributions should remain at the same pre-maternity level.
If your employer uses salary sacrifice, they not only have to continue to pay their pre-maternity contribution, but if your income drops, they must also make up your contribution to its pre-maternity level. For women on SMP employers must cover the entire contribution - your share and theirs.
Payroll errors can happen so check your payslips to ensure that your maternity benefits are being treated correctly.
5. Plan for the worst
Becoming a parent means greater financial responsibilities. Updating existing insurance policies to make sure they still provide enough cover and that your beneficiaries are as you wish is a priority when your family grows.
If you don’t have life insurance, having a baby is a key driver for putting insurance in place to help ensure that your family is financially protected should the worst happen.
Don’t forget to review what workplace benefits you and a partner have. For instance, if your employer offers private medical insurance, you may be able to add your baby to the policy from day one.
Writing or updating your will also takes on a new level of importance when you have a dependant, particularly if you and your partner are unmarried. If one of you passed away without a will, your estate could pass directly to your child, and not to your partner, potentially leaving the latter financially vulnerable.”
Source for figures: Child Poverty Action Group (CPAG): https://cpag.org.uk/sites/default/files/2025-10/CPAG-Cost-of-a-Child-2025.pdf
Notes to Editors
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