Cost of raising a child rises by 3.3%

Date: 26 Jan 2012

The cost of raising a child from birth to their 21st birthday now totals a record £218,024, according to the annual Cost a Child Report from protection and retirement specialist LV=.

The report says this equates to £10,382 a year, £865 a month or £28.44 a day.

It shows the overall cost of raising a child has increased by 3.3% in the last year with education and childcare remaining the biggest expenditures, costing parents a massive £71,780 and £62,099 respectively. The cost of education, including school uniforms, after-school clubs, and university tuition fees, has experienced the biggest rise, with a 5% increase in spending over the past year.

However, some areas of expenditure have decreased since last year as three-quarters of parents (76%) look at ways to cut back, with spending on hobbies and toys down 5%.

The overall cost of raising a child has increased by 55% since LV='s first Cost a Child Report in 2003.

To reduce outgoings, 67% of those mums and dads planning to cut back, are hunting down lower cost items or 'value' goods in their weekly shop. Over a third (35%) of those cutting back are buying items from second-hand shops and 34% are making extra cash by selling goods on eBay and at car boot sales. Nearly a third (30%) of parents making reductions to their outgoings have devised a specific budget for the family to stick to.

Over the last 12 months the report says the cost of raising a child has increased the most during university years (age 18-21), when parents could pay as much as £17,459 a year, up 5% from last year. New parents have also seen the cost of the first year of their child’s lives increase 2.8% to an average of £10,261.

The breakdown of how much parents are spending throughout the life of their child, and the percentage difference from last year:

- 1st year - £10,261 – up 2.8%
- Years 1 to 4 - £56,562 (£14,140 a year) – up 2.5%
- Years 5 to 10 - £46,073 (£7,679 a year) – up 3.1%
- Years 11 to 17 - £52,753 (£7,536 a year) – up 2.7%
- Years 18 to 21 - £52,376 (£17,459 a year) – up 5%

Mark Jones, LV= Head of Protection, said: "Our report shows education costs have increased dramatically and despite financial pressures, many parents are seeking out savvy ways to ensure they can still afford their children's higher education prospects. With tuition fees increasing this year we expect to see more parents making significant cut backs across the family budget to accommodate this."

With university tuition fees rising from September 2012 to a possible £9,000 a year, the report says the cost of educating children is putting the biggest financial pressure on parents. The report found 42% of parents who thought their children would to go to university still hoped their child would go despite the planned increase in fees. Many parents will be sharing the cost of university with their children. 15% of parents said their children will need to fund part of it themselves, while 10% of parents will be cutting back in other areas to fund the costs associated with university, and 8% will plunder their savings. Significantly one in five (21%) parents who thought their child would go to university have now said they won’t due to the increase in tuition fees.

The LV= Cost of a Child report has also captured the average cost of private school fees between the ages of five and 18, in addition to the main report. The results show private school fees would add £105,336 to the cost of raising a child, increasing to £193,743 for boarding school fees (these figures are not included in the £218,024 cost of raising a child).

The report also covers pocket money and shows the amount given to children as pocket money totals £4,337 from birth to age 21. Of the parents who give pocket money to their children, 18% have made the decision to give their children less pocket money in the last year to help combat the financial strains they are under and help stretch the family budget further. However, overall the average amount of pocket money given to children has increased by 4.8% in the last year.

With mounting financial pressures, many families are reducing the amount of savings and protection they have in place. Two in five (43%) parents trying to decrease their spending have cut back on saving and reduced the amount they are putting away. A further 22% have cancelled or reviewed their insurance policies to try and save money.

When safe-guarding the family finances, 50% of parents don't have any life cover or income protection in place. Just a third (32%) of parents do have life cover, and only 11% have both life cover and income protection.

Related tags: Childcare costs | Education