Some high net worth (HNW) parents are relying on inheritance to fund childcare due to a lack of planning, according to new research from wealth manager Charles Stanley.
The research reveals a striking gap in financial planning among HNW parents, with nearly a quarter (24%) admitting they did not account for the cost of having children.
This has led some parents to seek financial support from unexpected sources, with one in ten (9%) turning to early inheritance to help cover childcare expenses.
The research also highlights differences in financial preparedness between men and women, with 25% of women failing to consider the financial implications of having children compared to 20% of men.
FINANCIAL STRAIN
For those who did plan ahead, the average consideration of financial implication was just two-and-a-half years before starting a family, which often leaves insufficient time to fully anticipate the financial strain.
The financial burden of raising a child is substantial. According to the Child Poverty Action Group (CPAG), raising a child to age 18 costs £166,000 for couples and £220,000 for lone parents; and that’s not accounting for the lifestyle expectations of HNW children, and assumes state schooling.
Beyond day-to-day expenses, the survey found that many parents overlooked other significant costs.
COST OF CONCEIVING
Over half (51%) did not anticipate the cost of conceiving, such as IVF treatments and almost a third (27%) did not factor in education expenses, including school choice.
A quarter (25%) overlooked their child’s future financial needs, such as setting up a junior ISA or investment fund.
And a similar amount (24%) failed to plan for childcare arrangements while just over a fifth (21%) failed to account for routine expenses like toys and clothing.
Beyond financial considerations, more than a quarter of parents (27%) neglected to consider the emotional impact of having children.
CREATE A BUDGET
Despite these challenges, only seven out of 10 (67%) parents created a budget to account for the cost of raising children.
Notably, men were more likely than women to prepare financially, with eight out of 10 (78%) creating a budget compared to six out of 10 (63%) women.
While three out of 10 (31%) parents crafted a detailed budget only slightly more (36%) managed a rough estimate while a similar amount (33%) had no budget at all.
These gaps in planning lead to the surprise financial cost of raising children.
Three quarters (74%) of parents who considered the costs beforehand still found parenting more expensive than expected. Just a quarter (26%) had a dedicated savings pot for day-to-day child-related expenses and a mere 15% consulted a financial adviser on the matter.
CAREER SACRIFICES
Financial planning is not the only challenge – starting and raising a family often requires career sacrifices.
One in five (19%) of parents changed jobs to secure higher salaries to cover costs, whereas 14% limited their progression in order to maintain financial stability. Just over one in 10 (13%) also delayed having children to prioritise career goals, and a similar number (12%) remained in roles solely for parental leave benefits.
Other sacrifices included having fewer children than desired (11%), encouraging a partner to switch jobs for better parental support (8%), and experiencing friction in relationships due to career demands (6%).
FINANCIAL PLANNING
Mia Kahrimanovic, Financial Planner at Charles Stanley, says: “The research emphasises the importance of early and comprehensive financial planning for prospective parents.
“It’s vital that families consider the broad spectrum of costs and sacrifices involved in raising children over time to avoid reliance on unnecessary measures like early inheritance.
“Not only is this important for covering the costs of raising a child, but also for each individual’s long-term financial security.”
PROACTIVE STEPS
She adds: “By taking proactive steps to budget, save, and plan, parents can navigate the financial realities of parenthood with greater confidence and stability.
“This is particularly pertinent in today’s high-cost environment. Seeking expert financial advice can help parents planning to raise children throughout their financial journey.”
