The cost of raising a child from birth until 21 has risen to around £229,251 – a 63 per cent increase since 2003 - new industry research indicates. Experts say it has risen by almost twice the rate of annual inflation.
The study, carried out on behalf of LV=, found that nearly a third of household income was spent on childcare costs. And despite the research suggesting that parents were spending less overall on food, hobbies and toys for their children, the soaring cost of education and childcare services were all but ‘eclipsing’ these savings.
Matt Duffy, Head of Online Consultancy at Aon Employee Benefits said: “Although inflation is reducing and pay rises have become more common place, people are still worse off than five years ago, as the pace of inflation has outgrown wage inflation. Working parents naturally want to get the most out of their employee benefits packages, making savings where possible from tax and NI efficiencies through salary sacrifice and obtaining discounts and savings on corporate negotiated rates on everything from grocery shopping to life assurance.”
LV= research figures showed that childcare services including nurseries, after-school care and child minders were costing parents on average around £67,586, although regional variations were apparent in the study. Average childcare costs in London came in at £81,276, compared with childcare costs in Yorkshire and Humberside which amounted to £61,397.
Commenting on the research, Myles Rix, Managing Director of protection at LV= said the figures emphasised the importance of financial protection and income protection in particular, would act as a ‘safety net’ if either parent was unable to work.
According to Duffy, there has been a ‘significant spike’ over a five year period of employers providing financial protection products such as Critical Illness Cover, Income Protection and Life Insurance which have been readily utilised by employees.
“Yes, childcare vouchers and holiday trading continue to be the most popular benefits for working parents but it’s important not to forget about financial protection,” Duffy added. “There may be a tendency right now for parents to calculate whether they should remain in the current employer-sponsored childcare voucher scheme or switch to government-administered Tax Free Childcare from October 2015, but planning for the unknown is also massively important.”
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