The financial impact of parenthood and how to prepare

Parents in England face a significant drop in income after having children, with mums losing out on an average of £65,000 in earnings over the five years after having their first child, according to recent figures by the Office for National Statistics.

The financial impact grows for parents who choose to have more than one child. A second baby can cost around £26,000 over five years, while a third costs an average of £32,000 over the same period.

There are lots of reasons for this. Some parents step back from work to look after their children, while others switch careers to find more flexible hours. Often, their earnings don’t match what they made before having children.

If you’re thinking about starting a family, the financial reality can feel daunting. But there are steps you can take to prepare for the cost of parenthood.

How to protect your income

Becoming a parent often changes your working life. Whether it’s taking leave or switching careers, it’s common to see a drop in income at least in the short term. Parental leave is usually paid, but typically at a lower rate. Here's how to limit the impact:

Know your rights at work

You have legal rights around maternity leave, flexible working, and returning to work. Understanding what you’re entitled to can help you make choices that work for you and protect your income.

Start with the government website to check your entitlements. Your workplace might have its own policies as well, so it's worth looking into those when planning.

Talk to your employer early

If you’re comofrtable, have a chat with your manager or HR team when you’re ready. Bear in mind, to qualify for maternity pay, you’ll need to tell them in the 15th week before the expected week of childbirth. In many cases though, you might want to tell them earlier so you can talk through any health and safety adjustments you might need.

You can discuss how long you want to be away for, and even what’s possible after maternity leave. You never know, they might offer options you hadn’t considered to make your eventual return easier.

Keep your skills fresh

If you’re planning on taking a longer break, it’s a good idea to keep your skills fresh. Online qualifications, staying up to speed with industry changes, or keeping in touch with your colleagues can help you feel confident when returning to work.

Look into benefits and support

If maternity pay isn’t enough or if you’re planning on leaving work altogether, it’s worth checking what you’re entitled to for example, child benefit (£26.05 per week for your first child), help with childcare costs, or Universal Credit. Try a benefits calculator to see what you’re eligible for based on your circumstances.

Think about your pension

It’s easy to focus on the here and now, but your pension matters too. Losing out on earnings now can eat into your future pension.

If you qualify for maternity pay, your employer will usually continue contributing to your pension for the first 26 weeks of your maternity leave. You’ll also need to keep contributing, but this will be adjusted based on your maternity income.

In some cases, if money is tight, you can request to stop making contributions. But you should aim to keep your pension contributions going if you can so you can keep building up your retirement savings.

How to keep the household budget on track

Even if your income takes a hit, there are ways to keep the household budget on track. You might need to make a few changes here and there, but there are all sorts of money savers that can make a reduced household budget stretch further.

Start a small savings pot

If you can, try to build a little buffer before your baby arrives. It doesn’t have to be huge, saving £10 or £20 a week adds up over time. You could look into opening a joint savings account with your partner so you can spread the burden. Some accounts also pay decent interest rates that can help your money grow faster.

You can use your buffer to supplement the family budget while you’re on maternity leave, which will mean taking less of a hit to your lifestyle.

Review your subscriptions

A lower household income calls for a subscriptions review. Most of us have a couple we don’t really use. Now’s the time to take a look at the streaming services, apps and memberships you’re paying for monthly. Cutting back on just one or two you don’t use much can free up cash for essentials.

Shop second hand

Babies grow fast and often need new clothes. But buying a new wardrobe every couple of months when you’re on reduced pay isn’t exactly ideal. The good news is charity shops, online marketplaces, and local swaps are brilliant for clothes, toys, and other baby gear. You’ll save loads and help the planet too.

Use free local resources

Libraries, churches, and community centres often run free baby and toddler sessions. They’re great for socialising and getting out of the house without spending a penny.

Talk openly about money

If you have a partner, keep the conversation open. Share plans, worries and goals. Working as a team makes budgeting easier. You might decide to pool your money or split costs differently to make up for your reduced income.

Becoming a parent is a huge life shift, and the financial impact can’t be ignored. But with a little planning, some honest conversations, and support from those around you, you can protect your income and take the stress out of this next chapter.