Am I better off going part time to look after the new born?

Child care vs changing your working hours, the dilema thousands of parents face as they start a family. It is by no means an easy decision, not least because there are so many financial factors to consider but also the parental factors weighing up whether your child will develop better in child care or with more parental influence.

Family finances when starting a family

It is first crucial to get over the binary choice that some seem to think they face: stopping work altogether or putting their child in care 40 hours a week. Thanks to laws on flexible working your employer has to deal with a request to change your working hours in a 'reasonable manner'. Of course you are not going to get exactly what you want, however it is a step in the right direction and avoids giving up work completely.

To aid you in deciding how to approach your working patterns and child care here are some things to consider:

  1. The person with the lowest earning potential should be the one to consider going part time, if at all. The best financial decision is not always for the woman to go part time or give up work. Consider who will be earning the most in the future and try to ensure you maximise their income.
  2. The cost of childcare at different times of the day depending on your normal working hours. Is it cheaper to have the child in care later in the day or earlier, and one of you look after the child during the more expensive time.
  3. Pensions. Try to think of pensions like a happy tax, that is it's one you will benefit from every penny but equally an unavoidable cost. So avoid at all costs reducing or stopping your pension contributions because when you invetiably make it to retirement age you and your children will be glad you contributed as the state pension is not enough to rely on.

 

So what should you do to decide the best way forward?

  1. Create a budget - identify your combined household income and your combined household expenditure. It doesn't have to be complicated but equally don't forget about budgeting for large one off purchases like replacement cars as well as the obvious such as food and rent/morgage. Ignore child care costs for the time being.
  2. Ensure you are claiming all state benefits possible - entitledto.co.uk is a comprehensive calculator and factor them into your budget in step 1.
  3. Claim child care vouchers as soon as possible.
  4. The person with the least income should fill out the child benefit form in their name even if you wont claim it. This ensures they get the national insurance credits to help them claim the state pension in the future as well as ensuring the child gets their national insurance number when they turn 16.
  5. Identify possible changes in working hours for example person A working 2 days a week and person B working 3 days a week and use salary calculators such as thesalarycalculator.co.uk to determine the decrease in your after tax pay for each earner.
  6. For each possible change in working working hours, as well as maintaining the status quo, calculate the child care costs required and determine which option leaves you with the most money left over each month (or the least in the black!).
  7. Create a list of the options, discuss any changes in working hours with the appropriate person at work (perhaps pick a moment when they are feeling most generous), be reasonable and present alternatives if they refuse your first suggestion.

It may feel like a long complicated list, but it's quite mechanical and worth it in the end to avoid working and caring for your child in the least effective way.

 

This article was updated on 27 December 2018