What to do when you’re unexpectedly expecting


Whether it’s your first or your fifth, having a child is an exciting (and daunting) time!

As a financial coach I work with a number of clients who are expecting a new arrival - with some arrivals being more of a surprise than others.

The most common reaction in those scenarios is mild to major panic. For Tim, a client I have been working with for nearly a year, the news that he was going to have a daughter was both exciting and panic inducing.

In our first meeting after the news, his main question was “Am I prepared for this?”.

Tim and his wife Jenny are both young professionals in London. They’d recently bought their dream property and were living a very comfortable lifestyle. Although the purchase of their home had drained most of their savings, they didn’t worry that they only had a couple of thousand pounds in savings.

It wasn’t long after I first started working with Tim that Jenny fell pregnant. They were delighted of course, but the realisation that they weren’t prepared financially was daunting. Tim felt a sense of urgency to begin preparing their finances, but had no real idea about where to start.

The stress was beginning to get to both of them so our early discussions were used to outline the things they could do now to ensure their family was in the best position to thrive going forward.

Here are some of the key things we discussed.

What does childcare look like?

We looked at Tim and Jenny’s workplace maternity and paternity leave policies to form the base for our childcare planning.

While Tim loved the idea of shared parental leave, in this scenario their financial plan showed that the couple would have to dramatically reduce their expenditure to afford the additional costs associated with having a child.

Next we modelled what their finances would look like if Jenny took maternity leave for a year. Jenny’s pay was 90% of her salary for 3 months, 50% for the next 6 months and unpaid beyond that.

In this scenario Tim and Jenny were more comfortably able to afford the additional costs of having a child, without having to change their standard of living.

We mapped out the costs of childcare in their local area (family lived too far away to help) and in the end, they decided that at the end of maternity leave Jenny would go part time, working three days a week and looking after their daughter on the other two. The days Jenny was at work, they would pay for child care.

By planning out multiple scenarios, we managed to ease any concerns Tim and Jenny had about how the first few years would look for their new family.

Track your expenditure

Tim and Jenny’s plan left them comfortable, but with little capacity to save for their future plans.

While they were saving small amounts now, after going into more detail, they realised they had no tracking in place on their spending. After building a budget together and adjusting their food expenditure slightly they were immediately able to save an extra £300 per month, without impacting on the things they enjoy most.

This extra money was put aside every month to build up their emergency fund and kept in easy access accounts. The key with these funds is to not touch them unless absolutely necessary as it allows you to pay for unforeseen expenses without having to use credit cards or short term loans. Both of which typically come with high interest rates!

Ensure you have adequate financial protection

Whenever there is a big change in someone’s life, I suggest they review their protection levels and will. Having a child is a big change!

Before they knew they’d be having a daughter Tim and Jenny didn’t see the need to have life insurance in place. As they were both young the idea that something could happen to either of them wasn’t even on their radar.

The imminent arrival of their daughter changed their views dramatically! They (rightly) weren’t prepared to chance their daughter’s future.

After discussing options Jenny discovered that her employer offered life insurance so she decided to opt in to the scheme.

Tim’s work didn’t, so after meeting with a protection specialist, Tim put in place life insurance, critical health cover, mortgage protection and income protection. This meant that in the terrible scenario that Tim died, Jenny and their daughter received a payout and the mortgage was paid off. Tim’s income protection also meant that were he to be out of work with sickness or injury for a significant period of time, he would receive a portion of his income during that time.

Finally, they both drafted wills which outlined who would look after their daughter and where their assets would be allocated.

How are Tim and Jenny now…?

Well… it’s no longer just Tim and Jenny. Their daughter, Emily, was born last month and they are no longer worried about their family’s financial future.

Their financial plan is going so well in fact that they’ve booked a holiday in next year to celebrate their 30th birthdays, and Tim has being putting an additional £50 a month aside into a Junior Stocks and Shares ISA for when Emily turns 18.

They’re marching full steam ahead through parenthood knowing that they’ve planned for the best and prepared for the worst.