The cost of child care

How would you cope as a lone parent?

But how would a widowed parent manage to cover the cost of child care alone? For someone on £25,000 a year, a child care bill of £180 a week would average £720 a month, assuming a 48-week year; that is not far short of half their take-home pay of £1,561 a month, allowing for tax and national insurance. And these costs are per child.

Of course, there is likely to be a substantial Working Tax Credit available (including Childcare element) under such circumstances. But child care is not the only financial challenge faced by a family when a parent dies, or is long-term incapacitated. Other “costs” can include:

• Extended support for children beyond normal school hours;

• Reduced principal income as remaining parent has to cut the hours worked to cope with children’s personal and emotional needs;

• Additional expense for catering and home responsibilities; and

• Extra “occasional” costs.

The death or long-term illness of a parent places a financial as well as emotional strain on any family, even if the parent was not in paid employment. Where they were economically active, the position is even worse because of the loss of their income.

It is therefore important to consider the need for life assurance not just to cover the mortgage, should either partner die or become seriously ill, but also all living and potential additional expenses.

It is not unreasonable to suggest that a sum of at least ten times each parent’s income should be provided as a lump sum on death, or an income of at least two thirds of their gross earnings for long term illness. For a non-earning partner, then a lump sum of £250,000 or more on death might be considered reasonable.

Premiums will depend on age, but to insure the life of a 25-year-old mother for £250,000 over 15 years could cost less than £10 a month for a non-smoker; more if critical illness cover is also required. Nothing can compensate for the loss of a much loved parent or partner, but the right life insurance can at least alleviate the financial cares naturally occurring at such a time.

Providing an income to cover the long term illness of a “non-working” parent is not quite so straightforward, as the maximum level of cover available is normally related to income; so if there is no salary, how can a reasonable level be established? There are, however, a small number of companies recognising the importance of providing permanent health insurance for parents who are not economically active and the level of cover can be negotiated with them.

If you require any further information about the services that we provide or would like to review your financial planning position, please contact us

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