Money: Counting the cost of the kids

Thinking of starting a family? Rachel Fixsen weighs up the financial implications

There I was, totting up how far my toddler's day nursery fees eat into my earnings, when a small kick inside my pregnant tummy reminded me this will soon cost twice as much. Whatever it is that makes people want to have children, it certainly isn't a desire to get rich. Not that money stops anyone embarking on the thrills and spills of parenthood, but what just what is the damage likely to be?

An oft-cited cost of having children is the price of prams, cots, clothes and other baby equipment you buy for the first year. Retailer Mothercare estimates this at pounds 933 for the average child in the UK, not including all the clothes and nappies. I spent about pounds 1,200 on the gear, but you can easily halve this by getting good second-hand items.

One of the biggest dents to your finances is the loss, or partial loss, of one parent's salary during the pre-school years. If both halves of a couple have stable jobs, it is easy to assume that if they have children the mother will simply return to work full-time after a few months' maternity leave.

But for most people, having children turns out to be a much greater adjustment than they thought. Priorities often change, and some parents decide their old work patterns are just not conducive to life with a baby. They may believe the child is better off with more parental contact, or simply find that the logistics of dealing with a small child, childcare arrangements and two full-time jobs make life intolerably hectic.

In 1988, as many as 46 per cent of women did not return to their jobs after maternity leave. The Policy Studies Institute is about to publish the latest study, which is likely to show a considerable fall in the number of non-returners. More women now work, and current laws give more women the right to keep their jobs.

Philippa Gee, of independent financial advisers Gee & Co in Shrewsbury, says a lot of the parents she deals with had initially agreed that the mother would return to work. However, later on they find she really does not want to, although the financial situation demands it.

"Whether there are children there or not, losing a job is critically important," Miss Gee says.

If both parents work, you will have to pay for childcare unless a friend or relative looks after your baby. Depending whether you choose a childminder, day nursery or have a qualified nanny, this could cost anything between pounds 50 and pounds 260 a week full-time, according to the Daycare Trust.

You may find it feasible financially for both parents to work full-time when you have one child, but the arrival of a second child may change this.

In many ways two children give you the benefit of economies of scale, though childcare and private education costs double, says Miss Gee. "It's a fine balance anyway with one child [whether both parents should work], but when there are two, it often swings the balance," she says.

Losing one salary, even temporarily, can be a heavy blow when as a childless couple you saddled yourselves with a mortgage based on two salaries. For the far-sighted, one of the new flexible mortgages on offer might see you through sticky patch.

The Bank of Scotland offers a variable-rate mortgage which allows you to suspend payments for up to six months. "There's nothing wrong with these, but you won't get such a good deal on the interest rate," Miss Gee says. Fixed-rate mortgages are a good idea for anyone planning to have a family, she adds. Simply knowing what your costs are going to be is invaluable.

You may think you'll be out of the woods, as far as childcare costs are concerned, when your children start school. After all, if they are in state education, this will be free. But school holidays take up about 13 weeks a year, while the average working parent is only entitled to four weeks' holiday. Also, school hours are much shorter than the working day, even without travel time.

After-school clubs, which cost pounds 15-pounds 30 per week, and holiday play schemes costing pounds 50-pounds 80 per week fill the gap between school and work hours.

If you favour state schools and are planning to move house, it is worth considering which school catchment area you move to. Being in the catchment area of a school with a good reputation bumps up a house's price, but this premium may be small fry compared to private school fees.

Private school fees for day pupils average pounds 1,533 per term, according to the Independent Schools Information Service.

The costs go on. Clothes, toys, food, outings, buying a bigger house - and don't forget pocket money. Children now get an average of pounds 2.33 a week in pocket money, according to the Wall's pocket money monitor.

Just when your young are flying the nest comes the expense of higher education. The state may hardly chip in at all in 18 years' time. One child at university can cost between pounds 6,000 and pounds 7,000 a year.

That glint in your eye may positively dull as you ponder on the bills of parenthood. But the real financial impact of having children is much lighter than it appears.

To some extent spending simply shifts rather than expanding. Your whole lifestyle changes with children, and you no longer have the time or need for many of your past extravagant habits. After all, how much fun is a shopping spree with two small children in tow?