Over 300,000 new parents are having to use credit to fund their maternity or paternity leave, a new study claims.
According to new research by credit report provider Noddle, 25 per cent of parents are racking up debts of around £2,700 to pay for the costs of a new baby, despite making efforts to prepare their finances in advance.
And despite over half of parents putting aside savings of around £3,000, they still under-budget for their new arrival by as much as £500 a month.
This means many new parents face money worries, with 53 per cent admitting they were anxious about their reduced income during their time off work.
Over a third of parents even returned to work earlier than planned and 48 per cent maintained a strict budget.
Other new parents relied heavily on support from family and friends or used their overdrafts, while some were even forced to take a second job.
Jacqueline Dewey, managing director at Noddle said: ‘Having a child can be one of the most exciting, joyful times in our lives, but financially speaking it may be tough. Parents have to try to factor in all the costs of caring for a new baby, such as nappies, clothes, toys and equipment, while on a reduced income.
‘Preparing to go on parental leave is a really busy time, but it’s important to do as much budgeting as possible before the baby is born to help reduce any financial anxiety. You may choose to use credit as part of your planning, and this can be a good short-term solution.
‘But it should be managed correctly, because otherwise it can affect your credit score and potentially your ability to get credit for larger items as your family grows, such as a new home or bigger car.’
Jacqueline advises prospective parents to save as much money as possible and stick to a monthly budget. She also suggests to check if you’re entitled to things like tax credits or child benefits.