Raising Children is Expensive but fun...

Children come with a £180,000 price tag If you think babies are expensive, wait until they get to university. Esther Shaw on the cost of child-rearing

Published: 12 August 2007

What price parenthood? The cost of food, clothing and childcare soon mounts up, and that's before you've even contemplated putting your child through higher education.

New figures from fund manager Invesco Perpetual show that the bill to parents for bringing up a child until the age of 18 rings up at more than £43,000, rising to £150,000 if the child is privately educated.

These findings echo similar research conducted by friendly society LV= (formerly Liverpool Victoria) in November last year. It put the cost of raising a child attending a school outside the state system even higher – at £180,000, although in this case, calculations went up to the age of 21.

According to LV=, the average UK family spends £16,002 on a child's food,

£12,352 on clothing, £11,086 on holidays, £9,592 on hobbies and toys and

£5,518 on pocket money.

With costs soaring to this level, how are parents making ends meet?LV= found that in almost two-thirds of families, both parents have to work, and look to grandparents and other relatives to help with childcare.

Those who do not have family to help out face paying an average of £152 a week for a full-time nursery place for a child under the age of two, according to the Daycare Trust, the national childcare charity.

The financial pressure is unlikely to ease as a child gets older. The university years remain the most expensive – especially since the introduction of tuition fees of up to £3,000 last year, pushing the total cost of a degree course up to £32,478 (based on figures from the National Union of Students).

But as students anxiously await their A-level results this week, new research from F&C Investments shows that most parents fail to plan adequately for their child's higher education – with less than a third having made any financial provision at all.

To help support their child in later years, parents should take full advantage of the child trust fund (CTF). Friends and family can add another £1,200 each year to the £250 voucher given by the Government to all children at birth, and the money can grow tax-free until the child's 18th birthday.

According to the Children's Mutual friendly society, a parent who tops up the CTF by £24 a month could see their son or daughter receive a £9,700 lump sum in 18 years' time.

Outside the CTF, diligent parents can put money into a bank or building society account, but while low-risk, these offer lacklustre returns. For investments of at least five to 10 years, exposure to stocks and shares via a unit trust is advisable, says Anna Bowes of independent financial adviser AWD Chase de Vere.

Don't forget to consider the tax liability, though. As Ms Bowes warns:

"Where money is gifted by a parent into a child's name, any income earned on this above £100 is taxed as though it belongs to the parent."