We are all told to be prepared for life's little emergencies, but what about its big changes – are we financially equipped for these?
Some of the biggest life events are becoming more costly and consumers need to budget for them to ensure they don't get in unnecessary debt and can make the most of these life changing experiences.
Having a baby is a heart-warming, but also costly, life event and, according to research from Aviva, expectant/new parents are finding themselves on average spending in excess of £1,600 preparing for their new arrival – an increase of 17% on a year ago. This outlay is mainly due to essentials such as prams, baby clothes, cots, car seats and nappies, but six in ten people did admit they bought things they didn't need or use, such as mum-to-be toiletries and baby slings.
It seems that a big life event, such as having a child, does not put people off splashing out on other costly purchases with 27% of expectant or new parents changing their car, at an average spend of £5,298. However they are not so willing to spend on peace of mind, as life insurance is clearly overlooked with 64% having no cover in place at all, especially concerning given that the typical family has only £2,773 in savings which would last less than two months on average – in fact parents are twice as likely to start a savings account for the new arrival that to take out insurances.
A fifth of expectant or new parents choose to move house, typically spending £40,000, but one in seven are spending more than £150,000 to upsize. And with the costs of moving home increasing by 6% in a year, according to another study by Lloyds Bank, this adds vastly to the initial outlay.
The average cost of moving home – taking into account rises in stamp duty, estate agency and legal fees - is £8,248, and this equates to 25% of average UK earnings. But as usual, there are vast regional differences with moving costs in London currently on average £20,825 - nearly five times more than in Northern Ireland where it costs £4,253. In London this equates to 47% of average gross full time earnings whereas in Northern Ireland it is just 15% - much of this is fuelled by the fees directly reflecting rises in house prices.
Marc Page, Lloyds Bank mortgages director, commented: "The cost of moving can be an expensive one, and rising house prices have had an impact on this with more property sales now within higher stamp duty brackets. On top of the costs of moving, homemovers also need to consider the costs involved with changing mortgages, such as product and administration fees."
Setting up a regular savings account or tax-free ISA can be a great way to save for life's larger events to ensure you are well prepared and to cut down on the risk of getting into any financial difficulties. Whether it is a new addition to the family, a new house – or both – there is no better way than being financially prepared.
Get prepared with the best savings product for your circumstances.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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