Four out of five new parents are risking their children’s financial futures by skimping on life cover, according to new research from Aviva.
The survey of 1,500 recent parents1 in the UK reveals that while two out of five (40 per cent) start a savings account for a new arrival, fewer than one in five (18 per cent) take out life insurance. This is despite the fact that some new parents clearly do consider the difficult “what if?” scenario, with a quarter (25 per cent) stating they had chosen a guardian for their child if they were to die.
The survey also reveals that even before the baby is born, expectant parents will spend on average £1,3701 on essentials such as pushchair, baby clothes, cot, bedding, car seat and nappies. With more than 300,000 babies born to first time parents in the UK each year this adds up to more than £425 million1. In addition:
More than a quarter of expectant/new parents (27 per cent) said they bought or changed their car, with an average spend of £2,658;
And a quarter (25 per cent) moved to a bigger house with an average spend of £20,813.
Typically, new parents think nothing of spending on baby goods, yet an overwhelming 60 per cent of parents admit that looking back, there were items purchased that they either didn’t use or could have done without.
Aviva data shows that two-thirds (60 per cent) of families have no life insurance in place and the average family only has £928 in savings2 which, without any other income, would last them around half a month. Yet if an “average” family paid £10 a month on a standard life insurance policy for both parents for 18 years, they could receive more than £128,000 tax-free if a parent died or was diagnosed with a terminal illness within that period3.
By comparison, investing £10 a month into a high-street savings account over the same period would amount to £2859.404 based on an interest rate of 3 per cent – little more than the average UK family’s monthly income of £2,0662. Significantly, the size of the savings pot depends on how long people have been saving, while protection cover means the sum is guaranteed as soon as the policy is in force.
Louise Colley, head of protection marketing and sales for Aviva said:
“Every parent wants to splash out to prepare for the exciting arrival of a baby, so it’s no surprise that the costs can stack up. But within the checklist of essential items, we’d urge parents to consider putting a small amount aside each month to protect their family’s financial future, if something unexpected were to happen to either parent. It should be considered just as much an essential as a buggy or a cot.
“We don’t think twice about taking steps to protect our children physically within the home, but not enough action is taken to safeguard the financial wellbeing of our families. While it’s understandable that people want to save for their children’s futures, parents need to ask themselves whether they would have enough money to meet their monthly outgoings if they were suddenly to lose an income.”