Congratulations. It's a girl. And, boy, is it going to cost you

Justin Urquhart-Stewart on the third stage in man's financial life

T hey say that children learn language from the moment of birth. I wonder if they can differentiate between the "Ahh" of the cooing parent when seeing their beloved newborn and the "Aargh!" of the parent when seeing the cost of the equipment for their beloved newborn.

From that moment we realise this baby is not a sound financial investment. To be fair, that is not why we decide to have children, but it is certainly worth bearing in mind when embarking on starting a family.

There is never a good time to start a family, but that is no reason for us not to make some preparations. Before going any further consider your financial situation. You may both be currently working, and possibly both wish to carry on with your careers. These days this is commonplace but still needs planning.

It is not just a question of maternity leave, but the impact your change of circumstances can have on your family's income, as well as outgoings. Those spur-of-the-moment holidays and treats look as though they are quite likely to become a fond memory. Adjust your purse's expectations now - that way you are less likely to be depressed when all you seem to have in it is an echo and a sticky sweetie paper.

Preparation

Entitlements: If both of you are working then you will need to check with your personnel department about statutory maternity pay. If you are self-employed you may be entitled to state maternity allowance. If in doubt, help can be obtained from Social Security offices or your nearest child health clinics.

Also, if you wish to continue to work on a full- or part-time basis, now is the time to consider the alternatives and the reaction of your employer. This may seem obvious but it is important to start looking at all the possible financial implications.

The good news is that you will be able to claim child allowance. This is payable irrespective of your incomes and can be an extremely helpful support. I found that having it paid into a separate account was very useful for those extra unexpected baby costs.

Kit. To paraphrase somebody, "Never in the field of human endeavour has so much been spent on someone so little". It is hardly believable that so much equipment is going to be required and at such a cost. Make a list of what you will need and if ANYONE offers to provide you with anything on the list - even second-hand - accept it. Whether it is cots, buggies or highchairs the list will grow in direct proportion to your ability to pay for it.

Key areas to consider

Education: Whether you are planning private education or not, now is the time to start putting money aside. If you go private, then be prepared to put aside significant sums each month from now on. This could be over pounds 150 per month. The rule is don't try and cover it all but at least try and cover the worst. More importantly for many is the ability to pay for university. This could be over pounds 3,000 each year at present values, and don't rely on getting a grant.

The art is to start early, and I prefer flexible schemes, not ones just tied to education. As this is hopefully a five-year-plus investment then look at Peps, which can provide a good tax-free return with a lot of flexibility. Care here, though. Look at the charges and the quality of the provider. You can have these managed for you or choose your own investments if you wish, albeit with some advice.

Insurance: Now there will be at least three of you, it is time to consider what would happen if either of you were not around. See if your job includes life cover, and if not consider some term insurance. This pays out if you die within a period, either as a lump sum or an income.

How much? Add up all areas of income and deduct the amount your family would be entitled to if you died. The balance is the amount of cover you need.

An important element here is critical illness. You can be left very short if the bread-winner of the family is struck with a illness and cannot work.Again check with your employer first and then look to private cover. But take care. It can be expensive, so only look for it to provide some help.

Savings, Investments and Pensions: Although your insurance schemes may cover the dire emergencies, it is vital to establish not only a short- term emergency fund, but long-term investments as well. Starting a family is expensive, so don't worry if you cannot save much now. But don't use that as a reason for too long.

If you are like me, I find it best to have the money siphoned off at pay day by standing orders before I can get my sticky fingers on it. Regular savings schemes into unit and investment trusts are very straightforward and low cost. You can protect them from tax in a Pep and at least you can have a choice.

As for pensions, if you have not done so, start one. If you do not have a company pension then put some time aside to evaluate a private one. You have lots of choice, so shop around. Think of quality though. You want good returns in the long term, not a one-year wonder.

Wills: I am very boring about wills, but I cannot underline enough how important it is to set out sound financial arrangements for those you leave behind. I would go further and say that it is unfair on your family if you do not.

Other Issues: Having a baby often elicits gifts. Without wishing to appear callous, I would suggest pre-briefing potential donors such as godparents.

As expensive as it may have been, I have not been able to find a practical use for the 14-inch gold-plated spoon kindly given to me by a god parent. The donation of National Savings certificates or some cash into a National Savings Account would do nicely.

Finally, if you do have any money left I can recommend to parents doing the late feed the purchase of a pair of radio headphones capable of getting the World Service.

The author is business development director at Barclays Stockbrokers.