You've given birth to a £10,000 baby

How to meet the costs of bringing up kids

Babies are so small that you wouldn't think they would cost much money. But anyone who has had one knows that the moment one arrives, your finances are hit hard.

Babies are so small that you wouldn't think they would cost much money. But anyone who has had one knows that the moment one arrives, your finances are hit hard.

Whatever your income, it's wise to think through the financial implications as early as possible. "The most important thing is to [make] a budget plan early on," says Debbie Musselwight, editor of Practical Parenting magazine. "Sit down with your partner and look at all your outgoings. If you can, save 10 per cent of your joint salaries every month so that you've got a little nest egg saved up."

That nest egg will ideally need to be around £9,500 if you are to cover the average costs of a child's first five years. The cost for the first year will probably be around £3,000 to £4,000. If you are really organised you could start saving a few years in advance and keep the money in an individual savings account (ISA).

From the birth onwards, you can find yourself spending a lot of money, particularly if you are not happy with having the baby on the NHS.

A private hospital, such as the Portland Hospital in central London, charges around £1,573 for the first 24 hours after the birth and £633 per day after that, for a straightforward delivery.

Some mothers employ a maternity nurse to get them through the first month or so of sleepless nights and to set a routine for the baby. Maternity nurses work 24 hours a day, six days a week and charge between £450 and £900 a week depending on experience and the number of babies to be cared for. After that you might want a nanny. Part-time nannies charge about £5 to £6 an hour but a full-time one will cost upwards of £13,000 a year, including their tax and national insurance.

A cheaper option is to employ a childminder. Costs vary wildly, depending on where you live. According to the latest survey conducted by the National Childminding Association, the average childminder charges £2.07 an hour. But some charge up to £3.55. Full-time nurseries will set you back £150 a week for council or community nurseries, or £80 to £180 a week for private ones.

When it comes to baby equipment, you can spend more than £1,000 in the first few months on a first child, according to Legal & General research. Typical costs include: cot and mattress £200; car seat £70; buggy £200; high chair £75; plus £600 on bottles, toiletries, bedding, safety equipment and toys.

Kathy Richards, a first-time mother living in west London, says there are several expensive gadgets on the market that look great but are not necessary. "One such example is a changing station, which isn't needed at all," she says. "You just need a changing mat on the floor and that's it. You don't even need a baby bath really. When they're really tiny you can just bathe them in the sink."

Other costs in the first year include up to £1,100 for disposable nappies. If you choose a greener option you can spend £900 on a cotton-nappy washing service, although you can cut that down to £260 if you wash them yourself.

Clothes for the little one will set you back around £220 in his or her first year, although that can be cut back drastically by taking hand-me-downs from friends and family, and through the gifts that new babies tend to attract.

Mrs Richards says friends warned her against buying too many clothes. "We were told to buy little and wash a lot," she says. "And it's so true. You do get better value from clothing then. Second-hand clothes are very good for babies because they grow so fast, the clothes are practically new anyway."

Juliet Leigh, author of The Best Baby Buys Guide (published by Headline), says many new parents buy too soon. "Don't buy things ahead," she warns. "You'll just end up with a zoo of baby equipment which you're tripping over. Only buy things once the baby has arrived and you know you can't live without them.

"That's also true with clothes. It's no good buying baby grows before you give birth and then finding you have a 10-pound baby who doesn't fit into any of them."

If these costs make you want to grab the Yellow Pages and find your nearest vasectomy clinic, there is help available in the form of child benefit, maternity pay and, in some cases, family credit.

It is also worth checking up on your employer's maternity provisions while you're pregnant so that you can budget properly.

If you can spare the child benefit money, and are planning to send your child to a fee-paying school, this money can reap great rewards if you invest it from the first month onwards. Most unit trusts will allow a minimum investment of £50 or less, so if you invest £65 a month (roughly the amount you will get for your first child) in a unit trust growing at an average of 9 per cent per annum, you will see a return of £4,858 after five years or £12,332 after 10 years. This would be a big help with school or university fees.