- 65% rely on grandparents to reduce financial burden of childcare
- Average household spends £6,500 per year
- Majority unaware of new Government childcare initiatives
9 January 2018 – Working, middle-class parents are struggling with high childcare costs and relying primarily on grandparents to care for their children, according to Killik & Co, the independently-owned investment house.
In The Real Cost of Childcare Report (the full report can be found here), Killik & Co has found that couples with a child under five are spending £6,500 a year on childcare on average, but overlooking a potential windfall of £8,384 per year in financial support from the Government (see below for details on this amount).
The report provides an insight also into the practicalities of raising a young child when both parents work; for example, childcare costs are deterring half of them from having more children and forcing more women to reduce their working hours.
Parents’ wider family members play a vital a role in childcare, with 71% of those polled relying on family for childcare to enable parents to work. Over 92% of that help comes from grandparents (or 65% of the total respondents), who are increasingly being called upon to help with childcare as parents struggle with costs and balancing work. Over 9.2 million grandparents spend an average of nine hours a week looking after grandchildren, saving parents over £1,900 in childcare fees. In addition, over one in five (22%) of those polled are hoping that their parents or grandparents will contribute to the costs of raising their child/children.
Aunts and uncles also play an important role in helping with childcare according to 34% of those polled, and sprightly great-grandparents and cousins get involved too (9% and 8% respectively).
Half of parents in the UK with a child aged five or under are reluctant to have more children due to the cost of childcare.
The survey reveals 40% of parents have cut back their working hours in the last five years due to the cost of childcare. More than double the number of women (49%) than men (22%) have reduced their working hours in the last five years due to the cost of childcare.
Parents are struggling to meet the costs of childcare and save. When asked what parents would do with any potential savings from the new childcare schemes outlined below, respondents gave a variety of answers: 48% would add it to an existing savings account, 31% would put the money towards their mortgage, 18% planned to spend more on childcare, 10% were keen to invest, 9% would add to their pension and 4.5% would pay off debt.
Svenja Keller, Head of Wealth Planning, Killik & Co. said:
“We are now living in an economic environment where the cost of childcare is influencing parents’ decision on whether or not they choose to have more children. This is a shocking position to be in, given that this decision comes as parents are still underestimating the cost of raising a young child by 34%.
“This situation could be easily prevented as parents could make significant savings towards their goals through financial planning, regular savings and by making use of financial incentives. As we show in this report, parents could make over £8,000 worth of savings a year on childcare by using Government help. Also, our Killik Private Education Index (2015) showed that keeping a child in a state school until the age of eight would cut £97,000 – more than a third – off the total cost of a private education.
“At Killik & Co, we believe in planning ahead – in setting aside small amounts and doing so regularly. That way, parents benefit from the power of compounding on their savings and investments. Start small, start early and seek advice – this is a mantra all parents should keep in mind.”
The vast majority of couples are not using two recently launched Government schemes that offer combined savings of £8,384 for parents with children aged three to five: 30 hours per week of free childcare in England – raised from 15 hours in September 2017 – and the Tax-Free Childcare Scheme introduced across the UK in April 2017.
- Only 31% of parents are using the initial 15 hours free childcare, with average savings of £3,192 per annum;
- None of the couples have started using the additional 15 hours free childcare introduced in September, worth an additional £3,192 in savings. However, just over a fifth (21%) do plan to use them in future;
- Only a fifth are using the Tax-Free Childcare Scheme, with inherent savings of up to £2,000 if a couple spends £8,000 on childcare via an online account which can be opened through the GOV.UK website;
- 40% of couples are using an existing Childcare Vouchers scheme, which will be closed to new applicants from April 2018, allowing parents to make £933 worth of savings per year each. Childcare Vouchers can be used in conjunction with the 30 hours free childcare scheme highlighted above.
Given that over seven in ten parents surveyed hope that at least one of their children will attend university and one in eight is planning on private education for their children, these schemes are the perfect incentive to save and invest on a regular basis.
Unsurprisingly, London emerged as the most expensive place for childcare with parents spending on average £152 per week compared to the lowest of £95 in the North East (please see a detailed regional breakdown in the report). The highest take up of the 15 hours of free childcare was in the East Midlands with 38% using the service, with the North East the lowest at 23%.