Big Changes Ahead for Childcare Funding!
By Helen Quayle
Attention, working families with preschoolers—exciting changes are coming your way! Did you know that childcare funding is about to change significantly? Here’s what you need to know about the expanded offer.
The Expanded Offer
Starting in April 2024, eligible working parents of 2-year-olds can access 15 hours of childcare support per week. By September 2025, most working families with children aged 9 months to 5 years will be entitled to 30 hours of weekly childcare support. These changes will be introduced gradually to ensure providers can meet the growing demand.
Here’s a breakdown:
From September 2024: 15 hours of childcare support will extend to eligible working parents of children from 9 months to 3 years old.
From September 2025: Eligible working parents of children from 9 months to school age will receive 30 hours of childcare support per week.
Depending on your provider, these hours can be used over 38 weeks (during school term time) or up to 52 weeks if you opt to use fewer hours per week.
Find more details here: https://www.childcarechoices.gov.uk/childcare-expansion/early-years-childcare.
Financial Impact and Opportunities
I’ve had numerous discussions with clients about the financial impact of having children. Often, women reduce their working hours, which affects their income, death-in-service benefits, and pension contributions. According to BBC News, on average, women need to work 19 more years than men to achieve the same pension size.
The upcoming changes in childcare funding present a tremendous opportunity for families. With reduced childcare costs, it’s an excellent time to reassess your financial plans and fill any gaps. Here are some key areas to consider:
Protection
Do you have sufficient life cover? What would happen if you became ill and couldn’t work? For a relatively small amount, you can enhance your protection for yourself and your family.
Pension Contributions
Using my children’s nursery fees as an example, let’s explore potential savings:
– Nursery Charges: £5.15 per hour.
– Monthly Savings: £247.20 (assuming a 4-week month and using the tax-free childcare account).
– Pension Contribution: If you pay this amount into your pension, with tax relief, your contribution becomes £296.64 per month.
– Total Contribution Over 17 Years: £60,514.56.
– Hypothetical Growth Rate of 5%: This could result in a fund value of £95,135.99. Imagine the difference this could make to your retirement!
University Education Savings
The average cost of university education today is around £22,000 per year. While student loans cover a significant portion, starting life with over £60,000 in debt is daunting. Using your nursery savings to support your child’s education could alleviate this burden.
ISA Investments
Every UK resident can save up to £20,000 per year in an ISA, a tax-free savings account. Directing your saved nursery fees into an ISA can prepare you for future university costs. With a 5% growth rate (not guaranteed), saving £247.20 per month could result in a savings account worth £79,279.99 in 17 years. This flexibility allows you to use the funds for various needs, such as university costs, early retirement, or even a house deposit if your child decides against attending university.
Doubling Your Savings
Remember, in just 12 months, eligible parents will gain access to an additional 15 hours of childcare. Imagine the potential to double your savings!
A Real-World Example
For many families, the high cost of childcare has been a significant burden. Reducing these costs can provide much-needed financial relief. Even saving a small portion of your nursery cost savings can make a substantial difference. For example, my husband has been saving £50 a month for his son since he was two. This fund has allowed us to cover costs like year 6 camp, ski holidays, and potential future expenses like a laptop for school. A little can indeed go a long way.
I have a passion for offering advice to those that, typically, do not seek independent financial advice. This is a real opportunity to seek advice, and ensure your financial planning is on the right trajectory! BOOK A CALL back on CONTACT US today to arrange an appointment for an intial chat, to see if I can help.
