Families today are facing serious financial pressure as the cost of raising children keeps going up due to ongoing inflation and rising childcare fees.
Planning for the future is becoming more difficult, adding more stress to household budgets.
Rajan Lakhani, a personal finance expert and head of money at the smart money app Plum, talks about how tough the situation is, based on his own experience as a father of two young children. “I know from experience how fast the costs of raising kids can grow,” he says.
Lakhani points out that “families with children of all ages are really feeling the pressure more than ever.” He explains that inflation has caused prices to go up by 25 percent overall since 2021, even though the current rate is 3.4 percent. That adds up to a big change in everyday expenses.
Even with these challenges, Lakhani says there is hope. He believes parents can cut costs with some smart budgeting habits, giving them more room to spend or save.
1. Make a habit of reviewing your spending every few months
“Start by checking your spending and see what’s really necessary. Make sure you’re getting the best deals on things like insurance, mobile plans, and streaming services,” says Lakhani.
He knows how hard it can be to manage money while raising a family, so he recommends setting aside a specific day each month to go through your finances, pay bills, and update your budget. Pick a time when you won’t be interrupted.
Lakhani also suggests looking at your full year of spending. “Go through your bank statements for the past year, or use an app to get a full picture of where your money goes. This will help you see where you tend to spend more, like during the holidays, or when you might receive extra income, such as a tax rebate. Knowing this helps you plan better and avoid surprises.”
2. Review your utility bills to make sure you’re not paying too much
Many people forget to check if they’re still getting the best deals on their broadband, electricity, and gas. “It’s estimated that people lose up to £291 a year by not switching,” Lakhani says.
He recommends reviewing your energy supplier every 12 to 18 months and getting ready to switch broadband deals before your current contract ends. Planning ahead helps you avoid paying more than you need to.
3. Use second-hand items to cut costs
“If you’re a parent, you know how quickly kids grow and change interests,” says Lakhani. That’s why it makes sense to use pre-loved clothes, books, and toys. He suggests shopping at charity stores, eBay, Vinted, and Facebook Marketplace. Sites like YoungPlanet, Rascal Babies, and Mum2Mum Market are also good for finding gently used items for babies and young kids.
4. Use family discounts and vouchers for outings
Many loyalty cards and railcards offer special deals for family outings, Lakhani notes. “With a railcard, for example, you might get 2-for-1 entry to zoos and aquariums, or discounts on cinema and theatre tickets. Railcards also usually pay for themselves quickly in savings.”
Some supermarket loyalty points can also be used for discounts on meals out, streaming subscriptions, travel, and more.
He adds, “Food and drink are often the biggest costs on a day out, so bring your own if allowed.”
Check your local council’s website too. Many councils host free events, often at libraries, like reading challenges or toddler groups. These events may also offer free internet while kids enjoy activities.
5. Teach teenagers how to budget
Lakhani suggests giving teens a small allowance during holidays to help them learn about spending and managing money. “Let them make their own choices, even if they spend it quickly. It’s part of learning. Just don’t give in and offer more money – that sends the wrong message.”
6. Ask about uniform grants that can save you up to £150
Fiona Peake, a personal finance expert at Ocean Finance, says that many local councils provide uniform grants for families with lower incomes, those receiving benefits, or those with several kids starting school. These are often one-time payments in the summer that can help pay for things like school jumpers, shoes, or gym clothes.
But they aren’t well advertised, and some families miss out on over £150 per child. To find out if you qualify, visit your local council’s website or ask your child’s school directly.
Some schools may also offer a second-hand uniform program, so it’s worth checking with them.
7. Make the most of childcare savings
Lakhani notes that after rent or mortgage payments, childcare is often the biggest cost for families. And in the UK, these costs are among the highest in Europe. However, there are ways to reduce them.
The government provides tax-free childcare for parents earning up to £100,000 a year.
“If you pay for things like before-school care, after-school programs, or holiday clubs, you can get a 25% top-up from the government,” says Peake. “For every £8 you add, they contribute £2—up to £500 every three months or £1,000 if your child has a disability. To qualify, you need to work at least 16 hours per week and have children under 12 (or under 16 if they have a disability). About 800,000 eligible families aren’t claiming this help, so check at GOV.UK.”
She adds that parents receiving Universal Credit can claim back up to 85% of their childcare costs—even during holidays. This option is often better than the tax-free childcare plan, especially for larger families. It could mean up to £1,032 for one child or £1,769 for two or more, for children up to age 16.
Parents of three- and four-year-olds (and from nine months old in England) may also be able to get up to 30 free childcare hours per week.
Lakhani also suggests teaming up with other parents you trust to share childcare duties. “If your schedules line up, you could take turns watching each other’s kids.”
