HAVING children later in life could force you to work for longer, an expert has shared.
A squeeze on living costs and a housing crisis has meant that many people have no choice but to delay having a baby.
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Sarah Coles, head of personal finance at AJ Bell, says: “We’re postponing parenting until later in life, and while it’s nobody’s business but yours when or if you have kids, it comes with some significant financial implications.”
Starting a family later can have some advantages, Coles explains.
You are likely to be in a more established career with more income and money in savings to dip into when it comes to covering expensive early years costs.
“You are also more likely to own a bigger stake in your home, so your security doesn’t depend on decisions made by your landlord,” adds Coles.
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Her comment comes as the average age of first-time parents continues to rise.
The average age of parents rose to 31.1 for mothers and 34.0 for fathers, the latest figures from the Office for National Statistics (ONS) show.
That is up from 31.0 for mothers and 33.9 for fathers in 2024.
Financial risks of starting a family later
However, as well as some financial upsides there are also likely to be costs involved with having a baby later in life.
Traditionally, when we enter our mid-60s, children have moved out and so your costs drop, meaning we have more breathing space to save for retirement.
But if you have a child at 40 and they stay with you until the age of 25, your nest will not be empty until you are 65.
“You need to consider how old you will be when they hit pricier times in their life – especially if they choose to study at university,” Coles adds.
In some instances, Sarah says that you may have to postpone retirement to help cover extra costs.
Jordan Clark, financial planner at Quilter, agrees, adding that you may find yourself working for longer to support even adult children.
“Many children now will yo-yo between home and further education, sometimes remaining at home until they are established in their choice of career,” says Clark.
This could mean a delayed retirement or accessing your private pension after the age when it becomes available to you.”
However, there could be a silver lining. The extra time working gives you longer to pay into your pension pot.
As the most tax-efficient way of saving for retirement, paying you should be careful not to neglect putting money into your pension “even with the pressures of having a family’ says Clark.
For example, someone aged 40 starting with no pension savings, who earns £45,000 and made an annual pension contribution of 10% until they reach their state pension age of 68, would still have a pension pot worth £340,314, assuming gross growth of 5%, wage growth of 3%, and fund, advice and service expenses of 0.7%.
If they increased their contribution to 15%, their pension pot would be worth a healthy £510,471.
“Coupled with the state pension, this could produce a decent income despite the later start in saving,” says Clark.
Add that to whatever pension saving you managed to do up until having children and the gains can be significant and can help alleviate financial concerns heading into retirement.
What YOU can do to prepare for the future
Charlotte Kennedy, Chartered Financial Planner at Rathbones, says: “Having children later in life can create a financial squeeze that many families underestimate.
“While older parents may benefit from higher salaries and greater career stability, they are often raising children at the very point when retirement saving should be shifting up a gear.”
One way to soften the blow, is by putting some money away now so you have a bigger cushion to fall back on when you stop working.
For example, using a perk called “salary sacrifice” can help boost your pot by thousands of pounds.
A salary sacrifice scheme is where a worker agrees for a chunk of their earnings to be put into a tax-free benefit.
Often, these include benefits like childcare vouchers, gym membership or a cycle to work scheme.
But you can also use salary sacrifice schemes to boost your pension.
The money you agree to take off your salary will be put into your pension, and your employer will contribute to the pot too.
A huge advantage of this is that you pay less in tax like National Insurance because the money is going straight into your pension.
That means that technically your take-home pay will be higher because you’re clawing it back through tax.
Alternatively, an adviser can help you understand how to plan for your own financial future.
You don’t have to pay a pretty penny to chat to an adviser, you can seek help for free.
For example, the Money and Pensions Service, which is backed by the government gives impartial and free money and pension guidance on 0800 138 7777 or at moneyandpensionsservice.org.uk.
How salary sacrfice could boost your pension pot by £50,000
By Emily Mee, Consumer Reporter
Analysis from Vanguard Europe provided to The Jattvibe estimates you can boost your retirement fund by up to £50,000 through salary sacrifice.
If you earn the average £37,500 a year and sacrifice 5% of your salary to your pension, this equates to £1,875 a year.
Then if your employer contributes 3% of your salary to your pension, this equates to £1,125 a year.
If you chose to use salary sacrifice, your gross pay could be reduced to £35,417 a year.
But you would see your pension pot grow by £3,521 – a boost of more than £500 a year.
That’s because you would cut your National Insurance contributions from £1,994 per year to £1,828, putting an extra £166 back into your pay packet.
Plus, your income tax payments would reduce from £4,986 to £4,569 – a £419 decrease.
If you started salary sacrifice early in your career, it would add up and benefit from compounding over the years.
Vanguard estimates in this case you could be looking at more than £50,000 extra in your retirement pot.
