Debt management for new arrivals

People having to stretch budgets to cater for the needs of a new baby in the family, should act with caution when using credit to balance their debt management.

A survey by Sainsbury's Finance has found that a total of £2.32 billion has been borrowed over the last five years by parents buying prams, cots, and car seats.

Sainsbury's says the typical cost to parents of a newborn is £2,980 – with the family borrowing an average of just over £5,000 to cover the costs.

With interest rates potentially leading to an amount such as this meaning households need to consult a debt calculator, the firm says parents should shop around for credit.

Sainsbury's found the cost of taking out such a loan across three years' time can differ as much as £1,400.

Kevin Still Director of Atlantic Financial Management says, "Whilst just over 2 per cent of our clients starting a Debt Management Plan (DMP) in 2010 state the reason for their debt problems being maternity or having a baby, the single largest debt reason is 'loss of income' often associated with a major reduction in household income, like maternity leave.

Changes in circumstances remain the primary reason why people seek short-term or long-term debt solutions."

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