# Can we afford a second Child?



## CorkGirl08 (11 Jun 2008)

Age: 24
Spouse’s/Partner's age: 25

Monthly net income from employment or profession: 1860
Monthly net income of spouse: 1600



In general are you spending more than you earn or are you saving? Not saving much but not building up debt either.

Rough estimate of value of home: 375,000.00
Amount outstanding on your mortgage: 235000
*What interest rate are you paying? EBS Variable Rate*

Other borrowings – car loans/personal loans etc
My car loan €4000 outstanding (114 per month)
His car loan €9500 outstanding (201.50 per month)
No Credit Cards.


Savings and investments: 4000 aprx

Do you have a pension scheme? Yes, PRSA €40 Per month contribution

Do you own any investment or other property? No

Ages of children: One child aged 4

Life insurance: €28 per month for us both Mortgage Protection


*What specific question do you have or what issues are of concern to you? *


*We are considering having another child but not sure if we will be able to do it financially.*

*We currently have no child care costs as a family member minds our child however we would not be able to avail of this again.*




*All advice much appreciated!*


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## ClubMan (11 Jun 2008)

CorkGirl08 said:


> Other borrowings – car loans/personal loans etc
> My car loan €4000 outstanding (114 per month)
> His car loan €9500 outstanding (201.50 per month)
> No Credit Cards.
> ...


Why are you saving when you have unsecured and presumably high cost debts? You might be better off using lump sum and regular savings to reduce/clear such debts first.

Do your income figures include _CB _and _ECS _(c. €3K p.a. for a single child under 6)?


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## CorkGirl08 (11 Jun 2008)

We have the €4,000.00 set aside for a rainy day.


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## irishlinks (11 Jun 2008)

You could reduce your outgoings by switching your mortgage. The EBS variabe rate is 5.33% - you could get a rate as low as 4.63%  from National Irish Bank or 4.75% from AIB or Halifax.(Potential savings for you of around 100 euro a month.) Based on 25 yr mortgage.


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## CorkGirl08 (11 Jun 2008)

Thanks Irishlinks, but we are tied to EBS as it is a AH mortgage.


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## ClubMan (11 Jun 2008)

Why not redirect the _PRSA _contributions towards debt reduction and resume pension contributions when you have reduced/cleared these? Unless you are contributing in order to benefit from employer matching of contributions?

Would renting a room in the house out to an au pair/childminder under the rent a room scheme be an option to benefit from a double whammy? Just throwing it out as a bit of lateral thinking...


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## CorkGirl08 (11 Jun 2008)

Clubman,

We didn't want to go down the route of an au pair or renting out a room. PRSA contributions could be ceased but I couldn't see it making much of a differnece short term and both our loans are fixed so we could face penalties if we were to pay off lump sums.

Our main concern is that we would be able to manage on our incomes with a second child without having to scrape the cents together every month.


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## ClubMan (11 Jun 2008)

Can you post a summary budget outlining is as much detail as possible all of your (net) income and all of your major ongoing outgoings right now? Do you keep a spending diary to ascertain where exactly where the money goes? Are you good at budgeting and sticking to a budget?


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## CorkGirl08 (11 Jun 2008)

Total Combined Net Monthly Income:3460
Childrens Allowance 

Outgoings:
Mortgage       : €945.00
My Loan:       :114.00 monthly
Spouse Loan  : 201.50 Monthly
Gas              : 80.00 Aprx
ESB              : 70.00 Aprx
Mort Prot       : 28.00
Life Assurance : 12.90 
Playschool      :104.00 monthly
Total = €2581.40


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## so-crates (11 Jun 2008)

Hi CorkGirl08,

will you be able to sustain the same level of income during and after maternity? Have you investigated the cost of childcare in your vicinity? How much can you afford to pay for childcare? Will you need to pay for two children or one child? Have you investigated whether it would be more efficient financially for the spouse with the lower income to give up work for a few years instead of paid child care? Or to change jobs to part time work? The older child should be starting school in the near future so it may be workable to pay for childcare for one and work part time.


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## CorkGirl08 (11 Jun 2008)

During Maternity leave I would only recieve maternity benefit I don't think the differnce in my wages would be topped up by my employer. I would only have to pay for childcare for the new baby. I think if I decided to work part-time there would be a significant drop in my income. I rang one creche in the area and they were charging €245.00 per week for full time care which I thought was very expensive.


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## ClubMan (11 Jun 2008)

CorkGirl08 said:


> Total Combined Net Monthly Income:3460
> Childrens Allowance
> 
> Outgoings:
> ...


You should now keep a detailed spending diary for a month or two and then sanity check the above figures against it. You may be surprised. For example you have not listed anything like groceries, lunches, home/car maintenance/repairs etc. etc.


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## Bronte (11 Jun 2008)

You have life assurance premiums of 12.90, is the 28 Euro Mortgage Protection for house insurance (fire/water damage) or is is a policy that pay out if you get ill?


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## CorkGirl08 (11 Jun 2008)

The €12.90 is a seperate life assurance policy I have.


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## so-crates (11 Jun 2008)

You could "stress-test" your income for the conceivable situations (such as: drop in income from being on maternity leave, drop in income from being obliged to go off sick during pregnancy, increase in expenses from additional child) and see how you cope. Once you have a diary of your regular expenditure it should be possible to see how the reduced net income will play out. I'd run other scenarios as well such as going single income (don't forget about tax credits in all of this).


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## CorkGirl08 (11 Jun 2008)

So-crates,

Going on single income - I dn't know how we would survive on a single income. Could you please elaborate more on how this would work? It really confuses me, sorry


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## ClubMan (11 Jun 2008)

Try www.taxcalc.eu to compare the married with two income to married with one income situations.


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## foxylady (11 Jun 2008)

CorkGirl08 said:


> So-crates,
> 
> Going on single income - I dn't know how we would survive on a single income. Could you please elaborate more on how this would work? It really confuses me, sorry


 

You say you dont think you colud survive on one income but with childcare costs so high it would hardly be worth working just to pay them and also this might answer your question about affording another child.


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## so-crates (11 Jun 2008)

CorkGirl,

I'm not suggesting you do so. What I am trying to say is look at each option open to you from a financial perspective, work out what the costs and benefits of each option are and the general affordability. In some cases it works out that the cost of childcare on top of the cost of working (e.g. specific clothing and transport requirements) eats up the equivalent of or nearly one income. It is always worth sitting down with a pen and paper and weighing up the cost of the different options before choosing which is best for you, then deciding how you want to proceed. I suspect you would find that it probably wouldn't be worth it in your case but as you have indicated that child care could potentially eat up almost €1000 a month it is worth doing the sums. My aside was a reference to the fact that tax credits accruing to the non-working spouse can be transferred to the working spouse which would increase their net pay. Sorry for the confusion, I am not advocating at-home mam, just to check if a parent at home is more valuable.


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## CorkGirl08 (11 Jun 2008)

Basically considering our incomes at the moment it would stretch the budget too far. So our only options would for one of us to re-arrrange our working hours i.e. go part time or something.


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## so-crates (11 Jun 2008)

Like I said, compile a list of different scenarios/options and work out your income and the cost in each case (using a spending diary as Clubman suggested as a basis). This will make for an easier and more concrete comparison.

One other thought would be to try and build up savings in advance of having a second child by setting aside money into a savings account when you get paid (not generally in favour of this as I would agree that saving while carrying debt is less productive but I think it this case it might be useful). This would have the added benefit of reducing your spendable income to a level closer to what you would have to manage on once you are on maternity leave.


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