While this has edged down in the last few months, it's still way above the government's 2% target and putting the squeeze on our finances. The cost of owning and running a home is also at its highest level since 2008, according to the Halifax.
Many people are cutting back on luxuries to balance the household budget. But some are taking more drastic action. In a recent survey by MoneySupermarket, 8% of people between the ages of 18 and 34 said they had been forced to postpone having their first child by an average of three years because of the current economic uncertainty.
In other words, they simply cannot afford to start a family. But are babies really so expensive? We take a look.
The cost of the first year
Half of parents underestimate the cost of a first baby in its first year, according to the Money Advice Service, a free independent service set up by the government. It offers an online Baby Costs calculator to help parents budget for a baby and reckons you could spend anything between £1,600 and £7,200 in the first year on essentials, such as a cot, car seat, buggy, baby monitor, clothing, food and nappies. The price range reflects various budgets, but if Victoria Beckham is your model mum, your little darling could cost much, much more.
The amount you spend on your baby will rocket if you need to move house to accommodate a new arrival. You could, for example, expect to pay about £282,000 for a one-bedroom house in London. Trade up to a two-bedroom home and the average price is around £440,000 - a difference of £158,000.
Statutory Maternity Pay (SMP)
Don't forget also that the expense of a baby usually coincides with the loss of an income. Many women are entitled to Statutory Maternity Pay (SMP) from their employer when they stop work to look after a baby.
But SMP is usually less than a normal salary. If you qualify for SMP, you should receive 90% of your gross salary for the first six weeks of maternity leave. You will then be paid the lower of either the standard weekly rate of £128.73, or 90% of your average gross weekly earnings for a further 33 weeks. Some employers are more generous, but not all. And remember that if you take a long maternity leave, you might get nothing at all after 39 weeks.
The cost of going back to work
If you want or need to return to work, you will have to budget for childcare. The hourly rate for a nursery place for a child under the age of two has gone up by 5.8% over the past year, according to figures compiled by Daycare Trust. In the same period wages have remained stagnant, only increasing by 0.3%.
A full-time place at a nursery in the South East now costs on average £232 a week. A childminder is not much cheaper at £192. Nannies are the most expensive option. Parents can expect to pay £482 a week for a live-in nanny or £649 for a nanny who comes to your home each day.
Clampdown on state help
Just when you think it couldn't get any worse, the government is scaling back the financial help available to parents. The income limit for Child Tax Credit dropped on Friday, April 6 from the previous level of £41,300 to £26,000 if you have one child or £32,200 if you have two children. Couples will also have to work 24 rather than 16 hours before they are entitled to Working Tax Credit.
The government has already cut the maximum level of support available through the childcare element of Working Tax Credit from 80% to 70% of the costs, hitting some households hard. The government's own figures show that 44,000 families no longer receive any help with childcare costs as a result.
Then there are the changes to child benefit. At the moment, child benefit is universal so all families are entitled to the payout of £20.40 a week for the oldest child and £13.40 a week for each younger child.
But from January, if you or your partner earns taxable income of between £50,000 and £60,000 a year, you will have to pay a charge of 1% of the amount of child benefit for every £100 above £50,000. In other words, if your taxable income is £55,000 you would lose 50% of your child benefit. Anyone who earns more than £60,000 gets nothing.
You can read more about benefit changes from the new tax year in
Mark Hooson's article on the subject. Money-saving tips for bringing up a child
To help new parents cope with the financial impact of a new baby, MoneySupermarket has come up with some tips and advice to save money.
Take control of your finances by drawing up a budget: Find out if you are eligible for maternity pay from your employer - and how much. Also check your entitlement to state benefits, such as child benefit and tax credits.
Start saving as soon as you know you are pregnant: The highest rates are on fixed-rate and regular savings accounts, but you might prefer an easy access account so that you can dip into your savings whenever you choose.
You can compare easy access savings accounts
If you haven't already used your tax-free ISA allowance however, this is the best place to start. The cash ISA allowance for the current tax year is £5,640. You can compare all ISA deals available
here. Apply for a 0% credit card:
A number of cards charge 0% on purchases for 12 months or more. As long as you pay off the balance in full before the 0% offer expires, you can effectively borrow money for free.
M&S Credit Card, Tesco's Clubcard Credit Card and the Halifax All In One card all have 15-month 0% offers on purchases. One of these could be a great option if you are looking to spread the cost of all the things you need to buy for a new baby.
You should aim to pay off the balance before the 0% period ends as you will then start being charged interest at the standard representative rate. M&S charges 15.9% (variable) while Tesco's rate is slightly higher at 16.9% (variable) and the Halifax card has a representative annual percentage rate of 17.9% (variable).
If you can clear the balance in full each month, why not opt for a cashback card? You can then earn cashback every time you spend on the card - handy if you plan a shopping spree for baby. You can search for the best cashback card
Switch to a more suitable bank account: Now might be a good time to switch your current account to one that offers a good deal on overdrafts, just in case you take some time to adjust to a smaller income.
Have a look at what's on offer
here. Take control
MoneySupermarket's free independent comparison service can help you budget for a baby. You can compare hundreds of credit cards and current accounts quickly and easily to find the best deal. And, while you are at it, why not also check out our
shopping service as well as our deals and vouchers channel to earn discounts on your purchases.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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