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How do you manage your fostering finances?

You could earn hundreds of pound a week...

We’ve all seen the fostering ads on buses: earn hundreds of pounds a week for your spare room. Can it really be that simple? It isn’t, of course. In reality, the finances of fostering can be complicated and take time to unpick.

The first thing to know is that almost all foster carers are considered self-employed. You will not be employed by your fostering provider and will be responsible for sorting out your own tax and National Insurance.

You will receive a weekly allowance, which is primarily intended to cover costs you will incur when children live in your home. It is not a wage or salary and does not reflect the time you will commit to foster care. Some additional payments are made, such as for Christmas and birthdays, a holiday allowance and school uniforms. You may also be entitled to a setting up allowance, which is a contribution towards the purchase of essential equipment like car seats and highchairs, when you start fostering. 

The weekly allowance itself is made up two elements. The basic allowance is paid to cover the cost of caring for a child. There is also a skills fee, based on your abilities and length of experience. Some fostering providers bunch the allowance and skills fee into a single payment. Weekly allowances do vary between fostering providers. In England, these are expected to at least match the minimum weekly allowance set by the Government. 

What else are you covered for?

Reimbursements for other expenses must be claimed separately and may need prior approval by a member of the fostering team, such as the child’s social worker. Normally, you will be expected to cover daily motoring expenses from your allowance, such as driving to and from school, regular health appointments, and family trips and holidays. You may be able to claim mileage for longer, one-off trips or if you have agreed to care for children who are living at distance from school and family, but this is usually agreed in advance.

Your weekly allowance is conditional upon children living in your home. This means you won’t receive any payments if you have no foster children, even if it is only for a few days. You should consider how this might affect you financially. Experienced foster carers, Gail and John, transferred back to Wigan Council to foster, partly because they found they were having to manage quite long gaps when they had no foster children. “It is difficult when you are set up to foster but you have no children if you are used to factoring in the fostering allowance every week.” 
Some fostering providers have special arrangements to make payments to foster carers for a short period when they take time off, in recognition of their commitment to children and young people. However, because you are self-employed there is no legal entitlement to holiday pay or absence through illness. You also need to make your own pension arrangements.

Technically, foster carers are liable for tax. However, there is an arrangement known as Qualifying Care Relief which provides a tax exemption of up to £18,140 a year per household. In practice, this means that very few foster carers have to pay tax on any allowances they receive for fostering. If you receive benefits, these are likely to be unaffected by fostering but it is worth checking. 

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    "We definitely chose the right time. It was important for us to be more settled and not have the worries about our business and our own children."
    Keith and Julie, Foster Carers for Bolton Council

    Can you afford to foster?

    The biggest question of all is whether you can afford to foster. There is no straightforward answer. It will depend on your own personal circumstances, such as your financial commitments. For example, will you have to give up work, or work part-time? If you do this, will you still be able to make mortgage payments or pay rent? Can you afford to take time off if a child is unwell or unable to go to school?  Will you need a bigger car and how much will it cost to replace the old one?

    Keith has been fostering for Bolton Council since 2013 and is a ‘buddy carer’ to other foster carers in Bolton. He and his wife Julie had wanted to foster for some years before they were approved but felt that it might have been difficult financially. “We definitely chose the right time,” he says. “Before then we were bringing up our own children and trying to get our business off the ground. It was important to be more settled and not have those worries.”

    Michaela, who fosters for Oldham Council, says that financial stability was an important consideration before applying. “We waited until we bought our first house, which gave us financial security. We felt that we were then ready to foster.”

    There are lots of less obvious things to consider. Even if you have your own children, having an extra child or children at home will have a material impact on your household expenses, such as heating and electricity, and contribute to additional home maintenance costs through routine wear-and-tear.

    There will be out-of-school activities to pay for, such as Cubs, swimming or football. They will have friends round, and be invited to birthday parties. Providing new experiences and opportunities to children in care is what fostering is all about, and as a foster carer, you will be delighted that all of these things are happening for your child. But don’t forget to factor in the likely cost when you try to work out the financial impact of fostering. Bear in mind that keeping track of your expenses and making claims backed up by receipts takes time and adds to the administrative burden that comes with fostering.

    Two foster carers receiving the same fostering allowance may well have completely different experiences, depending on their own financial circumstances. One may consider that it is ample to support a child, the other may struggle to square the books. So it is really important to do your own sums before you make a commitment. Seek as much advice as possible from your fostering provider and other foster carers. 

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      Are you interested in fostering in Greater Manchester? Speak to your local authority to find out more.