Thinking Of Having Kids? Know These Costs To Be Financially Prepared
A recent study by Credello on the cost of raising a child found that the average cost to rear a child in America today is $100,000!
This is a staggering figure, and it can quickly add up if you don’t have the financial resources to cover it all.
But how could raising a kid cost so much? Here are the expenses you need to consider before thinking about having kids:
Having kids? Know These Costs To Be Financially Prepared: Health care costs.
The costs for a baby begin even before their birth, so you must start saving as soon as possible if you’re planning to grow your family.
A study by care.com found that families are spending 155% more on healthcare for their kids now than they were in 1960.
Costs associated with healthcare:
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Prenatal checkups
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Prenatal medications and vitamins
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Birthing at a birthing center or hospital
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Follow up appointments
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Children’s medications
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Dental care
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Mental health care
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Menstruation-related expenses for children who menstruate
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Travel expenses to and from healthcare providers
Having kids? Know These Costs To Be Financially Prepared: Child care costs.
Child care is one of the most significant costs associated with growing a family, and its costs increase yearly.
Credello found that the average household will drop anywhere from $59,000 – $107,000 per year on childcare alone!
Costs that are associated with childcare:
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Daycare
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Nannies
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Babysitters
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Transportation
Having kids? Know These Costs To Be Financially Prepared: Education costs.
Education is an appreciating asset for your child and your family.
It can pay off dividends thanks to the additional opportunities and earnings they’ll bring in the future.
However, that may take some time to get back, and it doesn’t make it any easier when it’s time to pay for school expenses!
Education expenses have increased by 1,175% since 1960, and analysts don’t expect it to slow down soon.
Costs associated with education are tuition, books, and school supplies.
Also, you may need to consider tutors, room and board, extracurricular activities, and transportation costs.
Having kids? Know These Costs To Be Financially Prepared: Food and clothing costs.
Feeding and clothing your kids is an essential task any parent must take.
While there are ways to cut costs in this area (shopping at secondhand stores, buying generic foods instead of name brands), the expenses can add up quickly.
Credello found that the average family will spend around $60,000 on food and $20,000 on clothing for one child until they reach the age of 18.
Costs associated with food and clothing:
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Groceries
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Snacks
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School lunches
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Restaurants
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Regular clothing – pajamas, everyday wear, underwear
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School clothing
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Extracurricular uniforms
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Shoes
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Coats, Gloves, Hats
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Diapers
Consider also… The hidden costs of raising a child.
In addition to the obvious costs of raising a child, there are the “soft” costs parents need to be aware of. This is so they can fully prepare for the massive undertaking a child can have on their lives.
Credello found some interesting hidden expenses that not many parents consider until it’s too late:
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40% of parents surveyed said childcare costs affected their relationship with their partner in a negative way
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53% have gone into debt after having a child
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63% believed childcare costs influenced their career decisions
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73% believed their job situation or performance was affected in some way by childcare plans falling through at the last minute
How to prepare your finances when you’re ready to start a family.
Despite these costs and harsh realities, many couples feel there’s more good than bad in having a child, and they’re right!
Growing a family is one of the best reasons to improve your financial situation. Also, seeing your child flourish can positively impact your mental and physical health.
When you’re ready to start trying for a child, here are some ways you can prepare yourself financially:
Educate yourself about the costs associated with raising a child and create a plan ahead of time – Simply learning about the different costs you’ll need to cover is a good start. Also, you need to put a plan into action as quickly as possible. The sooner you start preparing your finances, the better off you’ll be when the time comes to pay for major expenses. Be sure to consider things like birth, childcare, or emergency healthcare costs for the mother or child.
Start putting away money – Saving for a child is a lifelong plan, so start small and slowly increase the amount you save each month as you go. The sooner you start, the more you’ll be able to utilize the power of compound interest to help your money grow without any additional effort on your part. You can also look into cost-saving accounts like 529 plans and Coverdell ESAs. These offer tax advantages that help you save on expensive costs like childcare and education.
Be open with your partner about financial and parental expectations – Being open and communicative about concerns and responsibilities will ensure your relationship stays strong during tough times. Establish financial responsibilities and parental expectations early on in the planning process. These decisions will help to make sure there are no surprises later.
Talk to family and friends about their experiences with childcare – Hearing from others who have been through the same thing as you can give you some great ideas about where to look for affordable childcare. In addition, you can learn what to expect during your search. Further, you can learn how much money you’ll need to set aside in case something unexpected comes up.
Don’t shy away from cost-saving measures – Many new families feel like their child needs the latest, best thing around when perfectly good alternatives are available. Baby costs are expensive, especially for clothing and toys they’ll grow out of quickly, so don’t shy away from hand-me-downs or thrift stores for essentials. There are also many government programs that can help with food costs or medical coverage for children that can save you hundreds every month.
The bottom line: Having kids? Know These Costs To Be Financially Prepared
When you’re thinking about starting a family, it’s essential to be financially prepared for the challenges that come with parenting.
By understanding the costs associated with raising a child, creating a financial plan, and talking to friends and family about their experiences, you’ll be well on your way to raising a healthy, happy child.
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