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Raising your kids can be costly

The USDA recently announced that to raise a child born in 2013 to the age of 18 will cost on average $245,000.  Even though estimates vary based on several factors, raising a child does increase your expenses. There are ways to save on those expenses and also ways to prepare for rising costs of children.
How should the $245,000 cost be put into perspective?
First, over 18 years, the cost is really only about $1,200 per month and nearly $500 of that is for housing and transportation costs.  Some of these costs you are likely to have anyway with or without children, so really a child may only cost you on average $700 per month to raise them to 18. And remember this is an average so your costs could be even lower.
What are the two biggest expenses that can vary the most?
Childcare/education and clothing are the two items that can vary the most.  Fortunately, these are two areas where parents can control and even lower the costs by a variety of methods. Examples include taking advantage of things like sharing a nanny, sharing baby clothes, furniture, and there are many other options that all help lower those costs.
What should prospective parents be doing now to plan for children?
The best way to plan for a child is to start planning for an increase in expenses. If both parents are going to work and childcare is part of the new expense, work out the budget to save that amount each month until the child is born.  That allows you to already live without that money as well as having built up a nice emergency fund. It may also mean that you need to look at other expenses and lower them to pay for higher cost of food and other expenses like medical care.
Is there any particular time in a child’s life that is more expensive?
The early years can be the most expensive with childcare and healthcare expenses being higher for new babies than they usually are for teenagers so the impact on the monthly budget could actually lessen over time.  Do remember, this $245,000 cost is only until the age of 18, so college expenses are not included in this number.  Planning for college is another subject entirely.

Posted: 10/14/2014 with 0 comments

Categories: Money Matters, Planning

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