Concerned about the cost of children? Here are a few financial tips that can help you decide whether parenthood is a good idea right now.
Choosing to raise a child is a life-changing decision that should not be taken lightly. The responsibilities that come along with parenthood are vast and, at times, very challenging.
Children naturally rely on their parents for just about everything. From food to shelter, safety and health, and love and affection, their needs must become every parent’s top priority. But perhaps one of the most critical components of successful childrearing is financial stability.
Without a solid and reliable income, you won’t be able to provide the essential acts of care that children need to stay happy, healthy, and safe.
To help you weigh up whether or not you’re ready to raise a child, we’ve highlighted five key financial implications that every potential parent needs to consider.
Parenthood Is Pricey
Due to inflation, the cost of raising a child grows a little more each year. But in 2023, the average child will cost roughly $275,000 from birth to age 17—or $16,176 per year.
These rather alarming figures include basics like housing, food, healthcare, transportation, clothing, and personal care. However, depending on your lifestyle, demographics, location, and various other factors, the amount of money you may spend on a single child could increase.
Even though plenty of low-income families are still able to provide their young ones with sufficient care and security, anyone considering parenthood should take every precaution possible to establish financial security.
If you’re in a strong financial position, paying for the basics (and more) should be a relatively painless experience. However, if you’re like the majority of people in the world and have debt or an unpredictable monthly income, doing your homework on the financial implications of parenthood is essential.
1. Increase Your Health Insurance
If you do decide to have children at some point, remember that they will depend on you completely for healthcare and medical support. Your health insurance will need to cover everything from basic flu medication to serious injuries, so make sure you have a comprehensive package.
In 2023, the average annual cost of family health insurance will be $22,460. That kind of deal will cover a wide variety of illnesses, ailments, and injuries.
Obtaining disability insurance for yourself and your partner is also a good idea. That way, if either you or your partner become ill or are unable to work, your children are still provided for.
2. Deal With Debt
A vast majority of people around the world are in debt. But debt accumulation can become a serious drain on your resources and make it much harder for you to build up significant savings over time.
If you intend on having children, dealing with your existing debt and imposing strict limitations on any future loans is really important.
Of course, borrowing money from the bank is sometimes needed to tide you over into more stable times, but it should be avoided as much as possible and used as a last resort.
3. Factor In School Fees And College Tuition
While school type and location both play significant roles in how much you will be charged, school fees are one of the most expensive parts of raising a child. In the US, public schools may be free, but private schools are not, and they cost around $13,000 a year.
Even if you do send your child to a public school, college tuition is still notoriously expensive, especially in the US. In fact, the average annual cost of sending just one young adult to college sits in the range between $11,000 and $39,000.
4. Accept That You May Need To Sacrifice Some Personal Comforts
When you become a parent, your life’s purpose changes. You’re no longer the center of your universe—your child is. And sometimes, that can be frustrating, as even the best parents will admit. Money that you may have spent on personal endeavors will inevitably go towards your child instead.
That doesn’t mean you will never be able to invest in yourself, it just means that you’ll need to make some adjustments to your personal spending habits.
5. Be Financially Savvy & Save
Savings for the future are essential for raising a secure family with a bright future. From school tuition to a new car to your own retirement, having a savings account that grows over time is going to play a major role in the long-term stability of your family. You need to figure out how much you can save monthly and annually and where you can get the best possible interest on your investment.
It’s also a good idea to educate yourself on financial matters and to become as financially literate as possible. If you know a few basic accounting principles, such as how to make an income statement or how to draw up accurate financial forecasts, you’ll be better equipped to manage your savings and build a stable future.
While there’s no way to know exactly how your life will unfold, actively preparing for medical emergencies, school fees, and other expensive situations is still vital for anyone planning to have a child.
By taking control of your finances and setting up a foundation for sustainable income over the next twenty years (or more), you can ensure your future child will enter the world fully equipped to lead the comfortable, healthy, and fulfilling life they deserve.