For many couples, having children is their goal when establishing a family. People dream of having multiple kids and think of the joy and adventures they will bring, but do you know what it means to plan for children? According to a 2015 Department of Agriculture study, the average cost to raise one child for a middle-class income family is roughly $233,610 from birth to age 17 (Sykes, 2017). Depending on your financial status, the amount you will spend is somewhere between $175,000-$372,000 per child. If you break these large numbers down, you’re spending $10,000-$22,000 a year on each child. While this is a daunting number, it’s easily managed through budgeting and savings accounts.
If your little one is still on the way, make a plan and supply list. Instead of diving in and buying a crib, diapers, clothes, and everything else they’ll need, plan each month out and save the larger items for closer to the baby’s arrival. This will allow you to save more for what you want, and through creating a monthly plan, you’re more likely to stay on track. However, make sure you’re only buying the essentials for you and the baby. Dave Ramsey recommends only buying what you need and do not opt for fancy baby gadgets–and if you can’t afford it out of pocket, then wait. As you’re planning for all the baby will need, make sure to budget for child care. When maternity leave is over and you go back to work (if you’ve chosen to), make sure you have enough set aside to pay for proper child care.
Now that you’ve started to plan and you’re building your budget, think about healthcare and your employee benefits. Add your newborn to a health plan within 30 days of their birth. If you both have individual plans, compare the two and see which offers a more affordable family coverage (Lambert, 2011). While you’re looking at health benefits, set up life insurance as well. Also, write a will and list a new guardian just in case an incident were to happen. If no guardian is selected in a will, your child will be in the hands of the court until a guardian is appointed to them – and you don’t want family members fighting over who should have this responsibility.
The next major event you want to plan for (apart from a wedding, traveling, and hobbies–like football, cheerleading, horseback riding, science camp, etc.) is college. This is a huge topic for many young adults and parents right now. College graduates have the highest student loan debt in history. According to CNBC, the average loan debt for current graduates is $37,172. With tuition on the rise and no end in sight, you can expect your kids’ tuition to cost 4x more than it is now (Hess, 2018). To overcome this debt or lessen the burden, a common investing plan for college is a 529 Plan. This plan is easy to navigate and you can open one in about 15 minutes online. To learn more about 529 Plans, click here.
While this only hits the very basics of financial planning for your young ones, there are more ways to invest in your child’s future and prepare for nearly every occasion, incident, or surprise you’ll face. If you’re wanting a sneak peek at what the cost of having a child is, use the Family Budget Calculator.
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