As any parent can attest, raising a child is a fulfilling, but expensive endeavor. According to the most recent data from the U.S. Department of Agriculture, the average cost of raising a child until age 18 is over $233,000, or nearly $13,000 per year. This can be overwhelming for many families, but with proper planning and budgeting, parents can successfully manage the cost of raising a child.
The first step to planning for a child’s financial future is to create a budget. This includes taking into account all expected expenses, such as diapers, formula, clothing, childcare, and medical bills. Once these expenses are determined, parents can allocate money from their income to cover them each month.
It’s important to be realistic when creating a budget, as unexpected expenses can arise. For example, a child may require unexpected medical attention or need to be enrolled in extra-curricular activities. It’s recommended to set aside a small emergency fund each month in case of unforeseen costs.
Another factor to consider when preparing for a child’s expenses is the impact it may have on the parents’ ability to work. It’s important to factor in any decrease in income that may result from one parent staying home to care for the child or reducing work hours. Additionally, if the parents’ employer offers benefits such as healthcare, they should factor in any additional costs they may have to pay for their child’s coverage.
One of the best ways to plan for a child’s financial future is to start saving early. Parents can open a college savings account or invest in a 529 plan, which allows money to grow tax-free until needed for college expenses. Starting to save early can greatly reduce the financial burden of paying for higher education later on.
It’s also important to consider the long-term financial impact of raising a child. For example, parents should factor in the potential loss of their retirement savings or the delay of purchasing a home due to expenses associated with raising a child. It may be necessary to adjust long-term financial goals to accommodate for these expenses.
Finally, seeking out financial advice can be a helpful tool in planning for a child’s financial future. A financial advisor can provide guidance on creating a budget, saving for college, and investing for the long-term. They may also provide insights into tax benefits and government programs that can help offset the cost of raising a child.
While the cost of raising a child can be intimidating, with proper planning and budgeting, parents can successfully manage the expenses associated with parenting. By creating a realistic budget, saving early, and seeking financial advice, parents can provide for their child’s financial future.