Understand how much raising a child actually costs – plus how you can prepare financially.
The journey of parenthood is filled with joy, love, and more than its fair share of financial considerations or challenges. From mountains of diapers to college tuition, the expenses that come with parenthood can seem endless. Understanding and preparing for the financial responsibilities you’ll encounter as your child grows can help you build a foundation for a secure future for your family.
The True Cost of Raising a Child
The initial phase of welcoming a new family member is often marked by excitement and a flurry of spending. Hospital bills, nursery supplies and a myriad of baby essentials can quickly add up to a significant amount – and the financial journey only starts there.
As your child grows, so do their needs and aspirations. Regular expenses such as food, clothing, healthcare and education become constants in the family budget. Each stage of a child’s life brings unique financial demands, from childcare costs to sports gear to college tuition and textbooks.
In 2017, the U.S. Department of Agriculture released an Expenditures on Children by Families report that estimated raising a child born in 2015 to adulthood would cost over $230,000, not including higher education expenses. That’s an average of $12,980 each year, per child. If you consider projected inflation, the total cost jumps to $284,570.
Actual costs will vary significantly by your location, lifestyle, economic conditions and individual needs. Housing, food and childcare account for the largest expenses, though, with transportation following close behind. Even as estimates, these numbers underscore the importance of embracing strategic financial planning from the get-go.
Foundational Financial Tips for New Parents
As soon as you start planning to grow your family, you should evaluate your current financial position and strategy, adjusting them to account for your new addition. Here are some essential strategies and tips that can help you build a strong foundation for your family’s financial security:
- Building an emergency fund. Life is unpredictable. An emergency fund is a financial safety net for unforeseen expenses, helping ensure your family’s needs are met without damaging your long-term financial plans.
- Investing in education early. The cost of higher education continues to rise, making early investment strategies like 529 plans or Coverdell Education Savings Accounts critical. Saving while your child is young can leverage the power of compound interest.
- Changing your coverage. A comprehensive review of your insurance coverage is vital to preparing for a child. Health insurance, life insurance and possibly disability insurance are recommended. These policies help shield your finances from costly events, such as receiving urgent medical care or becoming temporarily disabled and unable to work. For life and disability insurance, you have to name your child (or a trust established for them) as the beneficiary on the policy.
Strategies for Long-Term Success
Beyond the initial financial adjustments, you’ll likely need more lasting changes to keep your family’s finances in check, including:
- Developing frugal habits. Embrace thrifty thinking to make every dollar stretch further, which can have a substantial impact over time. Shop for secondhand baby clothes, buy nonperishable items in bulk, minimize frivolous purchases, and try meal planning to cut down on waste and dining out.
- Committing to financial literacy. The more you know, the better you can navigate the complexities of family finances. Take advantage of digital and in-person resources for financial literacy, such as budgeting workshops held by a local nonprofit or finance webinars offered by your financial institution.
- Seeking professional guidance. Every family’s financial situation is unique, making personalized and expert advice priceless. A trusted financial professional can help you hone your strategies, set realistic goals and find products that could make a powerful difference in your life, ensuring you’re on the best path toward financial security.
Embracing the Financial Journey of Parenthood
While the financial prospects of raising a child can seem overwhelming, approaching your new journey with ample knowledge, planning and strategy can make it a manageable and rewarding part of your family’s story. It’s never too early or too late to start planning for your child’s financial future. By taking proactive steps today, you can build a foundation of financial stability and security that will support your child’s growth and success in life.
At Amegy Bank, we’re committed to helping families confidently navigate the financial journey of parenthood. Our team of experts is ready to connect you with the tools, resources and personalized advice to bolster your family’s financial health. Contact us today to start building a more secure financial future, together.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Amegy Bank.