Introduction
Whether you’re still expecting or already overwhelmed by too many nappies and bedtime books, raising a child can be expensive. However, it’s good for you to know that raising a child doesn’t have to break you financially.
With proper planning and budgeting, you can stop worrying about finances and enjoy this wonderful time of life.
Play & Prosper aims to be your partner and guide in the first decade of parenthood as you create a workable budget to meet your child’s needs.
The Numbers: How Much Does it Cost to Raise a Child?
The United States Department of Agriculture (USDA) predicts that an average middle-income family with two children will spend about $310,605 in raising a child born in 2015 to age 17 in 2032. This may appear to be a big figure, but let’s not be overwhelmed by it.
Now, let’s break down the costs of your child’s life over the first ten years into easier-to-handle segments. Below are some of the major expenses for this period that you should consider:
● Housing: This is likely your largest and continuing expense. If you want to add more room, it may be good to investigate mortgage options with attractive rates for first-time home buyers.
● Childcare: Depending on where you live and the type of care chosen, such as daycare, nanny, or in-home care, childcare costs can vary greatly.
● Food: Children eat very little, yet need too much feeding! Groceries, occasional eating out, and formula (if required) should be part of your food budget.
● Healthcare: Regular check-ups, vaccinations, and unexpected diseases are all aspects of taking care of your family health-wise. Consider putting up a Health Savings Account (HSA) to save money pre-tax towards medical bills.
Looking for the best HSA provider? Here are some excellent options to consider:
➔ Lively
➔ HSA Bank
● Clothing: The thing is, children generally grow too fast for their clothes, so expect to buy more clothes frequently. Thrift stores or hand-me-downs from loved ones might be cost-friendly choices.
● Transportation: Another aspect to consider in your transportation budget is investing in car seats, gas money for driving kids around, and perhaps going for a bigger vehicle due to an expanding family.
Note that these are just general rules of thumb; actual costs will vary depending on personal tastes, location, and family size.
Building Your Budget: A Step-by-Step Guide
Below is a practical guide on how to develop a workable budget for your child over the first ten years.
Document your earnings and expenditures
Start by keeping track of your revenue sources, such as salaries, bonuses, and other income you receive, as well as current expenses over the course of several months. By doing this, you can clearly comprehend where you stand financially.
Estimate Child-related Costs
Check the average cost of childcare, diapers, formula (if needed), and other essential baby items in your area. Websites like NerdWallet have tools designed to assist people with these kinds of estimates based on their zip codes.
Useful Resource: NerdWallet’s Cost of Living Calculator.
Include Non-essentials
Do not forget to include activities, toys, and occasional luxuries in your budgeting process. It is important to raise a happy and well-rounded child.
Use Budgeting Tools
There are many different budgeting apps or online tools that one can choose among. Consider options that allow goal setting, expense tracking, and automated alerts.
Here are some of the best budget apps in 2024:
➔ YNAB
➔ Honeydue
Review Regularly and Change As Necessary
Keep in mind that life is full of uncertainties; hence be prepared to accommodate changes in your budget when it becomes necessary. Ensure you continuously review your inflows vis-a-vis outflows so there is no mismatch between the two at any point in time.
Making Budgeting Work: Tips for Each Life Stage
Here are some budgeting tips you can adopt, according to the age of your kid:
From Newborn to 1 Year
Prioritize things like babies’ diapers, wipes, milk (if necessary), and basic clothes. The cost of clothing can be reduced by consignment shops or by using hand-me-downs. Breastfeeding can help save on the amount spent on formula when you have a baby.
1-3 Years
Food costs increase as the child starts to eat solid foods. Consider adding affordable items such as beans, rice and fruits into their meals. Additionally, think about daycare or nanny fees at this stage.
Ages 4-6
When your child is school age, it is important that you consider how much tuition costs in preschools are. Scholarships and financial aid are available in some preschools; look into them. This is also when children between 4 and 6 may start showing interest in sports or taking music lessons.
However, there are cheaper alternatives found in community programs or group classes instead of these ones.
Ages 7-10
When your children grow older, expenditures such as school supplies, after-school activities, and clothes may be more expensive.
Let them participate in budget talks suitable for their age so that they can learn responsible spending. T-shirts are cheap if bought during off-season clearance sales. Pick out free or low-cost after-school activities at your local library or community center
Saving for the Future: College and Beyond
While the priority of the initial decade is important, it’s never too early to think about what lies ahead for your child. Below are some ways through which one can begin saving in advance:
● 529 plans: These education savings accounts come with tax advantages that help save money for future college expenses.
Read More: Saving for Your Child’s Education: 529 Plans Explained
● Coverdell Education Savings Accounts (ESAs): ESAs are like 529 plans, but they give you more room to move around with your money while ensuring it is taxed more favorably.
● High-yield savings accounts: High-yield savings accounts do not qualify for retirement account tax advantages; however, they offer a means of saving for a child’s future needs and provide easy access to the money they may require.
If you’re looking for a high-yield savings account, take a look at our top picks for the best overall, federally insured accounts with high rates.
➔ Barclays Online Savings Account
➔ American Express® High Yield Savings Account
➔ EverBank Performance℠ Savings
➔ Synchrony Bank High Yield Savings
The Bottom Line
Having children is a beautiful journey, but it is also costly over time and something we can only save on after a while. You can have a financially stable and fulfilling experience by establishing a practical budget, exploring cost-saving strategies, and preparing in advance.