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Five ways kids stress your finances (and what you can do about it)

Having kids can be extremely expensive. Fortunately, there are ways to ease the financial burden.

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    A mother and her two girls look in a shop on the main shopping street in Mytilini, Lesbos, Greece (April 4, 2016). Having children can be expensive, but there are ways to lighten the load.
    Melanie Stetson Freeman/The Christian Science Monitor/File
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DealNews' recent survey of 1,000 representative Americans taught us a lot of interesting things about the financial stress facing families today. Not surprisingly, having kids is crazy expensive; but would you believe it also breeds a sunnier outlook on money matters?

We look at the hard data on how kids wreak havoc on your finances, and what you can do to make sure you're (somewhat) ready for this responsibility.

People With Children Have More Debt

No surprise: Parents have more debt. Among our respondents, 72% of people with children carry a balance on their credit cards, compared to 48% of their childless counterparts. They're also more likely than people without kids to carry higher balances. Is it any surprise then that many people have opted out of parenthood completely, in hopes of a better financial situation?

Recommended: Ditch the playdate: 4 ways to encourage creative play for kids

Parents are also more likely to carry student loan debt, with half owing less than $20,000. However, 21% owe between $50,000 and $150,000. That's an enormous debt burden to tackle alongside the financial toils of purchasing diapers, baby food, and paying for the hospital bills that accompany the birth of a child, and more concerns that could be pushing people to have children later in life (or not at all).

Kids are Getting More Than They Need

The U.S. Department of Agriculture regularly calculates what the average cost of raising a child is in the United States. In its most recent report, the USDA states that the cost of raising a child to adulthood is $245,340. That means the yearly cost of having a child is roughly $13,000, though it can be almost double depending on region, income level, and the child's age.

And that doesn't even include the cost of college! Families with a child born in 2014 can expect to pay another $185,000 for a four-year public university.

Making matters worse, a T. Rowe Price survey of parents found that 57% say they spend too much money on their kids for things they don't really need. It's never easy to tell your children "no" when there's something they want, but beginning your child's financial education from an early age in a non-threatening way can help sometimes.

The Whole Family Needs Financial Literacy Lessons

Many parents are reluctant to talk to their children about finances — 71% in fact, according to the T. Rowe Price survey. That cycle leaves children in the dark about how money works and leads to lower financial literacy as those kids grow into adults. It also impacts the stress they feel about the family finances as they get older.

The T. Rowe Price survey also found that many parents don't know how much to save for retirement. The majority think a 6% retirement savings rate will be enough for them when it comes time to eventually quit working. Retirement experts beg to differ; many say that it's important to save between 10% and 15% of your income to be able to retire comfortably. That percentage also assumes that you start investing in your 20s or 30s.

You Can Budget for Having Kids

While parenting will always be a costly job, there are ways to help.

The very first step is creating a budget. When you have an understanding of your current earnings and spending habits, you can set realistic financial goals and track them carefully. Then you can avail yourself of the many ways you can save and spend wisely.

If you have siblings, you might remember wearing your brother or sister's hand-me-down clothes while growing up. Budgeting choices like choosing used clothing, cloth diapers, and making your own baby food can save you big money in the long run. A lot of cost-conscious parenting resources are available online to help you manage the money challenges that come with your new baby, too.

If you intend to have kids in the future, plan ahead. Make hay while the sun shines: Start with paying down debt and increasing savings. If you have two incomes, set aside a good portion in anticipation of the arrival of your bundle of joy. Consider ways to cut your spending now so you can create a larger baby nest egg. Those sorts of thoughtful financial moves will help you when your costs suddenly increase after your new baby arrives.

Parents Are Financially Optimistic

Despite all these challenges, our survey found that parents are more optimistic about their financial situation in 2016 than the childless are — 57% to 47%. What could possibly explain that, given the all the additional debt, diminished earnings, and decreased savings? Maybe kids bring some perspective along with all that stress.

This article first appeared in DealNews.

The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

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