Raising a child doesn't have to break the bank

Raising a child born in 2013 to the age of 18 will cost a middle-income couple more than $245,000, according to the USDA. But if you do your research, having a child doesn't necessarily have to be cost prohibitive. 

Gosia Wozniacka/AP/File
A woman swings a baby before a news conference last week in Lake Oswego, Ore. The USDA projects that raising a child to age 18 will cost $245,000 on average, but that figure makes a lot of assumptions, Rosso writes.

Raising a child born in 2013 to the age of 18 will cost a middle-income couple more than $245,000. That’s up $4,260, or almost 2%, from the year before, according to a recent U.S. Department of Agriculture report. And that doesn’t include post-secondary education expenses.

Thankfully, my daughter is 16, so the bulk of her financial support is behind me.

Or is it?

There is college in her future ­— a small fortune. If you examine household formation in the United States, it appears she may remain under my roof after her studies are completed. If the current trend continues where one in five individuals in their 20s is living with his or her parents, I’m thinking the odds are greater for her to be underemployed or unemployed for years after graduation.

I’m not a pessimist, just facing the reality of the world after the Great Recession. The financial crisis exacerbated this shift; however, kids have been steadily returning to the roost after college for years.

It doesn’t matter; I have no regrets. My child has been an extraordinary investment. If she needs to return home to gain financial footing before she goes out on her own, I’m fine with it. Actually, I’m in favor of it.

But talk about sticker shock; a dear friend of mine, a demographer, calls it “zipper freeze.” Since 2008, I’ve encountered a change in how couples perceive children. They’re waiting until they are on sound financial footing first, having fewer children or none at all.

The USDA study, prevalent in the media, is often cited as strong evidence for “zipper freeze.”

How do you manage to experience one of the greatest joys without breaking the bank? Step back and do your homework. It may not be as bad as you think.

Consider the imaginary child first: Examine your budget as if you have a newborn and see how your finances handle it. Go to www.babycenter.com and use the cost of raising a child calculator. You can adjust for a child’s age, 0 to 2, 4 to 5 and so on. Then investigate your household cash flow to determine how the increased costs can be met. A young couple decided to cut their retirement savings by 2% annually. Having a child was a responsible choice, and they fully understood the pros and cons to the family budget.

Bolster your cash reserves: Decide on how childcare expenses will affect your overall financial situation. Go to www.parents.com and run the stay-at-home calculator. You may be surprised to discover that one parent staying at home may not make a great financial impact. Bolster your emergency reserve as much as you can beforehand to reduce the financial burden of childcare expenses. Some people are moving closer to home and paying grandparents, great-grandparents and other family members to watch the kids. Is this an option for you? That’s been an option for two out of every six couples I counsel.

Take advantage of all the tax credits available: Credits are a dollar-for-dollar reduction of taxes that are more powerful than itemized deductions. Don’t forget the child tax and dependent care credits. I see more couples with children who miss valuable tax credits. Ask your tax advisor if you qualify.

Don’t forget your workplace benefits: Yes, your employer may offer relief. You may have overlooked childcare subsidies and other benefits an employer provides because they weren’t important to you. Contact your human resources department and find out. Many couples have been pleasantly surprised to discover benefits are available through childcare or a dependent care flex plan, which in some cases is a better financial decision than the dependent care tax credit. Have a financial planner crunch the numbers to help you decide.

Don’t be too disheartened by the USDA study: It makes assumptions that may not fit your personal financial picture. For example, the study assumes your children will attend private school. If not, reduce the total by roughly 20%. In addition, the estimated cost of annual child care used is greater than the services I investigated in several areas of the country. I understand planning for maximum childhood expenditures; however, don’t let the analysis prevent you from having children. Use it to begin your research, and consult professional resources to plan accurately.

Obviously, every situation is different. Formulating a three-year plan to save and investigate childcare and education options can result less stress, fright and sticker shock.

Then you can focus better on the fun stuff — like diaper changing.

Learn more about Richard on NerdWallet’s Ask an Advisor

The post Children May Not Be as Costly as You Think appeared first on NerdWallet News.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Raising a child doesn't have to break the bank
Read this article in
QR Code to Subscription page
Start your subscription today