July and August have the highest percentage of births for any month in America. While new parents across the country are adjusting the air conditioning in baby’s new nursery, please allow your friends at Efinancial to offer some timely advice. First congratulations are in order for the proud new family. As the old saying goes: “Children may be priceless but if we waited until we could afford them to raise a family, none of us might ever become parents.”
Truly, the best advice for new parents to be is to begin planning the baby budget as soon as possible. The first baby step? Prepare a spreadsheet detailing the cash flow streaming or trickling into your household and what expenses you’ll likely face – in the short term and the long.
So just how much does it cost to raise a child? According to USDA estimates, middle income families will spend between $11,650 and $13,530 a year while upper income households dig considerably deeper into their pockets, shelling out between $19,380 and $23,180 a year.
A baby born during the past year will cost a middle class family $286,050 by the time that child reaches age 18 and can easily range as high as $475,680 based on household demographics and when adjusted for inflation.
The reality is that most families will spend far more than these figures since there are child-related costs that aren’t included in the government’s statistics. First, it doesn’t take into account the cost of college or all the money that many parents start setting aside for education when their little ones are still in diapers.
The USDA expenditures also don’t include the cost of life insurance. Sure, buying term or whole life isn’t a requirement for parents. But many of us choose to purchase policies that could run several hundred or even thousands of dollars a year to help support our children should anything happen to us. We politely suggest that Efinancial can save you a great deal in this budget category starting with a free rate quote at http://www.efinancial.com.
Is there a silver lining in the financially cloudy forecast? Interestingly, a family’s biggest expenses — housing and food — were the same back in 1960 as they are today. Only, we now actually spend a smaller percent of our child-rearing expenditures (16% versus 24%) at the supermarket.
Clothing and transportation are also cheaper today. Families spend just 6% of their kid budgets on their children’s wardrobes today versus 11% back in 1960. And transportation costs account for just 13% rather than 16% of expenditures.
Where is all of the baby budget going? Blame child care and health care costs for the biggest spikes. Two income families in 2009 are handing over 17% of child-rearing expenses to caregivers and education expenses. The other big increase is in health care costs, which have doubled over the past 50 years. Families now spend 8% of their expenditures on it versus just 4% back in 1960.
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