Take Steps to Prepare for the Cost of a Bigger Family
A couple's decision to start a family leads to one of the most significant periods of transition in their lives. Along with a host of new responsibilities comes the financial impact that children have on a household. This is not something to be taken lightly. You may be focused on immediate expenses like diapers, booties and baby food, but that's just the start. By some estimates, the cost of raising a child from birth to age 18 can fall in the range of $200,000, and possibly much more depending on any number of variables related to lifestyle, education and healthcare costs.
These numbers make it apparent that it takes not just a village to raise a child, but a fair amount of money as well. But take heart: families have been managing to make this work since people first roamed the earth. The key is to make sure you have your financial house in order before the new arrival comes on the scene. Here are some critical factors you can't afford to overlook:
The first expense that comes to mind is the cost of delivering a baby. Are you covered by medical insurance? How about dealing with any potential complications, either for the mother or child? Beyond that, will you have to pay additional costs to add the child to your existing insurance policy?
Child care expenses
Some new families prefer to have a parent stay home to raise the child. Though ideal in many respects, this option also comes at the cost of one potential income, which can put a big squeeze on a family budget just at the time when the headcount has expanded by one. On the other hand, if both parents plan to be back at work full-time, daycare costs become part of the equation. Depending on where you live and the options available to you, this can easily amount to several hundred dollars of additional expense per week--a significant cash outflow even in most dual-income households.
Other everyday living expenses
Is your house or apartment big enough to handle the arrival of a new child? If not, you may need to move into a larger space. A new addition to the family also means another mouth to feed, so your grocery bill is likely to go up. Clothing is another ongoing cost, and your entertainment budget may rise as well, if for no other reason than the need to pay a babysitter when you want to go out.
If you choose to send your child to a private school for grade school and high school, you could be in store for some hefty tuition bills. And the cost only escalates for higher education. If you're planning to assist your child with college expenses, you may want to consider making monthly contributions to an education savings fund. The sooner you begin saving, the better financial shape you'll be in when it comes time to write out the checks.
The arrival of a new child into the family is an exciting and exhausting time in a parent's life. On top of the day-to-day tasks involved in running an expanded household, you'll have new responsibilities related to the development and well-being of your new son or daughter. Given all you'll have to juggle, you won't want to waste time worrying about whether your financial future is secure. Talk to a financial advisor to etch out a plan to reach your long-term goals. Being proactive today will mean more time to enjoy the treasures of parenthood that lie ahead.
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