Here’s How Much it Costs to Raise a Child

Couples consider many things
when deciding to start a family, but the financial burden of raising a child is
not always first on the list. I often hear from clients who are soon to be parents,
“We’ll figure it out!” This could be a good strategy in deciding which spouse
will handle the 2am feedings, but not the smartest approach to being
financially prepared.

According to the U.S.
Department of Agriculture it costs a whopping $233,610 to raise a child in the
United States (birth to 17 years old), and this doesn’t include college
education! On average we see the cost of a child around $15,000 per year.

Here are a few important
questions to ask as you and your spouse plan for the arrival of your little one:

  • How much are
    healthcare costs for having a baby?
  • How much will childcare
  • How much should
    we be saving for future college costs?
  1. How much are
    healthcare costs for having a baby?

averages range from $5,000-$15,000 depending on a number of delivery factors.
It’s important to plan early and look at what your insurance covers (and
doesn’t cover) so there are no surprises. Here are a few things to do as you
plan for out of pocket expenses:

  • Review your insurance,
    years in advance if possible, to ensure you don’t need to change plans.

    • Ensure you know your
      max out of pocket spend amount.
    • Create an
      emergency fund to pay for costs you’ll incur before you max out your
      responsibility to the insurance company.
    • Consider opening
      a Health Savings Account (HSA) to cover out of pocket medical expenses.

      • Many employers now give employees a contribution into
        their health savings accounts. Remember, health savings account contributions lower
        your W-2 income, grow tax free and are withdrawn tax free!
  • How much will childcare

This will
vary based on what type of childcare is a fit for your lifestyle. According to
Care.com, the average weekly childcare cost for one infant child is $199 for a
family care center, $211 for a day care center, $390 for an au pair and $596
for a nanny. A few things to keep in mind:

  • Some employers
    offer a dependent care flexible savings account (FSA). This would allow you to
    put away up to $5,000 per year tax free to cover approved daycare expenses.

    • Having live in
      help like an au pair can add up. I’ve seen many clients pay up to $10,000 to an
      agency who has vetted the au pair. In addition, if you opt to use a live in au
      pair don’t forget about the added cost of feeding another adult and
      buying/maintaining another vehicle.
  • How much should
    we be saving for future college costs?

This is a
common question and every couple’s perspective is different given their
personal experience and preferences. For parents who don’t want their child
burdened by debt, starting to save early for college is crucial. Start as soon
as you can!

  • The main accounts
    we see clients open are 529 plans and Uniform Transfer to Minor Accounts
    (UTMAs) – the primary difference is tax treatment and control.
  • The amount you
    must save on a monthly basis depends upon whether you are saving for private or
    public college tuition.

    • For most state funded universities, you should be
      saving anywhere from $250-$500/month from the day your child is born.
    • For private schools, the cost can vary more, but from
      my experience, you are looking at $1,000-$1,500/month from when your child is

While some of these figures
might appear staggering, you can’t put a price on the peace of mind you’ll have
knowing your child is taken care of. Our parents made it work and so can you!
The question is – what can you do today to help create financial freedom for
your family in the future?

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