A Family Financial Affair
Grey hair, worry lines, high blood pressure - these are some of the physical costs associated with the joys of parenthood. Then there are the financial costs, which are just as draining. The last time any research was done into the cost of raising children in Australia, back in 2012, for an average family the cost of raising two children was $812,000. Since then, that figure has kept steady; it now comes in at an extra $2,000 per child, at $816.000. But it's still a huge sum. No wonder the Australian birth rate is on the decline! And with children staying at home longer, the costs of raising a family are dragging on and on.
Each stage of your child's life is unique and comes with its own financial burdens, but if you are realistic about your financial situation, there are ways to save money and ease the economic strain of parenthood:
Setting up home for a new baby can be very expensive. From the ages of 0-3, the main cost of raising a child is the stuff you suddenly find you cannot live without: a change table, pram, high chair. While it is natural to want the best for your baby, you can save a fortune by opting for pre-loved baby equipment. There is always a glut of second-hand baby essentials out there and most parents, once their children are older, are happy to declutter and give away their old baby things. Or, if it must be new, keep it simple. Your baby does not know the difference between a basic IKEA highchair and a luxury one. And both are only going to end up covered in food... or worse!
With children between the ages of three and five, the biggest expense associated with parenthood is childcare. Unfortunately, there is no way of cutting corners when it comes to quality supervision for your children, but there is government assistance. The average cost of childcare is $8.50 per hour, but you can usually get a child care benefit to help pay child care. Before returning to work, it is essential to sit down and crunch the numbers on the true cost of returning to work. Travel expenses, work clothes, bought lunches, child care - all these things can add up, meaning that sometimes, being a stay-at-home parent with part-time work can be more financially (and emotionally) rewarding than rushing back to a full-time job.
Those same work-family lifestyle choices are just as imperative once your children reach school age. The cost of your child's education is very much down to you: whether you send them to the local state school, a church school or a private school. You need to work out what you can best afford; and what you are willing to sacrifice, both in terms of material possessions but also time spent away from your children working. If you opt for a private education, remember to take into consideration the extra costs that come with private schools: overseas trips, pricey uniforms and costly extracurricular activities. But wherever your children go to school, it is time for you to start teaching them the true meaning of money. Once their circle of friends expands, they will start to experience the peer pressure associated with the latest fashions and technology. They need to understand how much effort goes into earning the money needed to purchase a $30 Nike drink bottle instead of the dollar-shop variety. By giving them an insight into how the family budget works, they are less likely to put undue pressure upon it by demanding the latest gadgets.
Unfortunately, even once your children are old enough to support themselves, it does not mean they will. Few children are economically self-sufficient by the age of 20, whether they are out working or in higher education. But if you start your financial planning early, a lot of the fiscal pain can be removed from your child's progression into adulthood.
The cost of a three-year degree is set to hit $50,000 by 2025 - that is a considerable sum. But by creating a savings plan for your children when they are still young, you can ensure that your children do not finish their studies with a huge debt hanging over them.
There are lots of different types of savings accounts and ways to save - but many tie up your money for long periods of time, and at the moment term interest rates are low.
Alternatively, by talking to your trusted mortgage broker, you could arrange new finance on your home and use a mortgage offset account to save for your child's future instead. Your regular savings will help reduce your mortgage - earning a far better return than currently offered by many savings accounts - and your money will always be on hand, should you need to make a sudden withdrawal.
Becoming a parent is the most important step in a person's life. And with a little advance financial planning, family planning should be one of the most rewarding - give or take the odd tantrum along the way.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information.
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