The Financials Of Motherhood: What Do Kids Really Cost?

Everyone knows that raising kids is expensive. Most parents don’t stop to think about how much kids cost until they’re in the thick of parenthood. If you’re thinking of having kids, or you already have one and are considering more, you probably have some financial concerns about it--especially in this economy.  Just what does it cost to raise kids and provide a starting point for financial success--both yours and your kid's?

How Much Do Kids Cost?

A USDA study reveals that a married couple, middle-income family should expect to spend a cool $233,610 to raise a child born in 2015 through age 17. That’s about $12,980 a year.

With inflation, costs jump to between $284,570 and over $300k – which adds up to about $15-16k a year. For reference, that’s the equivalent of 3 Prada handbags or a one-week luxury hotel stay in an international tropical destination like Bora Bora.

And, this estimate doesn’t even include college tuition. Plus, these numbers will change if you make more or less than the “average,” have more children, or live in a more expensive city or state. Which begs the question: Where does the money go?

How Much Do You Spend On Kids?

According to the same USDA study, middle-income families spend:

• 29% on housing
• 18% on food
• 16% on child care & education

If we take the inflation-based average of $300k, that’s about:

• $4,800 a year on housing
• $3,000 a year on food
• $2,600 a year on child care & education

Again, this is only for ages 0-17, so college tuition hasn’t even made it into the calculations yet. It also doesn’t account for things like health insurance, transportation, clothing, and other miscellaneous items.

When Do You Save For Kids?

The short answer is: ASAP. That's true whether you're in the early stages of family planning or in the midst of counting pennies to save for your toddler’s future college fund.

Here are three quick tips to help parents at every stage.

Start saving. Preferably tax-free. There are many accounts designed to provide current and future parents with an easier way to set their kids up for financial success. For example, when it comes to college funds, 529 accounts are your best friend. Open one, start saving – and save on taxes in the process.

Open a Roth IRA. The IRA account family is best known for its retirement benefits. But that’s not all! Some Roth IRAs allow you to withdraw money for birth, adoption, or college expenses without penalty. Add the investing and tax perks to the list, and it’s a great way to both save & build long-term wealth for your family.

Open an account in your kid's name. Custodian accounts, trust funds, and yes – even investing and retirement accounts like the Roth IRA can be opened by you, on your child’s behalf, from day one. If managing multiple accounts for you and your kid feels too complicated, start with a savings account at your local financial institution and go from there.

Moms, Kids, And Financial Stress

A quick word to the moms reading this: you NEED to be involved in financial decisions involving your family and, most of all, your children. Research shows that mothers make the bulk of their family's financial decisions--but moms are also stressed because they aren't sure whether those decisions are right.

You may think it's easier to defer to a spouse or financial expert. However, studies show that route will only cause you more financial stress because you won't know what's happening with your money or how much you have saved for your child's expenses and future needs. Moms need to educate themselves on money matters to feel more confident in their financial decisions.

Also, don't forget to save for yourself! Funding for your kid's future is important, but you must also plan for your retirement and other big milestones.

It may seem overwhelming when you add it all up, but if you make a plan and stick to it, you will be able to plan for your child's future without creating more stress for yourself. After all: kids are expensive. But even on days when they drive you nuts, you know they’re worth every cent.