Raising children comes with a hefty price tag. The U.S. Department of Agriculture estimates the average cost of raising one child, from birth to age 17, and who was born in 2015, to be $233,610. When inflation is taken into consideration, that figure inches closer to $284,570.
We often hear that purchasing a home is the biggest expense you’ll take on, but raising a couple of children will exceed that expense for most people. Add in college or the cost of raising two or more children, and you could buy your home twice in most areas.
But like preparing to purchase a home, you might want to get your financial ducks in a row before choosing to bring your precious little one(s) into your world. In a best-case scenario, there are a few money milestones you should strive to achieve before becoming a parent.
Have a Stable Career
Establishing a secure work situation before becoming a parent is crucial. While that can mean traditional employment, self-employment, or some combination thereof, you want to have a stable foundation that will support your growing family.
Try to pursue career paths that you can continue after your children are born or adopted. Also strive to earn a salary that will cover the expense of child care in case you need it. That can amount to about 16% of the total cost of raising a child, on average, according to the U.S. Department of Agriculture.
However, there is more to take into account than just salary. Consider a career that will afford you benefits like parental leave and health insurance. Also, look for a decent personal/sick leave policy so that taking a day off to care for an ill child does not mean you’re out of a day’s pay.
Have Enough Disposable Income
If $233,610 sounds like a lot, it's because it is. That amount breaks down to about $12,980 per year or $1,082 per month for one child from birth through age 17.
You can use Huntington National Bank's Cost of Raising a Child Calculator to get a better idea of your estimated annual costs to make sure you have enough room in your budget before the expenses come rolling in.
Running these numbers will give you an idea of how much of your disposable income will need to allocate toward raising children. You can even get ahead of the game by saving up a year or more—or as much as possible—of those estimated costs.
Have an Emergency Fund in Place
Because parenting is an adventure that can bring you to the zoo one day and the ER the next, it's important to be financially prepared for the unexpected when you become a parent. From covering the copay for a broken leg to the insurance deductible for your teen’s first fender-bender, having an emergency fund of around three to six months of expenses will protect you and your family from being overwhelmed by life's inevitable messes.
Begin To Contribute to Your Retirement
As your children grow, the cost of raising them will grow as well, so start to save for retirement before you have them. Since the responsibility of saving for your retirement will fall solely on your shoulders, contributing to a retirement fund before you become a parent will not only secure your future but will also relieve the potential burden of your children being financially responsible for you as you age.
Be in a Position To Save for College
Many people are unrealistic about what it takes to handle the (rising) costs of college. The student loan debt crisis worsens every year, and there is no indication that it’s going to turn around anytime soon.
There are ways to lessen the financial burden you and your future children will face when they reach college age, and the best is preparation. If you make sure you’re in a position to save for your kids’ college education right away, you'll set them up to be ahead of the class—at least financially speaking.
Have Insurance (or the Ability to Pay for It) in Place
Being able to afford medical and dental insurance for yourself and presumably for future children is extremely important. If you plan to become pregnant, make sure your health insurance covers routine prenatal care (it should). If you need fertility treatments and care, you should also contact your health insurer to see what's covered and what's not.
If you're looking into surrogacy—which could cost more than $25,000—make sure the surrogate has medical insurance to cover the pregnancy and birth. Your insurance likely won't help cover any of those costs. You and the surrogate will also likely need surrogacy insurance.
Add your child to your insurance policy or enroll them within 60 days of a birth or adoption.
If you plan on being a parent, you and your spouse may want to consider purchasing life and disability insurance to protect your family's financial future should one or both of you die or become disabled.
Even if you have health insurance in place, be prepared for other out-of-pocket expenses if you're birthing your own child—they could be thousands of dollars. Having money in a savings account to help pay off this debt after labor is important.
What Happens if You Don't Hit the Milestones
Ideally, you’ll be able to hit these milestones before becoming a parent. But you should also realize they represent a best-case scenario. Not being able to check these all off the list doesn’t mean you shouldn't become a parent or that you’re destined for financial ruin if you do. Rather, let them serve as goals to be aware of and reach for. The more of these milestones you’re able to achieve before your children come into your life, the fewer financial worries you’re likely to have while raising them.
Frequently Asked Questions (FAQs)
What is the average cost of raising a child in their first year?
The USDA reports that it costs just under $13,000 per year to raise the average child. You should expect to spend around this much, if not slightly more, in your first child's first year because you'll need to purchase many items for the first time.
How do I calculate the cost of raising a child?
The USDA numbers are based on averages from data across the entire U.S., and actual expenses vary significantly based on where you live. You should also factor in your own needs and preferences when it comes to how much living space you'll need, whether you'll need daycare, where you'll live for school, whether you can buy secondhand clothes, and more. Weigh your answers against the costs of these products and services where you live to get a better idea of the costs for your family.