Whether you are thinking of starting a family, already have a baby on the way, or are in the throes of parenthood, just thinking about how much children cost to raise can be overwhelming. Children have an impact on almost all parts of your life, including your finances. From working out parental leave to making significant purchase decisions, like buying a house, starting a family has financial considerations.
According to the Suncorp Bank Cost of Kids Report 2021, the costs of raising a child have increased by more than 10% in the last five years. Technology is one rapidly growing cost, up from $37 per child/month to $106.
Costs change from family to family and for different income levels, but raising a child is expensive no matter what. So whether you are thinking of having a small or large family, it is essential that you sit down and plan what that means for your finances.
Here are a few tips to help you navigate finances when raising a family:
#1 Know where your money is going
It is important to review your financial situation. Budgeting isn’t everyone’s favourite activity, but it is critical to understand where you are spending your money – especially if you or your partner are planning on spending an extended period of time at home. Running a household on one income might mean tightening the spending.
Apt Wealth offers a free budget planner template to guide you through this activity. It’s something we do with all new clients, and many find themselves surprised at where their money is going, and often find areas to cut back that don’t have a notable impact on lifestyle.
#2 Understand and make use of government entitlements
Before you grow your family, take the time to understand your government entitlements and the parental leave policy at your work. It is important that both you and your partner do this. Many companies now offer paid paternity leave, and the government also provides paid parental leave to eligible families of up to 18 weeks, which is $772.55 per week (pre-tax) at the time of writing. In addition, you may be eligible for “dad and partner pay,” which is an additional two weeks paid leave while you or your partner are on unpaid leave from work.
There are also several state government programs that support family costs throughout your child’s life, such as the NSW Active and Creative Kids vouchers and VIC Get Active vouchers that help you cover the cost of eligible activities.
#3 Plan for the costs and arrange childcare early on
For many families, two incomes are necessary, but with childcare costing as much as $200 a day, it can be a costly exercise. The Australian Government subsidises childcare for Australian families, and this can be up to 50% per day with a capped limit.
Before you decide to go back to work, crunch the numbers and make sure it makes sense for you, both personally and financially. It’s not just a money decision but a career one too. Time out of the workforce can impact future earning potential and superannuation, so it’s worth weighing up the cost both short and long term.
Your Apt Adviser can help you understand the costs and the impacts on your finances today and tomorrow, factoring your choices into your financial planning.
If you are in a major city or anywhere with a shortage of childcare, make sure you look into options early, so you aren’t limited in your choices when it is time to return to work.
#4 Consider how you will fund education
Whether you are sending your child to a private or a government school, educating children always costs more than you expect – parents need to plan for much more than just tuition fees. According to the Australian Scholarships Group’s 2021 Education Index, education today can cost as much as $68,613 through the government system and $487,093 in the private system.
So, no matter where you decide to educate your children, it is worth building it into your financial plan early to ensure you can cover the costs. Apt Wealth contributed to this article in Money Magazine that provides some food for thought on funding your child’s education.
#5 Plan for the unexpected
As your family grows, so does the number of people you are responsible for. It is essential you have adequate insurance to ensure your family will be provided for, should something unexpected happen to you or your partner. Life is unpredictable; if you aren’t adequately covered, it can be costly. For example, if you cannot work for a period of time, what could this mean for your family? Would you need to move? Would you be able to cover schooling costs? Insurance is not just about protecting your money, but your loved ones and your lifestyle too.
#6 Account for kids staying at home longer
Gone are the days when parents reclaim their home when their youngest turns 18. According to the 2016 census, 43.4% of 20–24-year-olds and 17% of 25–29-year-olds still live at home with their parents. These figures may only have grown with the economic impacts of the pandemic.
While living at home longer may help your children get a head start and save for their first home, it’s important to make sure you take this extended time frame into account when planning your financial future and saving for your retirement.
It isn’t always easy to make the right financial decision for you and your family. So make sure you take the time to understand your goals and what matters to you and your family. From there, you can create a financial plan that will help you live for today while ensuring you are building your wealth for the future.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.