By: Syed Hussain
If and when couples decide to start a family, they must be prepared for their lives to change in drastic ways. New parents can no longer focus only on themselves; instead, they must prioritize their baby's wants and needs. In today's economy, one of the biggest challenges of raising a child is supporting him or her financially, and as a result, many potential parents wonder, "Can I afford a baby?"
Brian Davis, a father of two young children, experienced a similar moment of reflection before he decided to start a family.
"Having a child was one of the best decisions (my wife and I) ever made as a couple," he said. "We knew it was going to be hard work, (but we were) willing to do what it takes. Financially, there were a number of adjustments we had to make with our spending."
This sentiment is echoed by many new parents, who often must change their spending habits to make ends meet. As such, many potential parents start their spending analysis by identifying key areas where they can cut costs.
A 2013 news release by the United States Department of Agriculture (USDA) projected that a middle-income family will spend about $241,080 over the course of 17 years to support a child born in 2012. The report breaks down this projected spending into different categories, which can provide parents with insight into the areas that have the most dramatic effect on the total cost of raising a child.
According to the USDA, middle-income families are expected to spend the most on housing. The report projects that the average family will spend $71,820 on housing over the course of 17 years, which represents 30 percent of the total estimated cost. Parents can reduce their spending in this area by buying only property that has a mortgage that they can realistically afford and monitoring their use of costly utilities.
Child Care and Education
Child care and education comprise the next largest spending category, accounting for 18 percent of the total cost. This broad category can include the cost of day care, a nanny, school supplies and private-school tuition.
Day care can pose a particularly large financial burden for new parents, which is why Davis is thankful that he had family nearby who were willing to babysit. "My mom (was) able to stay with us early on and watch the children, (which) was a huge help for us financially and as a couple as well, since raising children can be very stressful at times," he said.
The food category incorporates money spent on groceries and eating out, and it makes up 16 percent of the projected cost. Parents can save money on food by buying groceries in bulk or purchasing generic products. Couples can also save money by dining out only to celebrate special occasions and by using coupons and discounted gift cards whenever possible.
According to the USDA's information, transportation contributes to 14 percent of the projected total cost of raising a child. Parents can minimize spending by taking public transportation when possible and taking good care of vehicles that they own. Proper maintenance keeps cars running longer and more efficiently.
When parents evaluate the costs of raising a child, life insurance is also something to consider. Davis bought life insurance shortly after the birth of his second child. "I decided to get life insurance to help bridge the gap to help with bills, mortgage payments and college tuition in case something happens to me or my wife," he said.
Can I Afford a Baby?
As the costs of raising a child continue to rise with each year, it becomes more and more important for parents to think about their financial plan and evaluate the areas where they can cut costs in the most efficient, but doable way.
Disclaimer: This material is provided for informational purposes only. It does not constitute advice. Anyone interested in these topics should seek advice based on his or her particular circumstances from independent professional advisers.