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| The real cost of starting a family |
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The arrival of a new baby is one of the most exciting times of your life. However, with the rising cost of child care and household expenses, that excitement is often overshadowed with the added financial worry of what this life-changing little bundle will bring.
The 33rd NATSEM (National Centre for Social and Economic Modelling) report Cost for Kids revealed that the cost of raising children for a typical middle-income family has risen by 50 per cent since 2007 - from $537,000 to $812,000.
This amount is based on a family raising two children from birth to 21 years, which equates to $19,300 per child per year. For high-income families that cost was found to be around $1,096,278, or $26,101 per child per year, the higher amount being mostly attributed to private education. Also, 50 per cent of young adults, aged between 20 and 24, nowadays still live at home with parents, which further adds to these costs.
However, household incomes over the same time have only grown by 25 per cent. This means that the growth in the cost of raising children is double that of the growth of income, and that having two incomes in today’s world isn’t a choice, but a necessity.
Affordable child care is one of the greatest concerns for families. Parents today are forced to pay twice as much as those ten years ago, with Australian families spending an average of 12 per cent of its budget on child care and education. Our handy childcare costs calculator can help you determine the cost of accessing early childhood services in your local area.
But there are lots of other costs that add to that expanding number. The main costs associated with raising children are food, transport and recreation, as anyone who feeds and runs multiple kids around soccer/dance/music practice understands!
For middle-income families transport totalled $158,955 and food was $143,148. And of course, the bigger the family, the bigger the car required. And though babies initially feel expensive—with prams, nappies and cots—the older the child gets the more they cost, when these extra-curricular costs and grocery bills really take hold.
Children in the 18-24 age bracket are the most expensive, costing five times that of supporting a 0-4 year old. This is due to not only the increased food and energy, but also transport, recreation and tertiary education.
A key concern is whether we will get to the point when raising children surpasses the earning capacity of the average Australian family, and what impact this has on the financial wellbeing of people in the longer term. These concerns highlight the need for a solid budget and savings plan, both before baby arrives and throughout their childhood.
Before baby arrives, it is worth taking a good inventory of debts, clearing credit cards and paying down loans, as well as having a plan in place for those times when you are relying on one income.
Do a family budget and make sure the numbers add up. Consider the up-front baby costs but also budget for child care, activities and housing as the family grows. It's also worth reviewing your life and health insurance, for both will become much more important once there are children to provide and care for.
Yet, as Craig Meller says at the opener of the report, "Whether you make the choice to have children or not, for most of us it will be the biggest economic decision we'll ever make. It's challenging, but also rewarding and enlightening. And remember it's often the simplest things, not the most expensive, where we and our children can find the most enjoyment."
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