VOL. 128 | NO. 169 | Thursday, August 29, 2013
Rays of Wisdom
Dana and Ray Brandon
Bundle of Joy Can Cost You Bundle of Cash
Ray’s Take I was asked once if two could live as cheaply as one. I answered, “Certainly, as long as one of them didn’t eat or wear clothes.” Most couples realize having a baby is going to mean extra expenses. However, many are shocked when they realize just how high those expenses are. According to the U. S. Department of Agriculture, a child born in 2011 will cost an average of $235,000 to raise to age 17. That number doesn’t include a penny for private tuition or college.
Fortunately, that is spread over all those years. The bad news is for even low-income families, raising a child still costs $212,000.
Of course, planning – and saving – for these additional expenses makes the most sense. Long before families are started, I suggest couples live on one of their incomes, saving all of the other. That helps create a pretty good portfolio and accustoms the family to a single-income source, should they decide one of them should be a stay-at-home parent.
If you are planning on using childcare, learn what your planned provider charges. Start penciling that amount into your monthly budget before the baby arrives so you get the feel for its impact, setting aside the money for later.
At the very least, sit down before the baby is born to develop a new household budget, remembering to factor in food, clothing, diapers, medical care, and all the equipment babies need. Finally some good news: the cost per child decreases with more children. Where do the savings come from? Shared bedrooms, hand-me-downs, and bulk food purchases.
Having said all of this, let me say that being a parent is probably the greatest privilege and joy of my life, and the rewards swamp the expenses a million to one every day. But the hard cold facts are that you can’t pay a bill with feelings.
Dana’s Take It’s back-to-school time, so let’s talk about the cost of private schools for pre-K-12. Tuitions vary from parochial to private, but count on $10,000 per year per child, starting at age 3 through 18. The lifetime cost of raising a child just went up by $150,000 in today’s dollars. Many private high schools charge closer to $20,000 a year, so bump that number up to over $200,000, per child. Add meal plans, uniforms and sports. Gulp.
Without deliberate planning, tuition and childcare expenses can sap dollars intended for college and other goals. Grandparents, bless their hearts, help with tuition for about a third of private school students. Scholarships can help, too. A good education can be a great investment. If a private education is on your dream list for your children, start the conversation and start planning. As Ray says, “Every dream deserves a plan.”
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at email@example.com.