Parenthood – the financial foregoes of one of life’s richest experiences.
Most parents agree on one thing – parenthood is a priceless and rewarding endeavor. Yet there’s no escaping another undeniable fact. Kids are expensive.
While it’s inevitable that as parents, we’ll divert much of our earnings their way, the stats are nevertheless pretty astonishing. A recent University of Canberra study1 found that raising two children in Australia will set you back an average of $812,000. And while a lower income family can get away with spending less (around $474,000), the cost for a higher income family rises to more than $1 million dollars – and that’s before both kids have even flown the nest.
These latest figures are a significant jump from just five years previous, when the average cost of having two kids was $537,000 – and it’s almost double the 2002 cost of $448,000. What these figures show is that child-rearing costs has risen by around 50% since 2007 – and with household incomes over the same period only growing 25%, meaning the growth in the cost of raising children is double that of income growth. No wonder, then, that the average Australian birthrate (per woman) was 1.93 in 2012, a considerable drop from 2.85 in 1970.
So which are the biggest expenses? Unsurprisingly, education and childcare are two major culprits. A child born in 2014 will cost around $63,000 to educate to Year 12 in a public school in metropolitan Australia2. Factor in private school fees and the cost jumps to a staggering $459,000. And with childcare costs skyrocketing by as much as 150% in the past decade, parents who return to full-time employment could be dedicating as much as 60% of their gross income in childcare costs.
As anyone who has kids will tell you, food is another major expense – and while being eaten out of house and home isn’t quite the reality for most parents, middle income families will spend around $143,000 on food for two children in their formative years.3
When you consider the countless trips to and from school, friends’ houses, and to soccer practice, band camp and ballet class, transport is another expensive business – not to mention the various sports, activities and hobbies that all need funding. Middle income families spend more than $100,000 on recreation costs alone… and whether it’s clothing or equipment, trips to the doctor, or summer holidays overseas, parents face substantial and unavoidable costs at virtually every turn.
With this in mind, anyone who’s not yet a parent might be asking whether it’s actually a good idea! Yet while there’s no doubt that having a child will be the biggest economic decision we’ll ever make, and even though the economic considerations are daunting, few parents would disagree that having children is one of the most rewarding and enlightening things we’ll do with our lives.
It’s worth remembering that while the money we earn could buy lots of other nice things, happiness doesn’t come from the things we own. Ultimately, it’s impossible to put a price on your loved ones – and having kids is a small price to pay when it comes to the real value they add to our lives. In spite of the financial cost of having kids, life’s richest experience really is its most priceless.
Planning your finances to best support your child? Regional Australia Bank can guide you with everything from term deposits, to home loan offset accounts.