For parents who want the best for their children, “the best” can often have serious implications on the household budget.
A recent report released by AMP and the University of Canberra1 looks into the cost of raising children in Australia today and not surprisingly finds that it’s costing us more than ever. The report states the cost of bringing up two children for a typical middle-income Australian family is now $812,000, up from $537,000 in 2007, and almost double that of 2002 when it cost $448,000.
The cost of raising kids for a typical middle income family has risen by around 50% since 2007 but household incomes over the same period have only grown 25%. This means the growth in the cost of raising children is double that of income growth.
This raises concerns over what the cost may look like in the future and whether we will get to a point when the cost of raising children is actually more than we’re earning?
A higher cost to raise children can also have a significant impact on the other areas of our life (such as our retirement) and highlights the importance of having a sensible budget and savings plan in place to not only manage what’s best for our kids, but also for ourselves.
From birth to leaving home, the greatest costs associated with raising children are transport and food. Another major cost of children is education; however, this very much depends on whether children attend private or public schooling. In some cases higher income families can now allocate up to a quarter of their annual income to education for their children.
Education and higher standards of living are also the key factors in it costing higher income families close to $1.1 million dollars to raise two children while lower income families, who educate their children through the public schooling system, will outlay $473,000 raising their kids.
With rising costs, it’s no wonder family sizes in Australia are also smaller and on average we have just one or two children families.
The report also highlighted that the cost of raising children can often increase when children finish high school as many parents contribute to university fees, rent assistance, first home deposits and weddings. And almost half of young adults between the ages of 20 and 24 still live at home with their parents.
For those who are not parents you may be asking yourself, “would I really want to get myself into all this?”
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 may be challenging but it is also very rewarding.
And remember it’s often the simplest things, not the most expensive, where we and our children can find the most enjoyment.
1 AMP.NATSEM. Income and Wealth Report Issue 33 – Cost of Kids: The Cost of Raising Children in Australia