Do I need life insurance in my 20s and 30s?
Life insurance isn't just for the elderly anymore
Afternoon naps to nappy changes. Night clubs to sleepless nights. Your favourite Spotify playlist to ‘Baby Shark’ on repeat. There’s no denying it: becoming a parent changes everything. And, while having a baby will provide you with countless experiences that money can’t buy, it’s still an expensive business.
According to the Australian Institute of Health and Welfare, over 300,000 babies are born in Australia every year. With more and more families adapting to life with little ones, let’s run through a few significant milestones to help you calculate the likely cost of raising a child in Australia.
Generally, the financial impact of having a baby begins well before your bundle of joy is born. A significant first step for any parents-to-be is to think about parental leave. How much leave would you like to take? What can you afford? How will you manage any debt? Will your partner be taking time off too?
It’s important to remember that your little one won’t just cost money to look after; you’re also likely to receive a reduced income from one or both parents depending on the arrangements you choose to make.
Parents in Australia are entitled to both paid and unpaid parental leave, but you will likely be earning less than when you were in paid employment. A good first step is to create a budget with your current income and expenses and then track your spending for a few weeks.
Then, add in details about the expenses you can expect to pay once the baby arrives – think about everything from a baby monitor to a bassinet and bibs – and see if your reduced income can continue to cover costs. If not, take a look at where you might be able to cut back.
For many parents, going back to work after a maternity or paternity break can be a difficult decision, but it’s usually financially necessary for one or both parents to resume their employment.
Returning to work will likely mean that the household income is increased, but when figuring out when to take the leap, consider the likely cost of childcare for your little one. There are many different types of childcare to consider, and they all range significantly in cost.
Care For Kids has a tool available to help you calculate the approximate cost of your preferred option. There are also government benefits available. To find out more about the benefits that may apply to you, check the Australian Government’s Family Assistance Guide.
Giving your child a great education is top of the list for most parents, and whether your child attends public or private school, the ongoing cost of education is something to keep in mind. Aside from any tuition costs, there are also uniforms, sporting expenses, extracurricular activities and school excursions to think about. Not to mention lunchboxes that need filling. Ultimately, the cost of your child’s education depends on a number of factors, so if you’d like to find out more, ASIC’s MoneySmart site has plenty of information on calculating how much your family may need to save.
Finally, there are the everyday living expenses to consider, which can quickly add up. Research suggests that in 2016 the average couple were spending $1,833 per week with children under five and $2,085 per week once their children were between 5-14 years old.
Holiday costs increase too, with the average family in Australia saving $77 per week for their next trip away, according to the same study.
According to the NATSEM Income and Wealth Report from 2013, for a middle-income family in Australia, the cost of raising two kids, from birth to when they leave home is $812,000. If you’re a higher income family, this figure increases to $1.09 million whereas a lower income family can look to spend $474,000. As the cost of living has increased since this report was released, you can expect these figures to be even higher in 2019.