Raising a child comes with many responsibilities and a considerable cost. The latest report from the US Department of Agriculture states that the average price of raising only one child in American society, from birth to seventeen years of age, has been estimated to be nearly $233,610. However, when considering the impacts of inflation, this figure may easily exceed the $260,000 mark to raise a child born today.
Although you have heard that buying a house is one of the most significant expenses an average household makes, raising a couple of children is far more critical than most Americans. For instance, if you add the expense of raising two or more kids and their educational costs, there are countries where you can buy two homes for that amount.
However, like preparing to buy a house, it might be a good idea to get your financial situation well-maintained before you bring an infant into this world. You need to improve your money matters and do necessary bookkeeping when you already have kids and face financial hurdles. Here are five money milestones you should strive to cross before having children.
Ensure Career Stability
Establishing a solid and secure work situation is crucial before having children. While it can imply entrepreneurship, freelancing, traditional employment, or some blend thereof, you must have a firm foundation that supports your growing family and helps you achieve your financial goals.
Thus, work on a career path to continue after your kids are born. This money milestone of career stability should come with a salary covering the childcare expenses that typically amount to nearly 16% of the cost of a child’s upbringing.
You must consider more than just salary. For instance, a career that affords you advantages like healthcare and dental care, maternity or paternity leave, and a decent person or illness leave policy so that you may take a day off easily to care for your ill child instead of being out of a payday.
Have Adequate Disposable Income
Indeed, $233,610 sounds a lot to just about anyone. But it makes excellent sense when broken down to $1,082 monthly. Calculate the estimated annual expenses of raising a child and consider that when preparing your budget so that when the costs come rolling in, you are ready. The following money milestone helps you adjust your earnings and other variables affecting your situation. This will also give you the disposable income required to raise your children. In addition, it ensures you have sufficient savings to compensate for estimated variable costs.
Pay Off Your Debt as Soon as Possible
Debt can be a substantial financial burden in your life. If you fail to control it, eventually, it prevents you in many ways. Therefore, getting rid of debt should be the crucial money milestone you strive to hit before having children. Aim to pay off the debts first on credit cards and others with a high interest rate. It is an excellent idea to do a part-time job to earn more income and eradicate your debt. It will improve not only your financial situation but also your credit score.
Make an Emergency Fund Available
Indeed, life is full of many uncertain events, including an unexpected loss of employment, a chronic health issue with one of your family members, or some other financial or natural disaster. These can miserably affect your living when you are unprepared for such events. That is why financial experts suggest having an emergency fund amounting to about three to six months of your living expenses, which you should also hit as your money milestone before having kids. Such a fund will protect and help you and your family in many ways during life’s inevitable messes.
Make Saving a Habit
One of the famous quotes by Warren Buffet says, “Don’t save what is left after spending, but spend what is left after saving.” Your fifth money milestone should be making saving money a habit before having children. Start immediately, keeping a sufficient portion of your income so it does not affect your life. Aim to live within your means, considering your financial goals.
Contribute Towards Your Retirement
The cost of raising your children will increase as they grow. Therefore, your next money milestone should be to save for retirement to make your future secure and independent before having kids. Once you have children, you will have a more challenging time contributing towards your retirement fund, as other expenses will inevitably appear.
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