Single Mothers : Manage The Cost Of Having Kids
Friday Oct 27th, 2017
Having been a single parent, I truly understand the cost of raising kids as well as the need to properly plan. I’ve done somethings right and some wrong. But I share this information with you to help you avoid some pitfalls, and to share some of the knowledge I’ve acquired over the years.
Raising kids isn’t cheap. According to the U.S. Department of Agriculture (USDA), the cost (in today’s dollars) of raising for a baby born in 2015 through age 17 for a middle income family is about $233,610, those in higher income families can expect to spend about $372,210. And that doesn’t include college. According to the College Board, a 4-year public school will cost about $80,360 (in today’s dollars) and a private school will cost about $181,480.
In my profession I see a great deal of student loan debt. Proper planning early on could help our children avoid acquiring a mountain of student loan debt and start out their adult life in a better financial position.
As human beings and women we all have a number of relationships. We are someone’s daughter, sister, mother, cousin, and/or friend. We are also employers and employees. Each relationship has its own dynamics. Some of these relationships will be positive some may be negative.One relationship may be loving, nurturing, and empowering, whereas another may leave you with feelings of uncertainty, discomfort and wanting.
In addition, to the relationships we have with people we also forge relationships with things unhuman. One of our unhuman relationships is with our money. First and foremost we need to learn how to manage our relationship with our money. Which of course will have a direct impact on our cost of being a parent.
Here are a few ways to help manage your money and the cost of parenting:
1. Prepare For The Unexpected
Children come with a mountain of joy and a vast array of expenses. Those expenses grow and change throughout each stage of childhood. There’s preschool, daycare, clothes, dance, sport activities, Spanish lessons, and teenage car insurance just to name a few. And it all cost a lot of money.
Having 6-12 months worth of expenses on hand is a good idea when you have children and even when you don’t. You may be saying to yourself I just don’t have any money to save, but you can do it. The key is just to get started. Check next week’s Financial Friday for Ways To Save For An Emergency.
2. Buy A Home But Not Too Much House
Your home is one of the best investments you can make and a great way to establish a financial foundation for future generations (aka your kids).
Sure, there’s the upfront cost of the down payment and closing. But the benefits far outweigh the initial cost.
Think about this - a landlord can raise your rent whenever a lease expires. In today’s market you can expect that increase to be about 6% a year. But as a homeowner, you can lock in a fixed mortgage payment for as long as 30 years.
By purchasing a home, you'll have an asset that, in many cases, will appreciate in value over time. Owning a home establishes an automatic built in savings account - each month you pay your mortgage you pay down the principal balance and build savings. You also benefit from the equity you acquire as the home increases in value.
That equity and built up savings can also serve as an rainy day fund or even and investment fund later on down the line. It may even help with the cost of college.
Even with all the great benefits of homeownership you still need to beware of overspending for the roof over your head.
3. Start Saving For College ASAP
The number one factor on your side for college cost is time. Start saving soon after your child is born and if not then just start now.
There are a variety of ways to save for college and depending on what financial advisor you talk to they all have their pros and cons. There’s 529 plans, whole life insurance, coverdell education accounts just to name a few. It’s not necessarily about one being better than another, but rather finding the best solution for your situation.
4. Protect What You Have
When you're a single parent, spending on insurance may feel like another bill you can’t afford. But in reality you can’t afford not to. And your employer’s group insurance is not enough. (link to other blog article). Term life is generally inexpensive and may provide some peace of mind. Whole life (set up web page) insurance while more expensive provides you with the benefit of a better return than most savings account or CD accounts at banks. Again while it depends on who you talk to you will hear pros and cons of both. It’s usually good to have both types of insurance.
If you can’t afford a whole life policy get a term and consider converting all or part of it a little later down the road.
A whole life policy started early enough can actually assist you with paying for the cost of college once again avoiding student loan debt.
You may also want to consider what would happen if you could not work- consider disability insurance. If you are covered through your job review the policy there may not be enough coverage. If not consider getting your own policy. The protection could be vital if anything prevents you from working and earning a paycheck for an extended period of time.
5. Educate Your Kids
Teaching kids the value of money is always a good idea. The sooner the better. What we learn about money as a kid shapes how we handle our relationship with money as an adult.
And it’s never too early to start saving for retirement. Kids with income from a job or self employment (i.e babysitting, mowing lawns, or that app he/she created) can contribute up to $5,500 per year in a IRA for Kids. Watch how excited they become as they see their money grow.
Plan, Plan,Plan, and Plan Some More
Our children are our greatest investments, with the biggest potential for returns. Planning for the future is one of the greatest gifts you can give your kids.