How to Afford the High Cost of Raising Children

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Bills.com reminds parents-to-be what to plan before starting a family.

This August, as the nation's 48 million school-age children go back to school, the spotlight is on families -- and Brad Stroh, co-founder and co-CEO of free online consumer portal Bills.com, offers tips for families budgeting to start a family of their own.

"Many couples put off having children until they believe they are financially stable enough," Stroh said. "Others say, 'when babies come, the money somehow follows.' But as with anything that affects finances, first consider your goals and values when planning to start a family. Outline your expectations and then assign costs to them (by year and by month). The elements of budgeting for children are within parents' control."

The U.S. Department of Agriculture compiles estimates of the cost to raise a child from birth to age 18, ranging from $134,370 to $284,460 per child.1 But these figures include the cost of a home, which a family might own even if they have no children, as well as other factors averaged from all U.S. consumption.

Here, Stroh's tips for families to consider:

1. Startup beyond the nursery: Many expectant parents budget for outfitting a nursery, but don't consider other expenses. Be sure to include the cost of hospital payments, diapers, child care, and income lost during parental leave in the financial planning for baby's first year.

2. Child care: Will a parent stay home temporarily or permanently? How will this affect income, as well as plans for projects like buying or renovating a home? Will the child attend a day care, an in-home care center or have a private nanny? Costs and benefits vary for each of these choices.

3. Medical coverage: Children require regular medical checkups and vaccinations. Look into health insurance coverage for these needs and for emergencies. If the parents do not have coverage, many states offer plans that cover children. Medicaid may be available if income does not allow for payment, but would-be parents who cannot afford medical coverage may be wise to wait until they are more financially prepared.

4. Education and activities: Public, private or parochial school? All have different philosophies and different price tags. Even with fees for activities and supplies, public school remains much less expensive than private education. If dollars are tight, think twice before spending your child's college fund on elementary education. Also consider the cost of lessons, sports and summer camps. Plan these into your annual budget and set aside funds every month.

5. Nutrition: Cooking at home is far less expensive than dining out. Most couples transfer their pre-baby dining-out dollars to other budget areas.

6. Travel: Vacations with a family mean additional airfare, snacks and admission costs for entertainment venues. On the other hand, many people find they travel less frequently with children, so total travel costs may balance.

7. Income constraints: Without children, people often can opt to work more hours or take an extra job if they need extra income. With a family, those options become more difficult, because they either limit time with the family or demand added child care in return. Put a manageable budget in place before starting a family, if at all possible.

"Remember, children need food, shelter, clothing and education. They don't need gourmet cuisine, a mansion or designer clothes," Stroh said. "A bit of planning will help you provide for your family, whatever size it becomes."

Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at http://www.bills.com/blog. Since 2002, Bills.com and its partner company, Freedom Financial Network, have served more than 15,000 customers nationwide while managing more than $350 million in consumer debt. The company's co-founders and CEOs, Andrew Housser and Brad Stroh, were named Northern California finalists in Ernst & Young's 2006 Entrepreneur of the Year Awards.

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Aimee Bennett
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