👪Nurturing the Future: The Financial Realities of Raising a Child in the United States👪
How to set up your child for financial success
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Life Update on Kids
My closest friends have begun to start on their families within my circle recently. It’s been interesting to see the dynamic change as they go from irresponsible buddies to slightly less irresponsible parents. I’m happy as they take the first big step of the rest of their lives.
This issue is all about the costs of raising a family in the U.S. Let’s dive in.
The Costs of Raising a Family
There are plenty of known costs with raising a family. From childcare to groceries, let’s look at the average costs of adding a plus one to your daily life.
Housing Costs:
One of the most significant expenses for families is housing. According to the U.S. Bureau of Labor Statistics (BLS), housing represents the largest expenditure for families, accounting for about one-third of their total spending. Rising home prices and rental rates contribute to this substantial financial burden for families.
Childcare Expenses
Childcare is another major cost that families face, especially for working parents. The cost of daycare or hiring a nanny can be overwhelming. The Economic Policy Institute (EPI) reports that childcare costs have risen significantly in recent years, surpassing inflation rates.
Education Costs:
As children grow, education becomes a substantial expense. From school supplies to college tuition, parents face a continuous stream of educational costs. The College Board reports that the average cost of tuition and fees for the 2021-2022 academic year ranged from $10,560 for in-state public colleges to $37,650 for private colleges.
Healthcare Expenses:
Healthcare is a crucial aspect of family life, and the costs associated with medical care can be significant. The Kaiser Family Foundation states that the average annual premium for employer-sponsored health insurance in 2021 was $7,471 for single coverage and $21,342 for family coverage.
Food and Groceries
Feeding a family can also be a considerable expense. The USDA estimates that the cost of food for a family of four can range from $567 to $1,320 per month, depending on the thrifty to liberal food plans.
Preparing Your Child for their Financial Future
Start Early with Financial Education
Introducing financial concepts at an early age lays the foundation for a strong financial future. According to a study by the University of Cambridge, children form money habits by the age of seven. Engage your child in age-appropriate discussions about money, savings, and basic economic principles.
Teach Budgeting and Saving
Instill the importance of budgeting and saving in your child's mindset. The Jump$tart Coalition reports that only 17 U.S. states require high school students to take a personal finance course. Be proactive in teaching your child about budgeting, setting financial goals, and the power of compounding through savings.
Introduce Smart Spending Habits
Help your child understand the value of money and make thoughtful spending decisions. The National Endowment for Financial Education (NEFE) suggests involving your child in everyday financial activities, like grocery shopping or comparing prices, to develop critical thinking about spending.
Encourage Entrepreneurial Thinking
Fostering an entrepreneurial mindset can empower your child to think creatively and seize opportunities. The Global Entrepreneurship Monitor (GEM) highlights the positive impact of entrepreneurship education on developing key skills such as problem-solving and risk-taking.
Investing Basics
Introduce the concept of investing and the potential for wealth accumulation over time. The Securities and Exchange Commission (SEC) provides resources for teaching kids about investing, emphasizing the importance of understanding risk and making informed investment choices.
Lead by Example
Children learn by observing. Set a positive financial example by demonstrating responsible money management, budgeting, and saving practices. The Journal of Economic Psychology suggests that parental financial behaviors significantly influence a child's financial attitudes and behaviors.
The 2024 Child Tax Credit
Legislators are looking to bolster our current tax credit at the time of this writing. It’s no surprise that it’s difficult to raise a child within the United States compared to other countries. The Tax Relief for American Families and Workers Act of 2024 seeks to boost the tax credit for low-income families who are hit the hardest.
The "Tax Relief for American Families and Workers Act of 2024" would increase the child tax credit and restore the full value of declining business tax deductions for investments in research and development and plant and equipment. - Reuters
At a time when global populations are declining, this is a small incentive to raise the population of the country. If we’re looking to raise the confidence of the population when having a child, I believe we should create more opportunities where raising a child doesn’t mean going into debt.
Have a great week,
Jordan