By Parenting Today | Presented by JP Morgan Chase

Photo: nd3000 via 123RF

Starting a family is a big step that can bring a whole new level of joy! You’ll also want to prepare for it financially, as raising children can be expensive.

So, how much does it cost to raise children, and how can you prepare and save money to expand your family?

How Much Does It Cost to Raise a Child?

The most recent data from the USDA’s report “Expenditures on Children by Families” is from 2015, published in 2017. It estimates that the expense to raise a child from birth through age 17 is $233,610 “for a middle-income (before-tax income between $59,200 and $107,400), married-couple family with two children.”

According to the U.S. Bureau of Labor Statistics CPI inflation calculator, $233,610 in 2015 dollars equates to $312,202.37 in March 2024. That’s approximately $17,000 per year per child, adjusted for inflation.

Some people limit their number of children or decide not to have any due to this kind of expense.

In a 2023 NerdWallet survey of 2,000 U.S. adults, only 25% of parents of minor children planned to have more, and only 27% of non-parents under age 60 planned to have any kids. For many, the reason was childcare costs and the overall cost of raising kids.

Tips for Financially Preparing to Start a Family and Ways to Save

Despite the costs, loving and raising children brings many priceless rewards. Here are some tips for financially preparing to start a family and ways to save.

Start an Emergency Fund

Whether you have children or not, it’s always a good idea to have an emergency fund to cover at least three months of bills if you or your partner lose your job, have an unexpected medical issue, or some other unforeseen event that adversely impacts your income.

Establishing an emergency fund before starting a family will help ease financial stress before and after your baby’s arrival.

Save Money in a High-yield Savings Account

If you want the best return on easily accessible savings funds, open a high-yield savings account, which pays higher interest rates than a regular savings account. Forbes Advisor offers a list of Top Savings Accounts for January 12, 2025.

Open a Flexible Spending Account at Your Employer

Infants require regular wellness checkups, immunizations, and other medical expenses that add up quickly. At least one parent should enroll in an employer-backed flexible spending account (FSA). FSA funds are automatically deducted from your paycheck to cover medical and childcare expenses. When you’re raising a family on a budget, an FSA helps reduce your taxable income.

Consider Potential Vehicle Upgrade Expenses

Having ample, reliable transportation is essential with kids. If your current car needs extensive repairs or isn’t big enough to accommodate your entire family, you might need to upgrade it.

If this is the case, shop around and compare prices to see what kind of car you can afford (also factor in gas prices and car insurance costs). You can visit local car dealerships in person or shop and compare vehicle makes and models online.

Add Child-Related Expenses to Your Budget

To help ensure you can handle child-rearing expenses, you’ll add diapers, bottles, formula, blankets, clothing, and shoes to your household budget. Make sure you have enough income to cover these costs. Using items family members or friends with kids no longer need, like strollers, high chairs, and clothing, is also a nice way to cut costs.

Create a Childcare Strategy

Childcare costs are a big expense for many working parents. The NerdWallet survey participants implemented some savvy cost-reducing childcare strategies to save money. They include:

  • Parents work opposite shifts to eliminate the need for childcare.
  • At least one parent works from home to care for their children.
  • Move closer to grandparents or other family members who can watch children when needed.
  • One parent works, and the other stays home to watch the children.
  • Move to a neighborhood with lower childcare costs.

Photo: altanaka via 123RF

Use Childcare Money Other Ways When Your Child Goes to School

When your child is old enough to go to school or no longer needs childcare, you can use that childcare money to cover other expenses like music or dance lessons, sports, or other activities. You can also put the money into a 529 college savings account or even save for your own retirement or pay off bills.

Plan Ahead as Much as Possible

Planning ahead as much as possible before you expand your family helps relieve financial woes. Forbes Advisor notes these considerations:

  • Find out how much parental leave your employer offers and how time off impacts your income.
  • Make sure your health insurance covers your children.
  • Create or reassess your long-term savings goals and current lifestyle. This can mean downsizing your house, moving to a community with better schools, or starting college funds with whatever you can set aside.
  • To relieve financial stress before having kids, create a debt reduction plan and pay off credit cards. Then, channel the freed-up monthly payment funds into a savings account.

Following these tips can help alleviate financial stress as you prepare to love, support, and raise your bundle of joy.

Parenting Today is presented by JP Morgan Chase