I was really blown away when I read the latest report from the The United States Department of Agriculture (USDA) on expenditures on children by families. The report provides estimates of the cost of raising children today. According to the analysis, overall for the United States in 2007, it is estimated that annual expenditures by husband-wife families (with a before-tax HH income average of $61,000) on a child from the time they are born until they reach 17 years old is due to total approx. $204,060. The expenditures covered in this study include housing, food, transportation, childcare, health, clothing, education, plus misc. expenses. I personally believe this cost estimate to be conservative. Plus, when you factor in paying for a college education you can conceivably end up paying half a million dollars or more raising a child!
After letting the report sink in a bit, Hip Slope Mama decided to talk to a financial expert who could help give advice and some real perspective about the cost of raising kids. Who better to come to the rescue then Galia Gichon, founder of Down-to-Earth Finance, an independent resource dedicated to demystifying personal finance, for individuals—particularly women—who have found money matters baffling and intimidating. Also the creator of the My Money Matters Kit, Galia will answer questions and provide six tips to help our HSM readers restore financial sanity while they raise their kid(s) from tot to teen.
HSM: Many parents underestimate the cost of raising children. What are some of the not so obvious costs that new parents should be aware of?
Galia Gichon: Parents definitely underestimate the cost of good reliable experienced childcare (whether a nanny or daycare), formula, diapers and lotions (I.e. A&D etc.). Also, I have found that many parents, even ones who were good about sticking to their budgets, restraint flew out the window when it came to buying items for their children, especially toys, books and clothing (myself included!).
HSM: There are website calculators on how to figure out what a working mom's salary is "really" worth after the deductions for marriage tax penalties, lost pay, work-related and child care expenses, extra dinners out, business wardrobe, etc. What would you consider the most optimal situations that would sway a working mom to consider staying at home?
Galia Gichon: It's hard to quantify that number. Clearly if you go through the actual numbers, including lack of retirement benefits, you have to earn more money than you would have thought. I am not making an opinion for stay at home versus working but I have worked with a few women that found it very difficult to re-enter the workforce after being out for as little as two years. How do you quantify that number? If you are thinking about ever re-entering the workforce and are a stay at home mom, I would suggest doing a consulting project now and then and keep up your networking as well. I actually wrote an article on the Huffington Post about women and compensation. One of the points deals with a few things women can do when choosing to stay at home: Huffington Post Article.
HSM: Does saving for your kids college trump saving for retirement?
Galia Gichon: No! I actually feel it is the other way. You can not borrow money or take a student loan at retirement however your children can borrow money for college. With that being said, it doesn't have to be all or nothing. You can save the majority towards your retirement but allocate a little towards a college savings account.
HSM: Do you have any key financial tips to save money for infants and young children?
Galia Gichon: If you are thinking of having kids, setup a separate savings account just for the possibility of staying at home or increased expenses. If it is separate from your other savings, it will have more meaning. Also, make your savings automatic to an online savings account (i.e. ING DIRECT)– you will end up saving more – I see it over and over.
HSM: When are kids old enough to start learning the value of money? How can we as parents start teaching kids about money?
Galia Gichon: I see nothing wrong with teaching children about priority of expenses and sharing your money thoughts as early as possible. You don't have to tell them your monthly mortgage payment but you can share the budget for the grocery store shopping excursion. I have a 4 year old and when it was time to plan for her birthday party, I offered her a big birthday party or a big present, but not 2 big things. She would still get a party and present regardless but only one was going to big. There was lots of explaining to do but she did pick one. Does she really understand it? I'm not sure, but she has somewhat learned a lesson in prioritizing your expenses. Also, when we go to the store, I do not buy everything she wants. Even if it only costs $2, that is a very important lesson. I think teaching them the value of saving money is a tremendous lesson.
HSM: Do you have any tips to help spouses get on the same page about financial goal setting?
Galia Gichon: Spouses and money! My main tip is to have a money date regularly. Go out to dinner or have a glass of wine and discuss fun future goals. Don't try and solve your money problems that night but start talking about where you want to go and your different styles. The point is to start talking about money on a regular basis (once a week is ideal) and not put off the conversation. Another tip is to exchange money duties. If one spouse always pays the bills, trade for a month. If one spouse always deals with the investments, again trade for a month. Walk in the other person's shoes.
Galia has made featured appearances and/or contributed to multiple publications, as well as TV and radio shows, some of which include: The New York Times, MSN Money.com, Working Today, Real Simple Magazine and Bloomberg Radio. Her My Money Matters Kit was featured in Newsweek in March 2008.
Galia offers teleclasses and live teleconferences at Down-to-Earth Finance Events. You can purchase a teleclass or teleconference from anywhere in the world! Seminar topics range from Find More Money Just By Getting Organized to 4 Weeks to Financial Sanity.
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