Published March 18, 2008
Now that you’re parents, another human being will be dependent on you for all of his or her needs for at least the next eighteen years.
Hugs and kisses are free, but other things such as food, clothing, housing, medical care, and education cost money-lots of it. To raise one child from birth to age eighteen will cost an average of nearly $100,000. That figure covers just the basic necessities through high school, but many parents today want more for their children.
At age five, when most children begin school, the costs of child rearing begin to escalate. About forty percent of the total expense of raising a child occurs between the ages of twelve and seventeen, which is good news for early planners who will benefit by beginning a savings program when their children are preschoolers.
Now is the time to arm yourself with information about how to prepare for your family’s future and to begin the steps to turn your plans into reality.
Begin by determining your financial condition. Before you can plan intelligently for your child’s future, it’s necessary to have a firm grasp of your present financial situation. It’s impossible to plan for the future if you don’t know what’s going on now.
Figuring out your net worth can be a very revealing exercise. Draw a line down the center of a piece of paper. Label assets on the left side and list them; include cash in checking and savings accounts, equity in owner-occupied real estate, bonds, stocks, cars and investment real estate.
Under liabilities on the right side, list mortgages outstanding, installment loans for cars, appliances or furniture, revolving credit card balances for department stores, and professional services such as medical and dental. Include past due accounts and charity donations.
Then add up each column. If you subtract your liabilities from your assets, you’ll have your net worth. Don’t worry if your figures aren’t precise, just the fact that you’re sitting down with pen, paper, and calculator makes it all the more likely that you’ll take firm action when planning your child’s financial future.
Making a simple monthly budget to determine how you are spending your income can be another eye-opener. By listing your income and your spending, you can highlight the areas where changes can be made. For example, you may be surprised to find out how much you spend on long distance phone calls or how often you eat out. Seeing those figures in black and white may spur you to reduce your expenditures, and channel the money to your savings account instead.