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The cost of raising a child

Online since 4.10.2017 • Filed under Feature • From Issue Fifteen - October to December 2017 page(s) 29-30
The cost of raising a child

Raising a child is not cheap or easy and you need a solid financial plan in place to ensure that you can give your child the best life possible and prepare them well for adulthood. Sydney Sekese, CFP®, 2016 Financial Planning Institute’s Media Award winner, explains how to adequately plan for the costs involved with raising a child.

What is the estimated cost of raising a child from birth to university?

Raising a child could be likened to a second housing bond. This is because raising a child is a long- termcommitment that could last 23 years or more; including starting that first job. So, if you already have a housing bond, the child could be considered a ‘second bond’! On a serious note, research indicates that it costs around R90 000 a year to raise a childOn a straight line projection (no inflation or growth) that’s over R20 700 000 by the time the child reaches 23 years old.

What monthly costs do you need to factor in?

The monthly costs to be factored in depends on the lifestyle, household income, money management and attitude of the parent. The main costs involved are education, clothing and past-time activities such as ballet classes, playgroups and soccer clubs. For those parents who can afford it, the entertainment expenses of various gadgets and toys also need to be factored into your costs.

What will be your biggest monthly/annual expenses for your child? The expense of raising children is directly linked to their life-stages – they change as children age. In the first 18 months, there’s a big spike in expenses and after two years it flattens out, increasing slightly every year. There is then a further escalation of expenses

that rise exponentially during early teenage years and leading into young adulthood. The job-hunting stage cannot be ignored based on the prevailing unemployment environment especially among the youth. As a parent, you will be obliged to continue supporting that young adult.

Does it become cheaper (economies of scale) with each successive child?

This again depends on the lifestyle, family dynamics and preference. If a family agrees that the second child will use the firstborn’s clothing, then that could be a cheaper way of raising children. This scenario depends on the successive gender, too. Food and‘nappies’ inflation (and all the lifestyle and survival requirements) could be the greatest challenge of raising children in succession. The great experience of raising children will be so much more worthwhile if they are backed by a lifestyle that a parent can comfortably afford.

How do you raise a child on a budget?

Most parents are ignorant of the various expenses of raising children. Having a plan in a form of a budget is a great way of managing expenses to ensure that parents are living within their means. A practical way of monitoring this budget is to create envelopes for each of the major expenses and stash receipts for review at the end of each month. If, for example, the food envelope tends to bulge each month, it means the parent is over-spending on food. A savvy strategy can be implemented. The suggested strategy could involve freezing left overs, for example. An extra chicken drumstick can come in handy as lunch. If a parent can prevent or even reduce food wastage it will help them lower their living costs.

How much should you save for your child’s tertiary education?

Research indicates that education inflation increases annually by 8% to 9%, which is about 3% higher than consumer price inflation (CPI). So the savings/investment product selected should aim to outperform inflation by more than 3% over a medium to long term. It is estimated that three years of university education currently costs R300 000 to R350 000 for tuition, books, room and board, and other expenses such as a computer, cell phone and internet access. This could be projected to cost R1 million by the time a six year old attends university.

This equates to roughly R3 000 per month investment assuming 6% return and assuming the child is currently six years old. Individual circumstance and affordability differ from one parent to the next. It is therefore prudent to consult a CERTIFIED FINANCIAL PLANNER®/CFP® professional to customise all the requirements.

To find a CERTIFIED FINANCIAL PLANNER® professional in your area and for more tips on financial planning, visit or call 086 1000 FPI (374). You can also join the Institute’s online community on Facebook (Financial Planning Institute of Southern Africa) and on Twitter (@FPI_SANews).

Issue Fifteen - October to December 2017

Issue Fifteen - October to December 2017

This article was featured on page 29-30 of Babys and Beyond Issue Fifteen - October to December 2017 .

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Meg Faure
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