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Author: Internal Customer Services Agent

The cost of raising children to age 21

I can remember many years ago watching a program on TV where a young child, who wanted a brother or sister, had been told that children were expensive. In her innocent way the child had mis-understood this to be the cost of acquiring the baby and had asked how much they had cost. Of course, as adults we know that the cost of acquisition of a child is, in most cases free. It is the cost of raising them that is the expensive part.

According to the insurer LV the average cost of raising a child to the age of 21 is now £231,843. That is an average of £11,040 per year. Clearly some parts of the Childs life are more expensive than others. The study has shown that the most expensive years are between the ages of one and four when some £63,224 on average will be spent. LV go on to say that households spend around 38% of their combined net incomes raising a child.

So where does over ¼ of a million pound go?

The good news, speaking as a parent, is that the most expensive element of the cost is education. At least we can rest knowing that at least this part has gone to a good cause. The problem with this is that, in the main, amounts tend to go out in smaller amounts so the cumulative cost does not register. We may spend £2.00 per day on school dinners, but over a term that amounts to between £100 and £150. Then there are the school trips. In the early years the costs are lower (normally around £10 for trips to local museums or the zoo), but as the child grows, a few hundred at a time can be spent on a trip abroad, maybe to go skiing or visit a sports or activity centre. For those with savings or spare income each month, these costs can be added into the budget, however some less affluent families will need to take out loans to cover such trips. Then there are the endless items of school uniform and other kit. It may only be £10 here or £15 there, but this, along with possibly university at the age of 18, all adds up to an outstanding £74,000. No wonder more and more parents welcome shops like Asda who continually drive down the cost of school clothes.   

The second biggest item is childcare and babysitting costs. Unfortunately for many families where both parents work, a large part of one parents wage can be consumed by these. There is the age old debate that in some cases it would be cheaper to have one parent stay not work, save the childcare costs and top up using benefits. This is not a debate I am going to have here, this can be saved for another article. Needless to say that if both parents want to work, and of course use babysitters when they want to go out together, the cost over that 21 years can spiral to over £70,000.

So what about the rest, well, roughly £20,000 to feed them, £10,000 to clothe them, plus holidays, recreation and pocket money…and of course there are 21 Christmas’, 21 birthdays to spoil them on.

So far we have only discussed having 1 child, of course while having multiple offspring will take advantages of ‘economies of scale’, such as hand me downs in terms of clothes and toys, or a babysitter not charging more to look after multiple children for an evening out, many of the costs will need to be multiplied by the number of children.  

Understanding the ‘actual’ annual cost of a child is also very important when considering what income protection we need in order to cover sudden income shocks, such as being unable to work due to sickness, or worse losing our jobs. Many people will take out some form of income protection to cover say a mortgage payment of £500 per month, but what about that average of £920 per month that our children burn through? Is this protected?

Now clearly these figures are averages and not every family will spend this much. According to the LV, the area with the lowest average is Yorkshire and the Humber at £214,559 with, not surprisingly, London at the top on £253,638. Equally, some families within each region will be more frugal with money, and therefore spend considerably less than others.

In an article in the Daily Mail, Nick Hill, Money Expert at the Money Advice Service, throws out a word of warning to would be parents when he says “'Having children is a hugely exciting time but it can also be very expensive, as these figures show.” 

He goes on to give some sound advice when he says “The cost of childcare can eat up a large chunk of the family budget, which is why planning is essential. Pulling together a budget is a great way to get a quick idea of how much spending money you have after you've paid your most important bills.”

From a personal point of view, having got 2 children, I can agree with Nick’s comments. Many people have children and only then do the sums to see if they can afford them. This can led to problems when there is a gaping hole in your finances, what is more, in like finding this after buying an expensive car and finding the ongoing costs too great, you cannot return them or trade down.  An approach I took, and would recommend to anyone considering starting a family, would be to work out your budget, including any benefits you may be entitled to after the birth of the child to make sure that it is still manageable.

I hope that this article has not only provided some interesting facts about how expensive bringing up children can be, but also emphasises the importance of taking this expense seriously in terms of budget and planning.

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