In spring many children look forward to the end of a long year at school or university. And while formal studies may soon start winding down, it’s a great time to focus on developing money smarts in your kids.
Because these days, without financial skills children may tend to rely on their parents’ ongoing financial support for longer. And the cost of raising children in Australia is continually increasing.
In fact, the latest research conducted by the National Centre for Social and Economic Modelling (NATSEM) reveals it now costs a middle-income family more than $400,000 to raise a child from birth to age 24.
So, according to the AMP.NATSEM report Cost of Kids: The Cost of Raising Children in Australia[ 1], if you have two children, you could spend as much as $812,000 by the time they leave home—that’s an increase of more than 50% since 2007 when it cost $537,000.
Helping kids help themselves
Children are living at home for longer and housing prices continue to soar. So it’s more important than ever to help give children the tools to manage their own finances.
Helping kids set and reach goals for first-time financial experiences—like buying their first car, moving out of home, getting a job or meeting their first big bill—can make a big difference to their financial habits.
The cost to families
A 24-year-old is five times more expensive than a four-year-old child and the proportion of income devoted to raising children is steadily increasing. This impacts families and parents in many ways. Like getting the balance right between raising children and working towards their own needs in retirement.
In order to meet the financial needs of raising children, 63.4 per cent of parents are working full-time.
What are we spending the money on?
A middle income family spends an average of $458 per week to raise a child—starting at $133 per week for children aged up to four years and escalating to $678 per week for children aged 18-24.
More than half a middle-income family’s household budget is spent on meeting basic expenses for kids up to 24 years:
-
Food – 18%
-
Transport – 20%
-
Clothing – 7%
-
Recreation – 12%.
Another significant cost for families is their children’s education. Private school fees cost an average of $216 per week compared to public schools which cost around $12. And independent Catholic schools cost about $81 each week.
Read the latest AMP.NATSEM income and wealth report [ 2] at amp.com.au to see how different families are meeting the costs of raising children. And remember, when it comes to equipping kids with financial smarts, parents can be powerful role models.
[1] Phillips B, Li, J, Taylor, M (2013), Cost of Kids: The Cost of Raising Children in Australia. AMP.NATSEM Income and Wealth Report, Issue 33, May 2013, Sydney, AMP
[2] Since 2001 AMP and NATSEM have produced a series of reports showing the way Australians live and work, and what our financial and personal aspirations look like.
What you need to know
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
