Once you have a child, financial planning for the future becomes even more essential. How will you finance child care, medical bills, food, education, clothing, toys, and education savings? What will you need to spend money on, and how much will each item cost? Here is some of the information you will need.
Table of Contents
- What Will It Cost You
- Birth Through Infancy
- Ages One Through Six
- Ages Six Through Twelve
- Ages Thirteen Through Eighteen
- Teaching Your Kids How to Handle Money
- Savings and Investment
- Taxes and Credit
This Financial Guide provides guidelines on handling the expenses a child brings. Specific costs vary according to family size, household income, and geographic location. The estimates in this guide are intended as a starting point for financial planning, and expenses may increase over time due to inflation.
Knowing what to expect will help you plan for the future and improve your chances of meeting your financial goals. This is also an ideal time to review and update your financial plan, if necessary.
Related Guide: Please see our Financial Guide: Your Financial Plan — Getting Started on a Secure Future.
What Will It Cost You
Here is a breakdown of the items you may need and their estimated costs, organized according to your child’s age.
These estimates are for a first child. Second or third children may cost less because many essential items will already have been purchased. Families with three or more children may spend less per child, while multiple births generally result in higher expenses than a single birth.
Government estimates published in 2015 indicated that a middle-income family in the United States could spend approximately $233,610 raising a child to age 17. This estimate excluded expenses beyond age 17, including college costs. Actual expenses vary depending on family income, location, and individual circumstances.
Planning Aid: Use a college savings calculator to estimate how much you could accumulate by the time your child enters college if you begin saving early.
Related Guide: Your Child’s College Education — How to Finance It.
Birth Through Infancy
Here are some of the expenses you can expect before birth and during your child’s first year.
For a second or third child, you may spend considerably less on furniture, clothing, and toys. However, health care, child care, and food expenses will continue.
Hospital Costs
According to estimates cited in the original guide, an uncomplicated hospital delivery in the United States in 2018 cost an average of $12,290 for a vaginal birth and $16,907 for a cesarean section. Actual costs depend on health insurance coverage and whether complications arise.
Baby Supplies and Equipment
Before bringing a baby home, you may need to purchase a crib, changing table, stroller, infant car seat, high chair, bedding, towels, blankets, and baby clothing. The costs depend on the brands and products you choose.
Feeding and Diapers
Feeding expenses may include breastfeeding supplies, a breast pump, infant formula, bottles, and eventually solid foods. You should also budget for diapers, whether you choose cloth or disposable options.
Child Care
Child care expenses vary widely depending on your location and the type of care you choose. Daycare centers, nannies, and other arrangements have different costs, so compare available options when planning your budget.
Health Care
During the first year, your baby will need routine check-ups and may require medical attention for common illnesses. Your out-of-pocket costs will depend on your health insurance and the care required.
Toys and Clothes
Clothing and toys are additional expenses to consider during the first year, alongside the essential items purchased before the baby’s arrival.
Total for the First Year
The original guide estimated first-year expenses at approximately $15,000–$18,000 in the United States. Actual costs will vary significantly depending on health care, child care, and family circumstances.
Ages One Through Six
During these years, expenses may include food, clothing, toys, child care, preschool, and health care. The amount you spend will depend on your child’s needs, your location, and the services you choose.
As you prepare your budget, remember to account for changing needs as your child grows and begins school.
Ages Six Through Twelve
During this stage, some child care expenses may decrease, allowing families to redirect money toward savings or other priorities. However, spending on clothing, food, entertainment, extracurricular activities, and education may increase.
Consider budgeting for music and dance lessons, sports, private schooling, summer camps, and other activities that support your child’s development.
Ages Thirteen Through Eighteen
During adolescence, food, clothing, and entertainment expenses may increase as your child grows and develops new interests.
Other potential expenses include driving lessons, vehicle insurance, purchasing a car, celebrations, orthodontic treatment, examination preparation, sports, music lessons, and college application fees.
Planning for these costs early can help reduce financial pressure as your child approaches adulthood.
Teaching Your Kids How to Handle Money
One of the best times to begin teaching financial skills is when children are young. An allowance can help school-age children understand budgeting, saving, and spending.
Parents may choose to connect an allowance to household chores or provide additional rewards for completing specific tasks. The approach depends on each family’s values and parenting style.
Encourage children to manage their money, set savings goals, and understand the consequences of their spending decisions. Allowing them to make age-appropriate choices can help them develop financial responsibility.
Savings and Investment
Beyond budgeting, children can learn the importance of saving and investing. A savings account can provide a practical introduction to setting financial goals and building a saving habit.
Parents can also encourage saving through matching contributions. For example, you might add a contribution for every amount your child saves.
Investment options for minors, including custodial accounts, depend on the laws and financial products available in the relevant jurisdiction. Seek professional advice before choosing an investment arrangement.
IRAs for Kids
In the United States, children with qualifying earned income may be eligible to contribute to an Individual Retirement Account (IRA), subject to applicable rules and contribution limits. Tax treatment, eligibility, and withdrawal restrictions should be reviewed before making contributions.
Related Guide: Higher Education Costs — How to Get the Best Tax Treatment.
Taxes and Credit
As children grow older, parents can introduce them to basic financial concepts, including banking, responsible credit use, borrowing, repayment, and taxes.
Age-appropriate discussions and practical examples can help children understand how financial decisions affect their future. If a child is required to file a tax return, involving them in the process can also provide a useful learning opportunity.
Teaching children how to manage money can help them develop responsible financial habits that support them throughout adulthood.
Note: The financial figures and tax references in this guide are drawn from historical United States sources and should not be treated as current estimates or Kenyan financial or tax advice. Consult a qualified professional for guidance relevant to your circumstances.
