For moms and dads, or those of you considering becoming a mom or dad, have you ever wondered just how much it costs to raise a child today?
A study released recently by the USDA, showed that raising a child is 22% more costly than it was in 1960. Adjusted for 2009 dollars, middle-income parents in 1960 spent a total of $182,857 to raise one child through the age of 17. Today, parents spend $222,360. The bulk of those costs are, not surprisingly, for health care and education.
(The suggested MSRP for a 2010 Bentley Continental Flying Spur Speed Sedan is $202,500.)
As a financial advisor, these figures shouldn’t sound too off the mark. Everyone knows the costs of raising a child are increasing each year, particularly for education. However, most parents spend so much money on the day to day expenses of raising their children, they fall short of being able to afford to pay for college, let alone fund their retirement sufficiently.
What are you doing to help your clients prepare for the financial reality of paying for their children’s expenses until they’re on their own? Effectively managing finances over the course of a child’s early lifetime can significantly impact how much money your clients will end up with in their retirement fund.
How can you help?
- Consider creating a marketing campaign surrounding the USDA’s new study to make your clients aware of the expenses of raising a child. Create a mini campaign for clients who are expecting their first child (or those becoming grandparents) and distribute it a few months before the child arrives to prepare them for what lies ahead. Once they have the baby, they will be too preoccupied with everything that comes with being a new parent to focus on their finances.
- Create a list of popular websites that you can share with your clients that offer good information and advice about health care costs (www.insurekidsnow.gov) and education expenses (www.collegeboard.com ).
- Devise a strategy to help your clients decide where they should put their money and when – is it better to pay off the mortgage, save for college, or fund a retirement account. If there are limited finances, which should be done first? Develop different scenarios with real life examples to share with clients.
- Host a seminar in your office to help clients understand their options. Consider holding it in conjunction with a local university financial aid officer or an estate attorney from your professional advocate network for maximum impact.
The better prepared your clients are for paying for their child rearing expenses, the better prepared they will be to enjoy the lifestyle they dream of having in their retirement. As their trusted financial advisor, you can help them prepare more effectively.
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