The expense of raising a child until they turn 18 amounts to $297,674, as reported by LendingTree [1]. Nonetheless, certain parents with young children are saving funds to assist them for an extended period beyond that.
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Leza and Anthony Dieli were featured in an interview with The Wall Street Journal, highlighting them as a young couple committed to supporting their 7-year-old daughter throughout her life [2]. As reported, young parents who anticipate that their children will require significant assistance during college and beyond are saving money accordingly.
Kyla Holcombe and her spouse have allocated several thousand dollars in investment accounts for each of their three children. Her reasoning is: “How can I support them while I’m still here, when they are younger and need it more?”
“I believe you must either be at ease with your children facing challenges or you should allocate some funds now,” said Robert Persichitte, a financial advisor from Denver, to the Journal.
What is driving this trend, and should every new parent allocate additional savings in their budget to support their children’s future? Here’s our suggestion.
The increasing expense of daily life
As part of their investigation into these emerging savings habits among young families, the Journal noted that although Americans are earning 18% more than they did in 1980 (after accounting for inflation), the cost of living has increased significantly beyond this amount. Housing costs have risen by over 400% during this period, while medical care expenses have jumped an astonishing 700%. Even more concerning, tuition and child care costs have increased by more than ten times since the 1980s. The basic annual expense of raising a young child has also risen sharply in recent years, with LendingTree reporting it now stands at $29,419, which is 35.7% higher than in 2023.
Because of these factors and others, parents of young children are working to stay ahead of the expenses their children will encounter when they become adults.
The Dielis are setting aside approximately $1,000 each month for their daughter’s future use as an adult, distinct from the funds they are saving for her higher education. They acknowledge that they are maintaining low living expenses to save more efficiently.
The foresight of these parents mirrors the growing trend of older generations supporting their adult children financially. A survey conducted by Savings.com [3] reveals that half of parents with adult children offer consistent financial help to their grown children, with an average monthly support of $1,474.
Parents are more lenient these days and more inclined to offer support, but I also believe the demand is higher,” said Patrick Huey, owner of Victory Independent Planning, in his conversation with the Journal. “I think parents recognize this and say, ‘I have the means to assist.’
A study by Savings.com reveals that working parents still contribute more than twice the amount to their adult children each month compared to what they save for their own retirement. As parents who are currently working or approaching retirement continue to support their adult children financially, the actions of the Dielis could represent the future of parenting.
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Preparing for your children’s future
Given the high expenses associated with raising a child today, many families might find it challenging to save for retirement or contribute to a 529 plan, let alone set aside funds for living costs after their children finish college. A family consisting of three people (a man, a woman, and a child aged 4 to 5) would spend almost $1,000 per month on groceries with a moderate-cost food plan, as reported by the U.S. Department of Agriculture.
Ensure you are utilizing the child tax credit and any other tax benefits provided by the government for parents.
The new Trump accounts, introduced through the comprehensive reforms of the One Big Beautiful Bill, provide parents with a chance to save for their children. In a situation with typical returns from the U.S. stock market, by the time the child turns 28, the account could hold a total of $1,091,900 if parents contribute the maximum amount. Even accounts that start with just the initial $1,000 government deposit would reach $18,100 by age 28 without any additional contributions.
In conclusion, Dependent Care FSAs are a tax-advantaged account that can be used to cover expenses such as preschool, summer day camps, before- or after-school activities, and daycare for children or adults with special needs. It’s important for parents to check their eligibility in order to reduce expenses.
For parents seeking additional flexibility in their budget for saving money, specialists suggest minimizing the food expenses by organizing meals and reviewing advertisements. You might also consider reducing or choosing more affordable family trips, purchasing used baby items, toys, and clothes, and finding methods to lower your entertainment costs to redirect more funds into savings.
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[1]. LendingTree”Raising a child for 18 years incurs an extra cost of $297,674, representing a 25.3% increase,” [2].The Wall Street Journal. “She is 7 years old. Her parents are saving to support her when she turns 30.” [3].Savings.comProportion of parents providing financial support to adult children hits a three-year peak
This piece offers information solely and should not be interpreted as guidance. It is offered without any form of guarantee.
