Financial Advisor Nicole Middendorf on the cost of kids
WAYZATA, Minn. -- Nicole Middendorf looks like any other young working parent, juggling a job, two children and toys underfoot.
And, like many other parents these days, those toys are just as likely to be used as new. Hands sticky with PB and J are generally wiped on clothing that came from an ECFE sale or Craig's List.
It's common sense cost cutting that Middendorf has employed all her life, but as a financial advisor, Middendorf knew she needed to look a little deeper than that.
"I was curious to see for myself, how much am I going to spend raising these kids?" Middendorf said. So, she ran the numbers.
"If I keep pace with spending how I'm spending, it's going to be about a half million dollars."
That's $250,000 per child. And while that might sound like a lot, here's another shocker. It's right in line with a 2009 government report that breaks down the cost of raising a child from birth to age 17.
The USDA study factors in various family circumstances and comes up with a figure between $160,000 to $369,000 based on income level.
Middendorf started tracking just where the money goes.
"The thing that really surprised me was health insurance. I was aware of it, the true cost, but the amount of money, $260 a month for each child, that's a lot," said Middendorf.
So Middendorf started saving where it made sense. It means homemade food over pre-packaged as much as possible. Used clothing and toys when she finds a deal. Middendorf points to a $2 blanket her toddler plays on.
She will not scrimp, though, when it comes to safety.
"I did not want to scrimp on a crib. I did not want to scrimp on car seats, or a stroller," said Middendorf.
As a financial advisor, she also advises clients not scrimp on their savings.
"You don't want to sacrifice your own retirement."
Middendorf says there are many vehicles to save for college, such as Coverdell Accounts, and 529 plans. Students can also get loans.
Retirees don't have that option.
"You don't want to do those if you aren't maxing out your 401K at work, or making sure you have enough liquid money, because your kids would rather play for their own college than pay for you in retirement," said Middendorf.
Middendorf does recommend parents start planning for college early, because the earlier you start, the smaller the bite.
"If you started right away, $250 a month. That would pay for just a public school," explained Middendorf. "If you wait until they are ten, you're going to have to start saving $440 a month."
The biggest lesson Middendorf has learned from running her family's numbers is the importance of not flying blind. Like any other life change, Middendorf advises her clients to plan.
"Hopefully saying, what if? What if you have this child and one of you loses your job? You've got to make sure you're thinking through some of these things, because having a child is a big commitment emotionally," said Middendorf. "But it's also a big commitment financially, and you want to make sure you're ready for it."
Nicole Middendorf's website
(Copyright 2011 by KARE. All rights reserved.)