The cost of living relative to income has catapulted. This means that there is less disposable income to put towards starting or growing a family, says Johan Werth, the franchise principal and financial planner at Consult by Momentum
When people decide to have a child or children they want to give their kids the possible start in life but sometimes its not feasible from a financial perspective, so they choose to have fewer or no children.
Werth said recent government calculations showed that it would cost an average middle-income family R1 681 470 to raise a child from birth to age 18, excluding their tertiary education. However, this figure was too conservative.
“While it will differ from household to household and depends on various factors, the real cost could amount to significantly more. For essentials such as clothing, food, toiletries, basic medical care and schooling, you can expect to pay around R90 000 per child, per year – or R7 500 a month,” Werth said.
“Assuming an inflation rate of 6% per annum and the cost of raising your child at R90 000 per year, you’re more likely to be looking at around R3 million from birth to age 18.”
Prospective parents should also consider the R3 million does not take into account other factors such as:
– tertiary education
– specialist medical treatments or developmental care
– childcare such as a babysitter, nanny or daycare
– activities
– entertainment
– transport costs to extra-mural activities
The cost of starting a family may double within the next 20 to 25 years due to ‘moving targets’ such as the state of the economy in South Africa and possible ratings downgrades as well as inflation which will impact daily living and educational expenses.
Tips to ensure that your financial affairs are in order when starting a family:
Medical aid
Werth said medical aid and gap cover for each family member, as well as life cover for the parents needed to be sorted out.
Gap cover was used to cover financial shortfalls during hospital stays when health-care professionals charged more than the medical scheme rate, said Rachel Janssens, the principal consultant at Alexforbes Health.
A will
“Parents need to ensure that their wills are up to date so their children are provided for financially should something unfortunate happen to one or both of them,” Werth said.
Moremadi Mabule, the head of Wills Operations at Sanlam Trust, said a will also allowed parents to provide proper guardianship of your children should something happen to the parents.
“My advice to would-be parents is to plan on having the number of children their hearts desire but to understand and budget for the expenses involved,” Werth said.
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