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Starting a family

A bundle of joy and a lot of planning

Thorough planning and disciplined saving can allow you to enjoy your growing family and help reduce financial stress.

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Approximately how much does it cost to raise a child to age 17?

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That's right.

It costs $372,210 to raise a child from birth through age 17 (for married couples with an income over $107,400).

More than that.

It costs $372,210 to raise a child from birth through age 17 (for married couples with an income over $107,400).

U.S Department of Agriculture, January, 2017 (Latest available data)

Budgeting for baby

The first step (after you call the grandparents) is to set up a flexible budget. While you may get gifts from friends and relatives, you should plan to rely on your own income. Set aside enough money to cover the basics first. And save money in advance for expenses during parental leave. (See the Saving section for more information.)

Budgeting checklist

Little babies can mean big changes. As you put together a budget, consider the following:

  • Medical costs for pregnancy and delivery
  • Medical costs for the baby (well-baby visits)
  • Adoption fees
  • Childcare
  • Major purchases: crib, changing table, car seat, stroller
  • Smaller purchases: baby monitor, travel crib
  • Everyday supplies: clothing, diapers, formula, wipes
  • Contingency savings for any unexpected expenses
  • Updating or adding insurance coverage
  • Savings for education

Increasing insurance

This is a good time to review your current levels of coverage. Make sure your new addition is included.

Protecting your child if you aren’t there

A will becomes much more important once you have a child. By naming a guardian in it, you direct who takes care of your child if both you and your spouse die while your child is a minor. Be sure to discuss this important responsibility with the individuals you plan to name and select an alternative guardian to serve as a backup.

Other considerations:

  • When your child should receive an inheritance
  • Whether a trust makes sense to protect the inheritance
  • Who should serve as trustee, looking out for your child's best interests

Learn more about Trusts and Estates

Funding the future

Start early and be consistent with your savings plan.

How much will 4 years of college cost? (Based on an average tuition inflation rate of 5%)

Source: College Board and National Merit Scholarship Corporation, 2019. (Latest available data)

College costs increase at about twice the inflation rate. But fortunately, most students receive some form of financial aid. Even those whose family income is too high to qualify for need-based aid can be awarded grants or scholarships, take advantage of low-interest education loans, or apply for work-study.

Non-gifting options

The following non-gifting options don't require you to part with your funds right away.


  • Some families decide they will pay for college out of their cash flow when the time comes.
  • There is a risk that this may not be adequate or that your investments may not be liquid.

Child contributes

  • You may expect your child to save money, earn some type of scholarship or grant, or work during college to provide some funding.
  • Just be mindful that this may not be enough and you may want to subsidize with savings.

Family contributions

  • Other family members may offer to pay for your child's tuition directly to the college.
  • This type of direct payment does not have to be reported as a gift by the donor.

Personal investment funds

  • You might set up a separate investment account in your own name and simply set funds aside periodically.
  • All the funds remain in your control, and any leftover when your child finishes school can be added to your other investments.


Gifting options

Gifting options require some or all of your annual exclusion gifts for funding. Anyone can make the following gifts:

Uniform gifts or transfers to minors (UGMAs/UTMAs)

  • These are simple investment accounts set up under your child's name.
  • Periodic gifts are made to the account and most likely, you'll pay income tax on earnings.
  • You control the use of the account while your child is a minor.
  • Once the child reaches the age of majority, the funds belong to him or her.

Prepaid tuition programs

  • With these programs, you purchase units or credits toward a particular level of education.
  • When the child is ready to attend college, the program guarantees that the tuition related to the level of college will be paid on your child's behalf.
  • Essentially, you're buying tomorrow's education at today's price.
  • Be sure to see if the plan you're considering has the financial backing of the state.

529 saving plans

  • 529 plans have the advantage of income tax deferral.
  • Funds put into the account are not subject to income tax within the account or when withdrawn if used for qualified higher education expenses.
  • If one child does not need all of the funds, the balance may be transferred to fund another child's education, or even withdrawn by you.
  • Withdrawals of earnings will be subject to income tax and penalties.

Trust accounts

  • Trusts are attractive for families that will be making consistent contributions.
  • Trusts may receive gifts from anyone as part of a wealth transfer program.
  • There are limited income tax benefits to these trusts, but they offer greater flexibility and control than other strategies.


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