When it comes to accumulating wealth, the millennial generation – today’s 30-40-year-olds – are lagging far behind older Americans. While millennials’ median debt levels are far higher than their parents’ generation, they’re trailing in income and wealth, making it harder for them to save for the big financial milestones in life.
One of those milestones is starting a family. Studies show that millennials have waited longer than previous generations to begin having children. Many report they’ve waited due to precarious financial situations: hefty student loan debt, fallout from two major recessions, and consequently, less in savings for their children.
This is the third installment of Arbor’s “Generational Wealth Series”, where we outline how to prepare for some of life’s biggest financial moments. In the last blog, we covered buying your first home. Today, we’re talking about one of the most beautiful, yet financially demanding experiences many of us will have: Starting and supporting a family.
RAISING CHILDREN
Starting a family is a wonderful adventure – but it also takes some serious financial planning. The U.S. Department of Agriculture estimates that a single child costs an average of $233,610 to raise from birth to age 18, and that’s before considering the cost of college. From food to transportation to childcare, the costs of supporting a family are only rising, while average household income in the U.S. has only seen 0.2% annual growth since 2000. For millennials who are already lagging in wealth accumulation, it can feel impossible to afford children.
But with the right mix of investing, budgeting, and saving, parenthood can become a reality. Before starting a family, revisiting your budget is extremely important. Parenthood can bring about a change in employment, medical bills, and other new living expenses – it’s important to take all these factors into consideration, down to the rising cost of diapers.
One of the most important factors is saving and investing early for your child. Many Americans believe it’s enough to max out their 401(k) or open a savings account, but with the cost of college only rising, a passive investment strategy isn’t enough anymore. A trusted Financial Advisor can help you establish a proactive, efficient way to grow your nest egg through a mixture of high- and low-risk investments, so you can provide for your child through adulthood and retire comfortably yourself.
A good investment strategy is particularly important when it comes to education. The cost of college is higher than ever: While the average tuition at an in-state public school today is $10,388 / year, that jumps to $38,185 / year for a private college. That’s an increase of 25% over the last 10 years alone, and it’s only rising. You don’t want to burden your child with student debt. But a trusted Financial Advisor can help you establish a strong savings strategy that takes advantage of tax-advantaged accounts, so you can ensure your children graduate debt-free.