The Cost of Raising a Child

Bringing a child into the world is one of life’s greatest joys but also a significant financial commitment. From nappies to school fees, the cost of raising a child in Australia can be overwhelming if not planned for properly. Understanding these expenses can help parents prepare financially and make informed decisions that ensure their child’s well-being without unnecessary financial stress.

So, what exactly does it cost to raise a child, and how can you plan for the years ahead? Here’s what to expect from each stage.

The First Year: The Cost of a Newborn

The first year of a child’s life can be one of the most expensive due to the initial setup costs. Some key expenses include:

• Hospital and medical fees - While Medicare covers many maternity costs, private hospital births, specialist appointments, and extra medical tests can add up. 

A recent study found that almost all births in Australia took place in hospitals (97%). Of mothers who gave birth in a hospital, nearly 3 in 4 (74%) did so in a public hospital. While having a baby publicly can keep costs down (up to $2,000), going through a private hospital with private health insurance can cost anywhere between $2,000 - $5,000+.  

• Essential baby items - Prams, cots, car seats, bottles, baby clothes, nappies, and formula (if needed) can quickly accumulate costs.
• Childcare costs - If both parents return to work, daycare fees can be a significant expense. In Australia, childcare costs vary widely, but many families spend thousands annually on early learning services. The latest government report found the average hourly fee per child was $13.15, up 6.6 per cent from the December quarter of 2023. 
• Ongoing healthcare - Regular check-ups, vaccinations, and unexpected health concerns can add to the total cost.

Being financially prepared for these early costs can significantly reduce financial stress during this life-changing transition.

Everyday Living Costs

As children grow, so do their everyday expenses. Parents should consider the ongoing costs of:

• Food and clothing - From baby food to teenage-sized meals, the grocery bill will rise over time. Frequent clothing replacements as children grow can also add up.
• Transport - Families may need to upgrade to a larger car, spend more on fuel, or cover public transport costs as children travel to school and activities.
• Housing - Many parents move to a bigger home or a family-friendly suburb with better schools and amenities, which can significantly increase household expenses.

According to a 2024 survey, parents spend an average of $1,073 per month on child-related costs, equating to $12,876 annually.

Factoring these costs into a long-term budget will help ensure financial stability as your family grows.

Childcare and Education Expenses

Education is one of the most significant long-term costs of raising a child. Parents must consider the following:

• Childcare costs - Daycare, before-and-after-school care, and school holiday programs can be costly for working parents. For example, the average weekly cost for full-time childcare in Victoria ranges from $450 to $600.
• Schooling choices - While public schools are generally more affordable, private schooling can cost thousands per year in tuition fees, uniforms, excursions, and learning materials. 

In 2024, the cost of educating children for 13 years rose by six per cent to an average of $92,710 per child. Parents will pay around $195,074 to send their children to Catholic schools, and independent education costs an eye-watering $316,944. This total includes more than school fees, including uniforms, camps, transport, sports equipment, electronic devices, relevant textbooks, and stationery.  

• Extracurricular activities - Sports, music lessons, school trips, and technology for learning can all add to a family’s expenses. Parents spend approximately $1,859 per year, per activity, for just one child. These extracurricular activities - particularly things like swimming lessons - can start as young as three months old. 

Investing in a child’s education is one of the most important financial commitments parents make, so it's crucial to plan.

Healthcare and Insurance

While Medicare provides a level of coverage, additional medical costs can be a financial strain. Consider:

• Private health insurance - Many families opt for private health coverage to access better healthcare options, but premiums can be expensive.
• Dental and vision care - Braces, glasses, and regular check-ups are common costs as children grow.
• Unexpected medical expenses - Accidents, hospital visits, and specialist treatments can arise at any time, making an emergency fund essential.

Adequate insurance and savings for medical expenses can provide peace of mind and financial security.                       

Teenage Years: More Independence, Higher Costs

As children enter their teenage years, they require more independence and, often, more money. Common costs include:

• Increased grocery bills - Teenagers tend to eat more, leading to higher food expenses.
• Technology needs - Smartphones, laptops, and internet access have become necessities for education and social life.
• Transport and driving lessons - Learning to drive, purchasing a car, and paying for fuel and insurance can be costly.
• Social and entertainment expenses - Outings with friends, birthday gifts, and hobbies add up.

Teaching financial responsibility and budgeting skills early can help teenagers manage their own expenses as they grow.

University and Beyond

As children reach adulthood, parents may still find themselves financially supporting them. Consider:

• Higher education costs - While Australia’s HECS-HELP system allows students to defer tuition fees, parents may still opt to assist with textbooks, accommodation, and daily expenses. Tuition fees for a bachelor's degree can range from $17,000 to $50,000 per year.
• Living expenses - If children move out for university, parents may contribute to rent, food, and bills.
• Transitioning to financial independence - Supporting children in managing their own finances is key to setting them up for success.

Encouraging financial independence while offering guidance can help young adults navigate their economic futures.

How to Prepare Financially

Raising a child is expensive, but parents can manage these costs effectively with careful financial planning. Here’s what we recommend:

• Budget for different life stages - Creating a long-term financial plan can help you anticipate significant expenses.
• Start saving early - Opening a savings account or education fund can help cover future costs.
• Consider government assistance - In Australia, families may be eligible for benefits such as the Family Tax Benefit, Child Care Subsidy, and Paid Parental Leave.
• Seek professional advice - A financial adviser can provide tailored strategies to manage family finances effectively.

Can the team at Inovayt help with the cost of raising a child?

Raising a child is one of life's most fulfilling yet financially demanding experiences. From the early years to adulthood, each stage comes with unique costs that require thoughtful planning. However, with smart budgeting, saving, and seeking financial guidance, parents can provide their children with a secure future without unnecessary financial stress.

If you’re preparing for parenthood or looking for ways to manage family finances better, speak to an Inovayt financial planner today. We’re here to help you plan for the future with confidence.