The financial planning process involves looking at all your expected inflows and outflows during your lifetime. At the start of the process, I ask people to complete an expenditure questionnaire. It can be a bit of pain but it is certainly a worthwhile exercise as you have to go through all your outgoings (ever wonder where all your money goes? Do this exercise to find out!). There is one area of expenditure that people consistently underestimate the costs; the cost of children. Layla Healthcare did a survey last year and they estimate that the cost of raising a child is €105,321. This is up to the age of 21 before you start thinking of giving them tens of thousands for a deposit for their first home. So where does all the money go?
The cost of childcare has become a political issue in the US Presidential race but for some reason it has stayed off the political radar in Ireland. At this stage, creche fees are like a right of passage for new parents. Remember all that disposable income you used to have? You make your first creche payment and you are suddenly waiting for payday so you have some cash in your bank account. You can expect to pay €1,000 a month to have your child in full time. Have 2 or 3 kids and you are paying a serious amount of money each month for someone to mind your kids.
Parents make huge sacrifices to ensure that their children have the best opportunities in life. This can come at a huge financial cost. When I ask people who grew up “down the country” whether they’ll send their children to private secondary school they look at me funny. “They’ll go to the local secondary school like I did”. In Dublin, it’s a lot different, there are a lot more schools that are easily accessed and for some, the “local school” is a fee paying school that costs €6,000 a year.
You can then add in all the activities that they do at school. School trips have changed a lot over the years. There are now skiing trips, weekends in New York and I even heard of one school who went on a trip to China to see the Great Wall! All come at a cost and you don’t want your kid to be excluded from them.
When you have finished paying over €36,000 in school fees, your child may want to go to university. Free third level education is a myth. Universities charge an administration fee instead which currently stands at €3,000 a year. If fees are introduced again, you can expect to pay fees in the region of €7,000 a year (€14,000 for medicine). If they have to move out of home to go to college, you have rent, food etc to add to that bill.
I asked my wife to help me with this list. We have two kids, aged 8 & 5 and we went through some of the things we spend on the kids:
This is before they get to an age when we have to pay for phone credit or they want to wear branded clothes.
This is why we need to plan for the major expenses that we will incur for our children. There will be a lot of unknowns but you will have a good idea as to whether you intend them to go to private school or university. Wouldn’t it be so much easier to have put money away to pay for their education so when you get a bill for €18,000 for your 3 children in private school, you already have the funds instead of having to take it out of cashflow?
I’d love to hear what costs have I missed out or what costs I can look forward to paying as my kids get older? Let me know by dropping me an email at email@example.com