How good are you at budgeting?
Are you prepared for new major expenses that may come your way?
A substantial number of Australians are starting parenthood without a healthy savings fund, according to new research by Finder, Australia’s most visited comparison site.
According to Finder’s Parenting Report 2021, which surveyed 1,033 parents of children under the age of 12, a worrying 10% of parents had no money in savings before starting a family.
A further 28% of parents had $5,000 or less in savings before their child was born, which is less than a years’ worth of living expenses for one child.
A 2018 study by the Australian Institute of Family Studies found it costs low-paid families around $170 per week to raise a child, equivalent to $8,840 per year, or $159,120 over 18 years.
On the other end of the spectrum, parents who choose to send their child to a private school can in some cases be set back up to $42,000 per child per year – around $20,000 less than the average Australian salary.
Alison Banney, Finder money expert, says personal circumstances will determine how much money parents should have saved up.
“It’s a good idea to take into consideration the cost of having kids before starting a family.
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“The amount you should have in savings will vary depending on your situation. For instance, having a large mortgage means dedicating a chunk of your income towards repayments, and the same goes for credit card debts or other loans.
“Think about whether you could afford to spend an extra $10,000 a year on your child, and whether you would be willing to give up small luxuries like eating out and new clothes to save money,” Banney said.
Finder’s data shows Gen X parents had more than double the amount in savings ($51,206) compared to Gen Z parents ($25,798) before starting a family.
Banney says building up an emergency savings fund is a must for new parents.
“Having a family is a big financial responsibility, and it increases the chance of facing unexpected expenses.
“This means it’s crucial to build up an emergency savings fund to make sure you can meet sudden expenses like medical bills for your family without feeling stretched.
“Ideally you’ll have at least three months’ worth of expenses saved up, accounting for the cost of food, bills and other living expenses for you and your family.”
The survey found respondents from New South Wales had the most amount of money before the arrival of their firstborn ($57,994), followed by those from Victoria ($46,005) and Queensland ($36,919).
|How much money did you have in savings before having your first child?|
|$5,000 or less||28%|
|$5,000 - $10,000||12%|
|$10,000 - $20,000||15%|
|$20,000 - $50,000||19%|
|$50,000 - $100,000||10%|
|$100,000 - $200,000||4%|
|More than $200,000||3%|
|Source: Finder Parenting Report 2021 of 1,033 parents with children under the age of 12|