Many of us approach starting a family the same way we do our Christmas shopping: we charge full-steam ahead with much excitement and little forethought…and deal with the financial fall-out later.
Yet, it seems that when it comes to the size of our families, things have slowed down in recent years. Current research shows that more people are choosing to have children later in life; having fewer children, or not having children at all.
South Africa’s birth rate, which refers to the number of individuals born in a population, saw 19,328 births per 1000 people in 2022 – a 5,2% decline from 2019. Moreover, in 1971 the average number of children per woman in South Africa was 5.6; a number that had dropped significantly by 2020, to 2.36 children per woman. This appears to be a global paradigm, with an average of 1.93 children under 18 recorded per family in the United States in 2021; a decrease from the average of 2.33 children per family in 1960.
Father-of-three Johan Werth, Franchise Principal and Financial Planner at Consult by Momentum, says that there are several factors at play here; both personal and circumstantial. “From a lifestyle perspective, more women are choosing to prioritise their careers in their 20s and even 30s. Climbing the corporate ladder generally involves long hours and less time for personal endeavours, which means that they’re starting families later in life. Furthermore, as things slowly equalise between men and women in the workplace – something long overdue – many are actively choosing not to have children, or to have fewer children than they may have if they weren’t pursuing a career.”
Werth says that the other reason comes down to finances: “The cost of living relative to income has skyrocketed, and this means that there is less disposable income to devote towards starting or growing a family.
“Added to this is the fact that as more of us start our families later on, when we do decide to have a child we want to give them the possible start in life. We have an idea of how we would like to provide for them and if this is not feasible from a financial perspective, we simply decide to have fewer children – or to not have any at all.”
And make no mistake, having a child is expensive. The most recent government calculations put the cost of raising a child for an average middle-income family at R1,681,470 from birth to age 18 (not including their tertiary education) – but Werth believes that this figure is likely too conservative.
He says that while it will differ from household to household and depends on various factors, the real cost could amount to significantly more. “For essentials such as clothing, food, toiletries, basic medical care and schooling, you can expect to pay around R90 000 per child, per year – or R7500 per month.
“Assuming an inflation rate of 6% per annum and the cost of raising your child at R90 000 per year, you’re more likely to be looking at around R3 million from birth to age 18.”
Werth says that prospective parents also need to consider that this estimation – staggering as it may seem – still doesn’t account for tertiary education, specialist medical treatments or developmental care, childcare (i.e. babysitter, nanny or daycare), activities, entertainment or transport costs to extra-mural activities; all of which rack up the bill significantly.
“Tertiary education, which is already very costly, is also subject to inflation. Three years of university education currently costs up to R350 000, which covers tuition and other related expenses such as books, university accommodation, laptop etc. Based on the current rate of inflation, you can expect this amount to hover closer to the R1 million mark by the time today’s six-year-old attends university.”
Werth says that those starting a family must also factor in ‘moving targets’ such as the state of the South African economy, possible ratings downgrades and inflation; all of which will give rise to daily living and educational expenses. “It’s not unreasonable to assume that the cost of raising a child may double within the next 20-25 years.”
He says that it’s important to ensure that your financial affairs are in order when starting a family. “In my view, the non-negotiables are medical aid and gap cover for each family member, as well as life cover for parents. Parents must make sure that their wills are up to date, so that in the unfortunate event that something should happen to one or both of them, their children are provided for financially.”
Werth says that his advice to would-be parents is to plan on having the number of children their hearts desire but to understand and budget for the expenses involved. “Now is not the time to bury your head in the sand when it comes to the real cost of raising a child. With a little planning and the help of an experienced financial adviser, you will be in a better position to give your child the best start in life – whatever that may mean to you.”
