How much does it cost to raise a child?

How much does it cost to raise a child?

Today’s family trends tell an underlying truth about the financial factors this generations are taking into account before having their first child. Families are getting smaller and women are having children later in life. It’s no coincidence then that money, credit card and mortgage debts, have a major impact on these life events and is a major concern when couples are considering having children.

There is not much you can predict and prepare for when having a baby but you can alleviate some stress by knowing exactly how much it will affect your finances and budget ahead of time for the changes.

How much does a child cost to raise?

In 2003 it cost close to $450,000 for an average-income household to raise two children from birth to age 20, according to a report from the National Centre for Social and Economic Modelling  (NATSEM) .

The report on the costs of children in Australia today focused on data from households earning a combined total income of $68,848 per annum. The data indicated it cost an average of about $224,000 per child or $11,200 a year.

Since 2003 we’ve seen a lot of economic changes, so how much does it cost today?

About $12,231 a year or $244,630 for 20 years, according to calculations based on the Child Support Agency “Costs of children 2008” data for the same household income used in the NATSEM report.

That means over five years there had been a 9.2 per cent increase, totalling an additional $20,630 to raise one child til they’re 20.

But before you start blaming the kids and thinking the phrase “I want” has caused the change it’s worth turning to the economy. Inflation seems to play a bigger part in the increase than the children do.

Between March 2003 and March 2008 the Consumer Price Index has gone from 141.3 to 162.2. Although an increase of 20.9 points may not seem like much it can significantly impact on the cost of living.

A report from the Australian Bureau of Statistics shows some of the highest price increases this year are for clothing, housing and household contents, health, and transport which all contribute to family costs.

Since the last quarter’s report children’s clothing alone has risen 3.8 per cent, making it that little bit more expensive for the wear and tear life children’s clothes often have.

The other categories show a similar trend, suggesting even a little increase in the CPI can make all the difference.

However, before you get the wrong idea there is good news for people thinking about having children.

Food costs have dropped 10 basis points from the last quarter’s figures and this change will make a positive difference in the overall costs that contribute to raising a child.

More significant than that is that the ABS report shows the net price of child care has fallen 28.7 per cent following last year’s inclusion of child care rebates and benefits on top of the usual CPI data.

So while $244,630 might seem like a lot of money to fork out, now that you know what’s involved you may be able to save on costs.

One of the most important ways to save is by keeping track of where the money is going and figuring out how to cut costs without anyone missing out. Consolidating your child’s expenditure into one credit card can also help you to save, and

find out if you are eligible for the Child Care Tax Rebate and other benefits.

Plus, with an easier financial situation you’ll have even more time to spend with your loved ones.

Try RateCity’s handy loan calculators to help you budget for the arrival of your little one.

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Learn more about credit cards

How to get a free credit card

There's no such thing as a free lunch. All credit cards come with associated costs when used to make purchases, even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

What happens if I have a bad credit score?

If you have a bad credit score, you might encounter two main problems. First, the lower your credit score, the more likely you are to be rejected when you apply for a loan or any other credit product. Second, if your application is accepted, the less likely you are to qualify for the lowest interest rates.

Why should I check my credit rating?

There are two reasons you should check your credit rating: so you have a better understanding of your financial position, and so you can take action (if necessary) to improve your credit rating.

Lenders use credit ratings or credit scores to assess loan applications. The higher your score, the more likely you are to get approved, and the more likely you are to be charged lower interest rates and lower fees. Conversely, the lower your credit score, the less likely you are to get approved, and the more likely you are to be charged higher interest rates and higher fees.

Why do different credit reporting bureaus use different scores?

The reason Equifax, Experian and Illion use different scores is because they are independent companies with their own different methodologies. As a result, a score of, say, 700 would mean different things at different credit reporting bureaus.

However, the one thing they have in common is that they divide their scores into five tiers. So if you receive a tier-two credit score from one bureau, you will probably receive a tier-two score from the others, as well.

Can I get a credit card on part-time/casual work?

Yes, as credit card providers look at your annual income amount as well as your occupation. Minimum income requirements tend to be between $30,000 – $40,000 for standard and rewards credit cards, however low income credit cards can have minimum income requirements as low as $15,000 per year.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

What's the best credit card for rewards?

There is no one-size-fits-all best rewards credit card. It's best you research what type of rewards program you'd like, as well as the fees, interest rate and conditions associated with those types of cards before making a choice. 

Rewards credit cards can also come with high annual fees that may end up nullifying the rewards, so think how often you use the card to decide whether the benefits outweigh the extra cost for you. A card with a lower annual fee might require a lot of spending to get any useful rewards, while another card with a higher annual fee might need fewer purchases to get a reward. 

How many numbers are on a credit card?

The numbers on your credit card actually follow a universal standard which is used to identify specific functions. Each credit card has a different amount of numbers. Visa and Mastercard have 16, American Express has 15 and Diner’s Club has 14. 

The first number on a credit card always identifies what type of credit card it is. Visa cards start with a 4, whereas Mastercard starts with a 5 and American Express with a 3. The remainder of the digits represent the account number, including the last number which is used to verify that your credit card is actually valid. 

Credit cards also have additional verification numbers, which are mainly used when the card isn’t present for phone and online purchases. These are the three-digit numbers on the back of Visa and MasterCard or the four-digit numbers on the front of an American Express card.

How to make a credit card online

If you’re wondering about how to make a credit card online application, here are some steps to follow:

  • Test the market. Many credit card options are available online. Compare providers by fees, interest and perks to ensure you’re getting the best deal.
  • Complete the application. Once you’ve selected a card, head to the provider’s website and complete the online credit card application form. Forms vary by providers.
  • Provide details. Most cards require you to meet age, residency, income and credit status condition, and you need to provide details like a bank account statement to prove this.
  • Review details. Ensure the information you’ve entered is correct.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

What is CVV on a credit card?

CVV stands for ‘card verification value’, and is also sometimes referred to as a CVC or card verification code.

A CVV code is usually needed when the card is used online or over the phone as an anti-fraud measure. Without the cardholder being physically present to sign or verify the purchase, the CVV provides an extra layer of protection. 

If you’re using Mastercard or Visa, the CVV is the three digits located on the back of the card. If you’re using an American Express, the CVV is usually four digits and is on the front of the card.

Do you need a credit card to get a loan?

You do not need a credit card to get a loan, but you usually need to have a credit history. Without a credit history, a financial institution cannot assess your ‘credit worthiness’, or your capacity to pay off the loan.

If you don’t have a credit card, your credit history can reflect any record of paying off an asset. Without any credit credit history, you’re limited in the type of loans you can apply for. But you may be able to obtain a secured loan against an asset. For more information on improving your credit score, go here

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.