Congratulations! Your family will soon be blessed with your first child. You are on your way to a life of treasured memories – and a whole new set of financial challenges.
From birth to start of work, children are one of the biggest expenses in your life. According to 2017 data from the US Department of Agriculture, the average cost to raise a child from birth to 17 years old is $ 233,610 for a two-parent family with two children. This figure can easily double if you plan to pay part of their tuition.
It’s no wonder that for many families, children are equated with debt. Each child adds to the average debt of a family – but maybe not as much as you think.
A recent study by the credit bureau Experiential found that the national average debt per household was $ 93,446. This debt includes an average of $ 6,445 in credit card debt, $ 34,906 in student loan debt and $ 16,249 in personal loan debt.
With one child, the average household debt was $ 106,205, including $ 7,298 in credit card debt, $ 33,436 in student loan debt and $ 16,468 in personal loan debt. Add a second child and the average household debt is $ 119,701, including $ 8,025 in credit card debt, $ 33,520 in student loan debt and $ 16,946 in personal loan debt.
Average credit card debt and personal loan debt increase with the number of children in the household, as you might expect, but student loan debt does not. This makes sense assuming student loan debts are loans that parents are still paying off during their college years. These debts are only affected whether or not you make payments on time.
For parents with two to four children, the average household debt is $ 125,505 – and families with four or more children have accumulated an average debt of $ 141,086. Trends continue for credit card debt and personal loan debt. Credit card debt averages $ 8,299 for those with two to four children and $ 9,099 for parents with four or more children. The average personal loan debt increased similarly to $ 17,480 and $ 19,105 respectively.
How are credit scores affected by this debt? Again, the results are a slight surprise. The national average credit score is 701 according to Experian, higher than all parental averages – but credit scores do not correlate with the number of children in the household.
The average credit score for one-child households is 695, but households with two children average 692 – the lowest of all demographics. Households with two to four children rebound to an average score of 693, and households with four or more children have an average credit score of 698 – not far below the national average.
Maybe once you get past the two-child threshold, you become more dependent on credit and deal with more sources of credit. You can have a revolving credit card balance and several installment loans (auto, mortgage, and student loans). When you manage several sources of credit well and you payments on time, you are demonstrating responsible use of credit. Keep credit card spending well below your limit and avoid seeking new sources of credit, and a higher credit score should follow. You can check your credit score and read your credit report for free in minutes by join MoneyTips.
Of course, you will go into more debt with more children. They are expensive – but think of them as investments as well as bundles of joy. Your children are your eventual inheritance to this world and your potential guardians in your later years. Invest in it wisely, with your money and your time.
If you want to reduce your interest and debt, join MoneyTips and use our free debt optimization tool.