Millennials now account for the majority of new and expecting parents. By growing up during the greatest economic downturn since the Great Depression and holding more student loan debt than any previous generation, millennials are faced with a very unique set of challenges when it comes to starting a family. With the cost of raising a child now equalling a small fortune, millennial parents need to be better prepared financially.
Student Loan Debt
According to Inc. Magazine, over two-thirds of millennials carry some amount of student debt. In fact, the average college graduate with a bachelor’s degree carries about $40,000 in debt! Statistics show the stark effect this debt has on young people’s lives, as nearly 40 percent of student loan borrowers will be delinquent within five years of entering repayment. Seventy-three percent of of millennial borrowers have put off saving for retirement or other investments due to outstanding debt. The student debt problem is so profound that 43 percent of millennials are putting off starting a family altogether until they’re more financially stable.
Cost of Raising an Infant
Whether a family is living comfortably or just barely scraping by, the cost of raising a baby will take a big chunk out of anyone’s budget. According to NerdWallet, a family with an annual income of $40,000 could spend as much as $21,248 on the child’s first year alone. This amount accounts for basic necessities like food, health insurance, child care and miscellaneous items like diapers, toys and a crib. What it doesn’t account for are things a family at that level of income may not be able to pay for such as life insurance and savings for college.
Inability to Buy a Home
Across all age groups, homeownership in the U.S. is at an all-time low of 62 percent. When it comes to those under the age of 35, that number is reduced by half. According to the Washington Post, for the first time since 1980, a greater portion of this age group is choosing to room with their own parents over any other living arrangement. The main reason for millennials straying away from the American dream is that they simply can’t afford to buy a home. Unlike during the mid-2000’s, there’s no longer a housing credit bubble to make it possible for them to buy a home in the suburbs.
Despite these challenges, it’s still possible for millennials to start a family. Even when they’re not qualified to receive government assistance, families can cut costs by using secondhand baby gear and resisting the urge to go crazy with unnecessary purchases like a third stroller and designer diaper bags. The best thing millennials can do to prepare for starting a family is to start saving money now and possibly speak to a financial advisor who can help you evaluate your situation. A financial planner will look at your income, outstanding debt and fixed costs. Ultimately, they can help you create a budget that makes sense and allow you to save for the future.