When you look into the innocent eyes of your sweet child, you know she is absolutely priceless. But if you had to put a price tag on her, how much would it be? About $250,000, according to USDA research.
The USDA estimates it will cost middle-income parents a whopping $241,080 (or $301,970 with inflation), on average, to raise a child born in 2012 until the age of 18. That mind-blowing amount has mushroomed by 3 percent since 2011 — and it doesn’t even include the exorbitant cost of college.
Whether you have a sixth grader, a kindergartner or a bun in the oven, here are a few financial tips for cash-strapped parents.
Take advantage of tax breaks. Fortunately, Uncle Sam gives parents some much-needed financial relief. For each dependent child under the age of 19 (or full-time dependent student 24 or younger), parents received a reduction of taxable income of $3,900 in 2013.
If you meet certain eligibility requirements, the child tax credit also reduces your tax bill up to $1,000 per child. You can also tap into medical mileage deductions, adoption credits and more. Talk to a tax professional to take full advantage of these valuable tax breaks.
Sign up for a dependent care FSA. It’s no secret that day care is phenomenally expensive — and the price climbs each and every year. In 2011, the average cost of full-time care for an infant was $4,600 to $15,000+ a year, depending on geographic location. Cha-ching!
Luckily, you can off-set these extraordinary costs by signing up for an employer-sponsored flexible spending account (FSA). These accounts allow you to set aside pre-tax money to pay for qualified child care expenses for kids under the age of 13 — so it essentially gives you access to tax-free money. In the end, an FSA can slash your overall child care costs by up to a third.
Start saving for college now. It’s never too early to start saving for your kid’s college education. The average cost of tuition and fees for 2013/2014 are $30,094 at private colleges, $8,893 for state residents at public colleges and $22,203 for out-of-state residents attending public universities, according to the College Board. Shockingly, that amount will probably be much higher by the time your little one heads off to the dorm. The cost of higher education has skyrocketed by more than 500 percent since 1985, according to the Labor Department.
This is why it’s essential to start saving now — whether you choose to contribute to an IRA, a 529 College Savings plan or a Coverdell Education Savings Account. Not only will these plans help you save up a bundle for your child’s college education but they also offer valuable tax advantages.
Ready to get started? Check out TampaBayFederal.com college savings calculator to figure out just how much you need to save for college.
Amy Bell is part of Tampa Bay Federal Credit Union.