In Case You Missed It - Inflation Is Making Parenting Pricier

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ICYMI: Inflation Is Making Parenting Pricier

In case you missed it, inflation is making everything more expensive—including being a parent. With inflation 8.2% higher than last year, and sitting at 40-year highs, the average cost of raising a child born in 2015 to adulthood has ballooned to more than $310,000, up from roughly $285,000.

Some parents told The Balance they are reducing food and gas expenses to cope with the higher costs of parenthood. According to the Consumer Price Index, groceries are up 21.5% since February 2020, just before the pandemic—and just before inflation started to go haywire. Gasoline and natural gas are up 50.6% and 64.5% respectively, and electricity is up 22.3%.

But while reducing gasoline consumption and skipping meat on the grocery list can help a family save money, parents can only cut back so much on spending for children. Entertainment and extracurricular activities for kids can also eat up household budgets. Transparency about finances can help parents both cut back on unnecessary entertainment activities and teach their children about money.

These uncertain economic times do come with a silver lining. Some parents are finding an opportunity to invest more while the markets are in a tailspin, whether for future education expenses or retirement.

- Kristin

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Term of the Day

Coverdell ESA

A Coverdell Educational Savings Account (Coverdell ESA) allows up to $2,000 per child per year in after-tax contributions to be made in a child's name. Parents or grandparents can open a Coverdell ESA provided they meet the modified adjusted gross income (MAGI) thresholds.

If used for qualified educational expenses, distributions from a Coverdell ESA are tax-free. Coverdell ESA can only be opened for a beneficiary under 18 years of age, but there is no age limit for special needs beneficiaries. Coverdell ESA funds must be withdrawn when the beneficiary turns 30, or rolled over to another eligible beneficiary in the family.

Off the Charts

Here's how much student debt Americans had as of the end of 2021. In August, the Biden administration announced that borrowers with federally held student loans who make less than $125,000 annually are eligible to have $10,000 of debt forgiven, or $20,000 for Pell Grant recipients. The online application to apply for student loan forgiveness is said to be released later this month.