Lately I’ve thought about how beautiful it would be to have a fourth child. But that thinking only lasted about 24 hours and was quickly ruled out by a reminder of what zero sleep looked like.
While love is the number one reason that most of us have kids, there does come a time when the cost of raising children is considered.
As I look as this I’ve discovered that there really isn’t much financial benefit to the average Australian family having multiple children today but there is hope that things might soon change for the better.
Australian families are growing wealthier, partly thanks to rising property prices, more women participating in the paid workforce and contributing to higher family incomes plus the all important fact – we’re having less children.
According to the Australian Institute of Family studies, it costs $140 to $170 a week to raise one child for low income families. That’s $8,840 a year and $159,120 by the time the child has reached 18 years of age.
Of course, I would argue the actual cost is significantly higher that that particularly the more children you have and even then what about the added costs such as sport/entertainment, upsizing cars and homes, unseen medical bills and even private schooling?
While it’s nice to think that we only have children out of love, money is a key consideration for modern families.
“It’s something you have to think about, for instance, we decided to space out our pregnancies so that we only had one child in day-care at a time, as cost of childcare I believe is the biggest obstacle for young families,” says Natasha Janssens finance expert and author of Wonder Woman’s Guide to Money.
While many have tried and failed, there are no tax deductions for having children or claiming childcare costs to allow people to actually participate in paid employment.
Rather there are the Federal Government’s Childcare Subsidy and Family Tax Benefits.
Both are targeted towards those on lower incomes and faze out the more money you earn.
The only thing that helps families claw back some of these benefits is actually having more kids.
Many families get between 50% and 85% get their childcare costs reimbursed by the government under the current childcare subsidy.
While this can make a significant contribution to the cost of childcare, there are many who argue it doesn’t go far enough to outweigh what’s now called by KPMG, the Workforce Disincentive Rate.
KPMG says this is the percentage of income from taking an extra day’s work that a person loses to income tax, the Medicare Levy, withdrawn Family Tax Benefit, Childcare Subsidy and out of pocket costs.
“We think that the Childcare Subsidy could be improved,” says Andy Hutt, director in economics and tax centre at KPMG.
“When you look at the dollars that government would pay out, you might say that is a lot of money but the fact is childcare costs a lot so even after the subsidy there is a significant burden on families to incur on top of paying income tax and the tightening of family tax benefits.”
KPMG is in talks with the government on how to improve the current childcare subsidy and family tax benefit following the recent release of its report, Unleashing Our Potential.
KPMG has called for a review of the current childcare subsidy and for it to be increased across the board to therefore support more families, particularly women in the paid workforce.
The other key element of government support for families is the Family Tax Benefit but once family incomes exceed $104,184 for one child, it actually starts to cut off.
You do get a slightly higher income limit the more children you have, but if you consider that it costs $8,840 a year to raise one child, as per the earlier citation, the increase is inadequate.
For two children, the childcare subsidy cuts off at $109,379, for three children, it stops at $117,993, for four children, the limit begins at $139,041 and for five children, the subsidy cuts off at $160,089.
The average full-time working woman earned $1456.50 a week in May, and the average full-time working man earned $1696.50 a week.
Assuming a man and a woman are in a coupled relationship and both work full-time, that’s a combined family income of $163,956 and unless they had six kids, they wouldn’t qualify for any Family Tax Benefit.
The average number of children per Australian household is 1.8 – which basically means that more of us are having just one or two kids these days. (Three as I am now discovering from my own family, is a lot!)
What’s becoming clear is that our current rate of government support for families and national productivity isn’t working to support growing female work participation and family incomes. Nor does it spur more families to have more children.
“That is the challenge for governments,” says Hutt. “Do you make that rate of faze out of the Family Tax Benefit flatter so that there is less of a workforce disincentive rate as income increases? It is a difficult balance.
“For governments it is worth reviewing this to see have we got the balance right,” says Hutt.