The cost of kids - how to manage it

Kids don't come with receipts.

There's no refunds on the million-or-so dollars you invest in their wellbeing and future.

So, it's vital to plan carefully and invest wisely.

Michelle Tate-Lovery is a financial lifestyle adviser at Unified Financial Services.

She builds what she calls lifelong cashflow modelling or family grids for clients, mapping out the fluctuations in income and expenses that one, two, three or more children bring to the situation.

The model can shine a few home truths on what type of education you plan for your child, how many children you'll have and, in some cases, even whether you'll have children.

"Unless you go through this exercise early on and start exploring it, it can be quite devastating to be confronted with the fact that you haven't planned the financial implications of raising children," Ms Tate-Lovery says.

She says the cost of putting a child through an independent private education system from preschool to year 12 is about $500,000.

The same course through the public system would be about $60,000, with free tuition partially offset by the cost of uniforms, books, computers, travel and extra-curricular activities.

A course through the Catholic system will cost about $200,000 per child.

"Once you start looking at the quality of life people are wanting to have, the quality of education, etc, it might actually dissuade them from having what they thought was going to be three kids, maybe to have two children."

The costs start mounting even before day one.

If you have private health insurance, you'll probably need to pay for your own obstetrician, about $5,000 after rebates.

Then there's the set up costs, the nursery, the baby clothes, the pram, the car seat - another $5,000.

It's important here to work out just what you're eligible for under the federal government's child care benefit and child care rebate schemes.

Ms Tate-Lovery says you may need to make a series of trade-offs.

"The biggest thing that is traded off may be deferring the house purchase or the mortgage being paid off, working longer, maybe reducing the number of children if they can see that it's crunch time and that it's not sustainable," she says.

But there's also what she calls windows of opportunity.

Your child's first day at school may mean annual savings of $20,000 that you were previously paying for day care.

"It's not all doom and gloom," she says. "It's a matter of understanding where the opportunities are, where the trade-offs are and knowing what the client is bringing into the equation - what income and whether they can use their long service leave for part of their funding or whether they're going to have an inheritance, whether they're going to increase their hours of work to maybe go full time."

Ms Tate-Lovery outlines what she calls the "five phases" of child raising.

Phase one - planning for children.

Phase two - taking time off work to be a parent, down to one income.

Phase three - back to work, possibly on reduced hours at a lower rate, with the burden of childcare costs.

Phase four - the cost of education.

Phase five - "helicopter kids", your kids' are at university, but still hovering at home because they can't afford to move out.

All of these phases impact on you lifestyle and plans - even more so if you have children later in life, with the kids over-riding plans to pay off the mortgage and retire.

"It all works out in the end. But, at some point, you are going to need to see a financial planner," Ms Tate-Lovery said.

But she is reluctant to put a bottom line cost on each child.

There are so many variables - child care, education, how long they live at home and whether their contributing to the household income as they get older.

"I reckon you're pushing a $1 million at a guess," she says.