Having More Kids Won

Borrowing, Credit Rating, Student Loans

Congratulations! Your family will soon be blessed with your first child. You’re on your way to a lifetime of cherished memories – and a whole new series of financial challenges.

From bringing them into the world to sending them off to the working world, children are one of the largest expenses of your lifetime. According to 2017 data from the U.S. Department of Agriculture, the average cost to raise a child from birth to age seventeen is $233,610 for a two-parent family with two children. That figure can easily double if you plan to pay part of their college tuition.

It’s no wonder that for many families, children equate to debt. Each child adds to a family’s average debt – but perhaps not as much as you think.

A recent study from the credit reporting agency Experian found that the average debt per household nationwide was $93,446. Included in that debt is an average $6,445 of credit card debt, $34,906 of student loan debt, and $16,249 of personal loan debt.

With one child, the average household debt rose to $106,205, including $7,298 in credit card debt, $33,436 in student loan debt, and $16,468 in personal loan debt. Add a second child, and the average household debt rises to $119,701, including $8,025 in credit card debt, $33,520 in student loan debt, and $16,946 in personal loan debt.

Average credit card debt and personal loan debt rises along with the number of children in the household, as you might expect – but student loan debt does not. That makes sense assuming that the student loan debts are loans that parents are still paying off from their college years. Those debts are only affected by whether or not you make payments on time.

For parents with two to four children, the average household debt rises to $125,505 – and families with four or more children racked up a $141,086 average debt. Trends continue for credit card debt and personal loan debt. Credit card debt averages $8,299 for those with two to four children and $9,099 for parents with four or more children. Average personal loan debt rose in a similar fashion, to $17,480 and $19,105 respectively.

How are credit scores affected by this debt? Again, the results are a mild surprise. The national average credit score is 701 according to Experian, above that of all parental averages – but credit scores don’t correlate to the number of children in the household.

The average credit score for single child households is 695, but households with two children averaged 692 – the lowest of all the demographics. Households with two to four children bounce back to a 693-average score, and households with four or more kids carry an average 698 credit score – not far below the national average.

Perhaps once you pass the two-child threshold, you become more dependent on credit and manage more credit sources. You may have a revolving credit card balance and several installment loans (auto, mortgage, and student loans). When you manage multiple credit sources well and make all payments on time, you’re showing responsible credit usage. Keep credit card spending well below your limit and avoid applying for new sources of credit, and a higher credit score should follow. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

Of course, you’re going to incur more debt with more children. They’re expensive – but think of them as investments as well as bundles of joy. Your children are your eventual legacy to this world and your potential caregivers in your later years. Invest in them wisely, with both your money and your time.

If you want to reduce your interest payments and lower your debt, join MoneyTips and use our free Debt Optimizer tool.

Photo ©iStockphoto.com/LightFieldStudios

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