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by Maurie Backman | Updated July 21, 2021 - First published on Dec. 5, 2019
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Kids don't just cost money. Apparently, they also make debt more likely.
Having children can be a very expensive prospect. From healthcare to food to childcare, the cost of raising kids has climbed so substantially that Americans who expand their families are racking up loads of debt.
Experian reports that U.S. households with children have between 14% and 51% more debt than the national average. Not surprisingly, larger families lead to larger levels of debt.
The average national total household debt is $93,446, but that figure rises to $106,205 for those with a single child, $119,701 for two children, and $125,505 among consumers with two to four children. Meanwhile, folks with four or more children have an average total debt level of $141,086.
Furthermore, families with children have lower credit scores than average consumers. The average FICO® Score in the United States is 701, but that number drops to 695 for people with one child, 692 for those with two children, 693 for those with three children, and 698 for those with four children or more. It's worth noting, however, that any credit score in the upper-600s is considered good, and that there's not a substantial difference between a score of 692 and one of 701.
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If having children has made your finances harder to manage, thereby leading to an increase in debt and a reduction in your credit score, there are steps you can take to improve your financial situation. First, get on a budget. It's the best way to see where your money actually goes month after month, and it'll make it easier for you to identify ways to cut corners.
Next, cut those corners. Reduce or eliminate spending in areas that aren't necessities, like restaurant meals and non-essential clothing. You can try cutting back on family entertainment, too -- the right low-cost streaming services could take the place of cable and save you some money. Those savings can then be applied to your outstanding debt so you're able to pay it off sooner.
Incidentally, lowering your debt level should also improve your credit score. That's because credit utilization is a major factor that goes into calculating your score, and yours should never exceed 30%. If you owe $3,200 on your credit cards and have a total line of credit of $10,000, your utilization will be 32%, which isn't great for your score -- but paying off existing debt will help.
Once you're on a tighter budget, you'll also be less likely to fall behind with bill payments. And that will help improve your score as well, since your ability to pay bills in a timely fashion is the single most important factor that goes into establishing your credit score.
Grappling with the cost of raising children is no easy feat. The positive news? As your kids get older, certain costs related to caring for them will likely wane. You may, for example, start to save money on childcare once your little ones are old enough to attend school and even more when they can watch themselves after it lets out for the day. You may find that you spend less on healthcare as your kids grow older and their immune systems strengthen.
In other words, hang in there -- there's a light at the end of the tunnel, and your savings account won't always feel like it's taking a beating. But until you get there, it helps to do everything in your power to lower your debt and increase your credit score.
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