MILWAUKEE, WI--(Marketwired - May 22, 2014) -
- Parents have saved an average of $8,433
- Experts suggest having three to six months' pre-tax income saved
- Parents in Wisconsin spend $1,929 on out-of-pocket medical expenses in child's first year
- BMO Harris Bank offers tips and online tools for future and new parents to manage family expenses
A new study released today by BMO Harris Bank found that 28 percent of Wisconsin parents with young children do not have money set aside for a financial emergency, slightly below the national average (32 percent). An additional one in five (19 percent) have emergency savings of less than $1,000 (11 percent nationally). Parents with young children have saved an average of $8,433, while soon-to-be parents have less saved -- an average of $3,264.
The study, which surveyed parents expecting to have a child in the next five years and those with children less than 10 years old, revealed that in Wisconsin:
- While three in 10 current parents (28 percent) have no savings, 45 per cent of future parents have no 'rainy day' funds set aside
- One in five current parents (19 percent) and one-in-ten future parents (7 percent) have less than $1,000 in emergency savings.
- Of those with savings, most have savings in the range of $1,000 - $9,999 -- 37 percent of current parents and 33 per cent of future parents.
- A smaller proportion of parents have more than $10,000 saved -- 17 percent of current parents and 15 percent of future parents.
"It can be difficult to start saving for a rainy day when it could be years away, but starting with small amounts each month can make a big difference down the road. Parents should aim to have between three and six months of their pre-tax income set aside," said Kara Kaiser, Regional President, Southeast Wisconsin, BMO Harris Bank. "It's encouraging to see from our survey that two thirds do have something saved, and a quarter have upwards of $10,000 set aside."
Wisconsin parents were also asked about other 'hidden costs' associated with a child, and found that the most common costs in Wisconsin were increased utility/energy bills (49 percent), needing to buy a car or upgrade to a bigger one (47 percent) and increased vacation costs (35 percent).
"Consumers are currently saving about 4.5 percent of their after-tax incomes, in line with the average of the past decade. While this is below the more than 6 percent savings rate in the wake of the recession -- as households worked hard to repair their balance sheets -- it remains well above the lows of around 2.5 percent that we experienced during the housing bubble period," said Michael Gregory, Head of U.S. Economics, BMO Capital Markets.
Savings for Medical Costs Need Regular Check-Ups Too
The survey also examined the savings needed to cover medical costs. A majority (81 percent) of parents in Wisconsin said the cost of healthcare is one of their financial concerns. Parents said they spend an average of $14,246 in medical expenses, with most covered by insurance. The average for out-of-pocket medical expenses for a child in their first year was $1,929. One third (34 percent) said they don't know how much they spent.
The survey showed what aspects of healthcare parents and soon-to-be parents in Wisconsin are most concerned about:
|Regular doctor check-ups
At the national level the study revealed:
- American parents have an average of $9,737 saved for an emergency
- Future parents have an average of $5,523 set aside
- Average spend on medical costs is $9,676, with $1,297 of that being out-of-pocket
- The most common costs were the need to buy a car or upgrade to a larger vehicle (49 percent), increased utility/energy bills (46 percent) and taking time off work (43 percent).
"As the economy continues to improve this year, particularly on the jobs front, it will help fuel personal income growth. This, along with a steady 4.5 percent savings rate, will result in rainy day savings building up more quickly, but this should not be a call to reduce the savings rate. It would be prudent to keep saving at the same pace, redirecting the flow to help finance future big-ticket outlays, paying down debt or saving for retirement," added Mr. Gregory.
For more information about planning for the next Life Stage, visit bmoharris.com/yourfinanciallife
Survey results cited in this release are from a Pollara survey commissioned by BMO Harris Bank with an online sample of 1,500 Americans (including 150 in Wisconsin) conducted between November 22nd and 29th, 2013. This includes 993 interviews with parents of children under 10 and 507 interviews with Americans who expect to have their first child in the next 5 years. The margin of error for a probability sample of this size is ± 2.5 percent, 19 times out of 20.
About BMO Harris Bank
BMO Harris Bank provides a broad range of personal banking products and solutions through more than 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. For more information about BMO Harris Bank, go to the company fact sheet. Banking products and services are provided by BMO Harris Bank N.A. and are subject to bank or credit approval. BMO Harris Bank® is a trade name used by BMO Harris Bank N.A. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with approximately 1,600 branches, and CDN $593 billion in assets (as of January 31, 2014).