Second child can result in more debt for parents than first

Parents who are considering having a second child had better put away the credit cards.

Data compiled by a national debt management company shows the second child will often trigger more debt than the first.

"Fundamentally, families do a better job of thinking about and planning for the first child," said Mike Croxson, president of CareOne Services Inc., in Columbia, Md.

Families with no children averaged $13,992 in credit card debt in 2010, while families with one child averaged $14,351 in debt -- only a 3 percent increase. But families with two children averaged $16,815 in debt -- a 17 percent gain over families with one child and 20 percent more than families with none.

Croxson said when couples have their first child, there are often multiple places they can cut expenses to accommodate the increased costs. There's less discretionary spending left to cut with a second child. In fact, families often buy a larger house or car before the birth of the second child, increasing their debt.

Financial planner P.J. DiNuzzo, of DiNuzzo Investment Advisors in Beaver, Pa., said fiscal discipline tends to decline in several ways as a household grows.

"As many first-born children can relate to, additional siblings in a family often receive less discipline from parents over time," DiNuzzo said. "Based on this research, it appears parents also exercise less financial discipline."

CareOne analyzed the debt and family status of more than 120,000 people who enrolled in its debt management or debt settlement programs since 2009. It found that, with the recession and layoffs, a growing number of people with children have sought debt relief.

While the Census Bureau estimates that only 41 percent of U.S. households had children in 2010, families with dependent children make up more than 50 percent of CareOne's customer base, the company said.

"Incomes have been stagnant. But the cost of raising kids continues to rise," Croxson said. Instead of cutting back on expenses, families rely on debt, he added.

"Parents don't want to cut back on what they are spending on their first child, and they have not planned or made a budget for the second child."

(Contact Tim Grant at tgrant@post-gazette.com.)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)