Two weeks ago my fourth child was born, as any parent would you start to think about what lies ahead for the child. But as a financial planner I started to think how much is he going to cost me?

I looked around online but the data available was either too out of date or didn’t provide enough detail to satisfy my curiosity.

So I set about calculating it for myself. I am in the privileged position in that my clients share their outgoings with me so I was able to work out a good average.

This does however slightly skew what might be considered average expenditure. I delighted to have a broad client base however it would lean towards higher earners.

But more interestingly is that research from Canada has shown that people who engage a financial planner are likely to have 2.5 times the net worth of people who don’t when they reach retirement.

This could be due to the fact that people only engage a financial planner because they have financial reason to do so, or that there financial position improves as a result of the financial planners involvement.

I think it is probably a combination of both with a biased sway to the financial planner having the influence. What is in no doubt in my mind is that your long term financial position will be improved by engaging with a good financial planner.

So I went about calculating the cost of my little bundle of joy. I factored in all the usual childcare, pocket money, clothing and footwear, extracurricular activities and hobbies.

I also apportioned some of the costs associated with running a car, a home, paying a mortgage and going on holidays. For the purposes of the calculation I took ¼ of the average costs of such expenses. Lastly I allowed for a €20,000 gift at age 25.

The calculation ran from age 0 to 22 and included four years in college.

If I won the lotto today I would need to set aside €360,000 to fund all of his expenses.  If I want to pay for it all from salary it looks more like I would need €23,500 per annum net of taxes.  Expensive little fella!

As most people will just suck up the day to day expenses and pay as they go, I considered college fees seperately.

A lot of clients come to me with some resemblance of a fund towards their child’s future college expenses. The biggest mistake made is they save the money in a deposit account. For lots of reasons (which would deserve a blog of their own) this is the wrong way to go about it.

If you save in a deposit account from 0-18 to fund for a child’s college expenses you would need to save €132 per month or all of the current children’s allowance. However if you go for a well diversified portfolio you would need to save just under €90 per month.

I am assuming college fees will cost €9000 per year for 4 years and will rise by 5% per annum between now and then.

If you leave things a little later and you have only ten years before your child is heading to college the figures for deposit account investment rise to €260 per month or twice the original investment or €210 per month for the diversified portfolio.

I discussed this topic with Ian Guider on Newstalk on Tuesday June 3rd 2014 and you can listen to it here. (skip to about 9mins 50sec)