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How to Make Your Child’s Expensive Activity Fit Your Family Budget

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Every time the Olympics roll around, we hear stories about parents making significant financial sacrifices to raise elite athletes. But if you have kids, you don’t need to raise an Olympian to know that supporting a talented, passionate child can strain the family budget.

Roughly 40 percent of American families spend more than $1,000 a year on their children’s extracurricular activities, and 20 percent spend more than $2,500 annually, according to a January SunTrust survey of about 510 adults.

Some families spend a lot more.

MagnifyMoney spoke to three families with children who have exceptional interests or talents in sports, arts or cultural experiences to learn about the costs, decision-making processes and money-saving tips related to helping their children pursue their passions. While families have different priorities and values, they have one thing in common: They want the best for their children and have to make financial sacrifices to make it work.

Common obstacles

Deferring retirement savings

Peggy Chen and her daughter, Sophia, who is holding her trophies from piano competitions. (Courtesy of Peggy Chen)

Peggy Chen, 58, of East Brunswick, N.J., is a single mother who supported her daughter Sophia, now 32, and son Albert, 28, as they pursued their musical talents and passions growing up. The siblings eventually became professional musicians, one a pianist, and the other a violinist. But in order to focus on her children’s futures, Chen had to put hers on the back burner. She didn’t save for retirement while raising the kids.

The costs were high from the beginning. Growing up, Sophia played three pianos, including a Steinway grand piano the family bought for about $25,000 when Sophia was 9. She took an hourlong lesson with a top-notch piano instructor each week, who charged $70 an hour in the 1990s. If she was preparing for contests, the lesson would last 30 minutes longer. Chen herself accompanied Sophia to almost every single piano lesson and competition. The constant piano maintenance, tuning, travel and lodging for competitions also ate away a huge part of the family disposable income.

“There was no budget,” Chen said matter-of-factly. “We’d squeeze out however much money was needed to pay for her practices and performances.”

Chen’s then-husband took home about $25,000 a year as an accountant. Chen, a violin teacher, supplemented family income by giving lessons at home. Although barely scraping by, the couple wanted to give the best to their first child, developing her talent in any way they could.

When Sophia was in 8th grade, Chen and her husband divorced. Chen, a Taiwanese immigrant who had never worked in the U.S. and couldn’t even tell the difference between a checking and savings account at the time, had to work three jobs. Her top priority was making monthly mortgage payments to avoid being homeless.

Even at such a difficult time, Chen continued paying $70 for Sophia’s weekly piano lessons. Being extremely frugal allowed her to take care of the necessities and support her budding musicians.

“I’d be thrilled if I saw a penny on the ground, as if I won a lottery,” she said. “I didn’t dare to waste a nickel.”

Still, Chen said she had no financial planning. She only started saving for retirement a few years ago, when Sophia and Albert had both graduated from college.

Putting off paying down debt

The Rechkemmer family from Iowa has five children. It is not easy for the parents to financially support all the children’s extracurriculars. (Courtesy of Molly Rechkemmer)

Josh and Molly Rechkemmer live with their five children in a suburb outside of Iowa City, Iowa. He is an architect and she a part-time academic adviser and lecturer at the University of Iowa.

Their kids — Gracie,18; Sam, 16; Hannah, 13; Kate, 11; and Luke, 9 — are all involved in arts or athletic activities. Most days, each kid has two things going on after school.

The family is constantly in their minivan, traveling to different games, auditions, training sessions, competitions and rehearsals. The busy schedule has meant their finances are always tight.

Despite painstakingly budgeting and planning ahead for big payments, covering expenses for the kids’ extracurriculars have hampered the Rechkemmers’ ability to pay down debt quickly. The couple has credit card debt, a mortgage, car loans and student loan debt.

“Partly we try to do it wisely, and partly we just also know that we’re only going to have these kids in our house for what? Ten years,” Molly said. “And so we want to do things for them to help them develop.”

Prioritizing their children’s activities means spending thousands of dollars they could otherwise put toward their debt.

“I think almost a minimum per kid per year is easily $1,000 on the low end, and probably $3,000 to $4,000 on the high end,” Josh said.

Private sport teams with out-of-town competitions are particularly expensive. The parents have to pay for all of the uniforms, training and tournament fees and travel. Just for one season of one club sport, the cost for this big family easily adds up to at least $1,000.

Choosing what’s ‘fair’ when you have multiple kids

When there’s more than one child, it’s not always easy to decide who gets more resources from the family budget.

For the Rechkemmers, it could mean going with inexpensive recreational sports leagues instead of a club team, Molly said. But other times they would go for the more costly option, like the club teams, if they see a gift requiring a higher level of time and financial commitment.

“We’d love to say it’s always proactive, that we’ve intentionally made those decisions and thought it all through,” Molly said. “But a lot of the times it’s also reactive. An activity comes up and we have to make a decision whether or not they get to do it.”

Molly acknowledged that they haven’t always made the perfect decisions. There are things the family had heavily invested in, but the kids eventually lost interest. Retrospectively, they also realized that they might not have done enough for other kids.

Albert is playing the piano as his sister Sophia watches. (Courtesy of Peggy Chen)

Chen said she had never expected it would cost so much to develop Sophia’s piano talent. When it came to her second child, Albert, she downgraded the spending — she gave Albert violin lessons herself.

“I taught him myself, and he sat in the first chair,” Chen said. “I thought it was enough: no competitions, no anything else.”

Albert graduated from Northwestern University with a bachelor’s degree in political science and violin performance. He now studies at the San Francisco Conservatory of Music.

Making trade-offs

Emmeline dePillis and her family at the local Shichi Go San festival in 2008. Maria, then 7, is dressed in kimono on the right. (Courtesy of Emmeline dePillis)

Emmeline dePillis is a business professor at the University of Hawaii at Hilo, on the southernmost island of Hawaii where a large population of Japanese immigrants live.

Her older daughter, Maria, partly of Japanese descent, is passionate about Japanese language and culture. She is getting ready for her third extended trip to Japan.

For her last two trips, Maria went in a group where her school covered some expenses, but the family still had to pay more than $1,500 out of pocket each time. It cost less than if they had planned and paid for the trips themselves, dePillis said, but sending Maria on those trips meant putting off other purchases.

“Each time we were like, ‘Well, that’s a lot of money, but that’s a good deal,’” dePillis said. “And she loves it so much. It was like, ‘Well, maybe we can’t buy a new refrigerator this year, but it’s worth it because it’s such a good opportunity.’”

In the Rechkemmer family, a lot of other entertainment activities have to go: movies, concerts and short family vacations.

“Instead of planning a long weekend to take our family to Chicago and doing things like the planetarium, the aquarium and all those things, we might have a long weekend in Chicago where we spend most of the time at a baseball tournament,” Molly said.

How to make it work

Financial planners say plainly there are no perfect solutions to fund children’s expensive hobbies. But they stress that families need to take a holistic view of their finances, understand the level of risks and discuss with the entire family — yes, kids included — to make sure everyone understands the commitments and agrees on the sacrifices to be made.

To help families facing tough financial decisions around paying for kids’ activities, we gathered advice from parents and experts who have experienced these dilemmas firsthand:

1. Prioritize family values

dePillis said her family decided to fund their daughter’s Japan trips because her husband and her both value education highly.

“We see our daughter’s passion for Japanese culture as an educational thing,” dePillis said. “This is not just, ‘Oh, I’m going for fun.’ So if it’s ‘Let’s go to Disneyland’ versus ‘Let’s give Maria a chance to go to Japan for this educational experience,’ we would choose the educational experience for her.”

Prioritizing family values is the most important step to take in the decision-making process, experts say. There are no right or wrong decisions, but ultimately, the parents should thoroughly think why they are investing in the hobbies.

“The real way to be successful at this is to really identify what the family goals are, and then trying to balance out what their goals are for the future with what they think they can realistically provide for,” said John Rivers, a Clinton, N.J.-based financial planner at Newroads Financial Group.

2. Make a budget

In the Rechkemmer family, Josh, the father, tracks family spending almost religiously on spreadsheets, and he tries to budget for upcoming activities far ahead to make sure that they wouldn’t be hit by unexpected expenses.

The family budget for kids’ recreational and entertainment activities could go up to $10,000 a year. That translates to 10 percent of the family income.

Experts say there is no formula of how much should be spent on children’s hobbies that fits all families — again, it depends on family prioritization — but they do need to set a budget, look at the family finances holistically and trim expenses elsewhere.

3. Cut back on spending

When it comes to trimming expenses, pros say it’s more likely that the family’s lifestyle needs to change.

For example, when someone in the Rechkemmer family has a weekend sports tournament, they minimize the number of family members staying overnight in a hotel. For holidays and birthdays, Molly and Josh give practical presents for their kids, such as sports equipment, instead of the trendy electronic toys that their children long for.

Sam Rechkemmer plays baseball in May 2015. (Courtesy of Molly Rechkemmer)

For Chen, diligent saving on every single thing helped her get through the tough years. She barely had any expenses for herself.

“My life was pretty much bare-bones,” Chen recalled. “I’d always only buy food that passed expiration dates or was about to expire. You wouldn’t die eating it, anyway.”

Jude Boudreaux, founder of New Orleans-based Upperline Financial Planning, said the best strategy he’s seen is downsizing a family home. A client of his sold their big home and moved into a much smaller space — with no mortgage — to free up cash to pay for children’s activities.

Boudreaux said, typically, it’s easier to cut a family’s big-ticket expenses to make financial wiggle room. Parents need to make conscious decisions about whether or not to buy cars, or send their children to private schools if they also hope to develop their hobbies, he said.

But there is a bottom line: “Taxes must be paid. Utilities must be paid. Insurance must be paid,” said Lauren G. Lindsay, a financial adviser based in Covington, La.

After paying all the fixed bills and life necessities, families can look at the discretionary expenses and trim spending based on family priorities, Lindsay said.

4. Eliminate activities when needed

For the most part, the Rechkemmers try to stick to their budget, but there are moments when things get out of hand. The couple has periodically paused and reflected on the reasons they do all these activities.

“If it is to develop good friendships and stay active and be healthy and finding enjoyment in life, then that doesn’t need to come with the high burden of debt and so much stress,” Molly said. “If [the activities are] putting us into debt and causing so much stress, then it’s time to rethink if it’s all worth it and try to kind eliminate some things.”

5. Look for other resources or sources of income

Chen, the avid saver, said being thrifty wasn’t enough — she had to find other ways to earn more to support the family. Often she found herself participating in laboratory tests, earning $10 here and $20 there. Little things add up, she said.

At times, the mother and children all used their skills to support the family: Chen taught violin upstairs, Sophia taught piano downstairs and Albert went to students’ homes to tutor them in math.

You may be able to find outside help, too. For example, having Maria go on group educational trips allowed the dePillis family to save, as the school covered a large chunk of the expenses.

Lindsay encourages parents to explore financial aid opportunities before shelling out money for expensive extracurriculars, as some local camps and sports associations offer scholarships.

6. Talk to the children

Experts say the biggest “no no” when it comes to investing in children’s extracurricular activities is not consulting their opinions.

“Make sure it really is for them, not for us,” said Boudreaux, a parent himself. “Check our egos at the gate when we make the decisions.”

The kids need to be involved in the decision-making and understand the financial sacrifices the family is making, to make sure they will be as committed to the choice as parents are, Boudreaux said.

The dePillis family did that with Maria, and they worked out a plan together.

Maria is expected to enroll in the University of Hawaii at Hilo’s Japanese Studies program in the fall. She has made an agreement with her parents to stay in state for college. The in-state tuition is about $7,200 a year. Maria has also agreed to stay home during college so she could avoid taking out student loans.

“If she had gone to an out-of-state school, we would be paying $20,000 a year or more,” dePillis said. “I mean, imagine saving that kind of money. We feel like, ‘Oh, yeah, we will send you to Japan as much as you want.’”

7. Understand the consequences

The reason why these decisions are tough is that essentially, every spending choice is a trade-off, and it’s hard for parents to picture potential future risks, Boudreaux said.

Some trade-offs, such as deferring retirement or putting off paying debt can have severe consequences, experts say. In general, financial planners suggest parents put themselves and their futures first.

“Kids can get their own loans, and we can’t borrow for retirement down the road,” Rivers said.

However, in families where children are expected to support their parents in their old age, maybe it’s worth making those sacrifices now, experts say. In that case, parents should explicitly and appropriately communicate with their children about the expectations.

Chen said she has no regrets about putting off saving for her retirement.

“She was so good,” Chen said. “It would have been a pity if she had given up after a certain level.”

Sophia eventually studied piano performance and English at Oberlin College and Conservatory of Music. She became a journalist after graduation, but still keeps performing. “I am pleased that she has piano as a great lifelong companion,” Chen said.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at [email protected]

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How Fed Rate Hikes Change Borrowing and Savings Rates

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Since late 2015, the Federal Reserve has raised the upper limit of its target federal funds rate by 2.25 percentage points, from 0.25% in December 2015, to 2.50% in 2019.

The Fed is no longer expected to raise rates. Now, the question is whether the Fed will cut the federal funds rate sometime this summer. The market is increasingly confident that at least one rate cut will occur this calendar year.

MagnifyMoney analyzed Federal Reserve rate data to illustrate how the rates consumers pay for loans and earn on deposits have changed since the Fed started raising them two and a half years ago.

  • Credit card borrowers are currently paying $113 billion in interest annually, up $34 billion from the annual $79 billion they paid prior to the first Federal Reserve interest rate hike in December 2015, making introductory 0% APR deals all the more attractive.
  • Meanwhile, depositors earned significantly more from savings accounts. In the 12 months ending in June 2018, depositors earned $26.8 billion in interest on their savings accounts, up $16.8 billion from the $10 billion they earned in 2015.
  • According to our analysis, credit card rates are most sensitive to changes in the federal funds rate, almost directly matching the rate change with a 3 percentage point increase since December 2015. Credit card rates will continue to rise in line with the Fed’s rate increases, and if the Fed raises them again, the average household that carries credit card debt month to month will pay over $150 in extra interest per year compared with before the Fed rate hikes began. MagnifyMoney estimates 122 million Americans carry credit card debt month to month.
  • Student loan and auto loan rates have also risen  — but by less than half as much as credit card rates — in part because they are long-term forms of lending that are less reliant on the short-term federal funds rate. Federal student loan rates are set based on the 10-year Treasury note rate each May.
  • Savers at big banks have seen little change, with the average savings and CD account passing through only a fraction of the rate increase. However, that masks a big opportunity for savers who shop around and move deposits to online banks. Online banks have aggressively raised rates, and now often offer rates of more than 2%, versus just 1% in 2015. That’s over 20 times what typical accounts pay.

In addition, MagnifyMoney also looked at the impact on consumer rates the last time the Fed reduced rates in 2007.

 

Generally, unsecured loans like credit cards and personal loans are more rate-change sensitive than secured loans like autos and home mortgage rates, no matter the direction of the rate change. However, savings products like Certificates of Deposit are a stark exception. Even after 3 years of fed funds rate increases, CD rates generally languished at rock-bottom rates until very recently, and then only increased modestly, relative to other financial products. Compare that to 2007, when it was the product most sensitive to interest rate cuts.

 

Let’s take a closer look at how the Fed rate hike impacts different financial products:

Credit cards

Most credit cards have a rate that’s directly based on the prime rate, for example, the prime rate plus 9.99%. As a result, card rates tend to move almost immediately in line with Fed rate changes. In the current cycle, the rates on all credit card accounts tracked by the Federal Reserve have increased 3 points, even more than the Fed’s increase of 2.25 points.

That said, consumers can still find attractive introductory rate offers.

For example, 0% balance transfer offers have continued to have long terms even as the Fed hiked rates, with offers still available for nearly two years at 0%.

Credit card issuers make up for the rate hike with the automatic rise in variable back-end rates, as well as the increasing spread between the prime rate and what consumers pay on new accounts. They can also increase other fees, like late payment fees or balance transfer fees to keep long 0% deals viable.

The Federal Reserve tends to hike up interest rates gradually over time. And people in credit card debt will barely notice the rate increase in their monthly statement. When rates are increased by 0.25%, the monthly minimum due on a credit card will increase $2 for every $10,000 of debt.
The danger of such a small increase in the monthly payment is complacency. Remember that by paying the minimum due, you could be in debt for more than 20 years.

Rates are expected to keep rising, so it makes sense for consumers to lock in a low rate today. The best ways to lock in lower rates are by leveraging long 0% balance transfer deals or by consolidating into fixed rate personal loans.

Savings accounts

On average, savings account rates haven’t changed much since the Fed started raising rates. That’s largely because big banks with the biggest deposits and large branch networks have less incentive to offer higher rates, and this skews national data on rates earned because most savers don’t shop around to find higher rates at online banks and credit unions.

Consumers who shop around can find much higher savings account rates than three years ago, and shopping around for a better rate on your deposits is one of the best ways to make the Fed’s rate hikes work in your favor.

Back in 2015, it was rare to see savings accounts pay 1% interest.

Today, many online banks are competing for deposits by offering savings account rates in excess of 2%, flowing through about half of the Fed’s rate hike into increased rates for depositors. These rates will continue to rise as the Fed hikes rates. The increases are already apparent in the data. Depositors are currently earning more than $26 billion in interest on their savings accounts annually, versus $10 billion in 2015.

CDs

CD rates have moved faster than savings rates, up 0.41 points for 12-month CDs since the Fed started raising rates. That’s in part because they are a more competitive product that forces consumers to rate shop when they expire at the end of their 6-month, 12-month or longer term.

But that rate rise doesn’t fully reflect what some smaller banks are passing through, as the banks with the largest deposits have been slow to raise rates.

The rates on 1- and 2-year CDs at online banks have been increasing rapidly, and are now well over 2%, reflecting much of the Fed’s rate increases since 2015.

The rates on 5-year CDs have also finally begun to increase, with some banks offering 60-month CDs with rates above 3.50%. As a result, the rate curve has been steepening.

Still, a reasonable strategy would be to invest in short-term (1- and 2-year) CDs. If competition on the short end continues, you can get the benefit in a year on renewal.

Student loans

Federal student loan rates are set based on a May auction of 10-year Treasury notes, plus a defined add-on to the rate. Today, rates for new undergraduate Stafford loans stand at 5.05%, up from 4.30% before the federal funds target rate began to rise.

Since student loan rates are determined by the 10-year Treasury rate, rather than a short-term rate, they are less directly related to changes in the federal funds rate than some shorter-term forms of borrowing like credit cards. Instead, future market views of inflation and economic growth play a role. Federal student loan rates are capped at 8.25% for undergraduates and 9.5% for graduate students.

For private refinancing options, rates depend on secondary markets that tend to follow longer-term rates, rather than the current federal funds rate, but in general, a rising rate environment could mean less attractive refinancing options.

Personal loans

Personal loan rates tend to be driven by many factors, including an individual lender’s view of the lifetime value of a customer, funding availability and credit appetite. Most personal loans offer fixed rates, and in a rising rate environment overall, we expect these rates will go up, making new loans more expensive, so consumers on the fence should consider shopping for a good rate sooner rather than later. Since the end of 2015, rates on 2-year personal loans tracked by the Federal Reserve have increased by 0.61 basis points.

Auto loans

Prime consumers who shop around for an auto loan can still find very low rates, especially when manufacturers are offering special financing deals to move certain car models.

But the overall rates across the credit spectrum have gone up since the Fed raised rates, in part due to the rate hikes and because of recent greater than expected delinquencies in some parts of the auto lending market.

Mortgages

Since the Fed started raising rates in late 2015, the average 30-year fixed mortgage rate has increased from approximately 3.90% to 4.55% as of Dec. 27, 2018. The mortgage market tends to follow trends in longer term bond markets, like the 10-year Treasury, since mortgages are a longer-term form of borrowing. That shields them from the impact of Fed rate hikes, and it’s not unusual for mortgage rates to decline during some periods when the Fed is raising rates.

What can consumers do

Eve if rates are no longer going up, life is still expensive for debtors, and more rewarding for savers than in recent years.

If you are in debt, now is the time to lock in the lowest rate possible. There are still plenty of options at this point in the credit cycle for people to lock in lower interest rates.

If you are a saver, ignore your traditional bank and look online. Take advantage of online savings accounts and CDs to earn 20 times the rate of typical big bank rates.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

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How to Pay for Transition-Related Expenses Without Going Broke

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Once a trans person has accepted their gender identity and decided to begin transitioning, it’s an exciting and liberating time. Everyone’s transition looks different, and each person may choose varying interventions. But as soon as someone starts looking at the costs, which could include doctor appointments, bloodwork, hormones, legal name and gender marker changes, a whole new wardrobe and potentially, surgeries, the costs can skyrocket quickly.

This is an especially tough pill to swallow for the trans community, which already faces significant financial disadvantages compared to the general population, according to the National Center for Transgender Equality. As revealed in their 2015 report, this is because many trans people face unsupportive families and suffer from discrimination with employment and housing, which results in financial distress and homelessness at higher rates than cisgender people.

“In the trans community, we see the highest amount of unemployment and housing insecurity,” said Emmett Schelling, executive director of Transgender Education Network of Texas. “Most trans people can’t save money because they’re worried about their day-to-day survival.” This makes it difficult to find money for binders, electrolysis or other transition-related needs when just getting by can be a struggle.

While there are some transition-related expenses that are difficult to avoid, many can be reduced or wiped out with the help of certain resources and strategies. Here’s how to save on several of the most common expenses.

How much does it cost to medically transition?

Not every trans person desires hormone therapy or surgeries. But for those who do, the costs can be high and vary greatly depending on the provider and whether you have health insurance that covers it.

For some ballpark figures, below are the costs of some of the most common transition-related surgeries at The Philadelphia Center for Transgender Surgery, including hospital and anesthesia costs. Note that this clinic and others provide a discount when multiple surgeries are done at once.

For trans women seeking hair removal, electrolysis and laser hair removal are used because they’re the most permanent methods. However, costs may vary drastically, since the number of sessions required to achieve results is unique to each individual and the amount providers charge can differ significantly.

Male-to-female confirmation surgeries and procedures

Breast augmentation

$9,000

Vaginoplasty

$25,600

Rhinoplasty

$9,000

Thyroid cartilage reduction (trachea shave)

$5,400

Female-to-male confirmation surgeries and procedures

Basic chest masculinization

$7,800

Phalloplasty

$24,900

How to finance your transition

Apply for grants

If you want a surgery or procedure that’s still beyond what you can afford, consider applying for a grant. There are several specifically for people who need assistance while transitioning.

“There are a few different nonprofit organizations out there that provide financial assistance for people seeking gender affirming surgery or electrolysis or binders,” said Ryan Sallans, a transgender author, public speaker and diversity trainer. He is also a volunteer vice president of The Jim Collins Foundation, which has an annual grant cycle that awards financial grants for gender-affirming surgery to a limited number of applicants. They offer one type of grant that pays for 100% of surgical fees.

“It makes us a unique organization,” Sallans added. “Being able to tell people that 100% of surgical fees are covered is completely life changing, because a lot of people aren’t able to even put down $1,000 or $2,000 for a surgery.”

Through a legacy donation by a trans woman, they also have a grant available that provides 50% of funding and requires the individual to put down the other 50%. “I actually really love that grant — sadly it’ll be gone in two years — because there are many people who may have most of the money,” he said. “They just don’t have that last piece.”

According to Sallans said each year, they typically receive 400 to 500 applications, and in the past, they were only able to award one to three grants annually. For the last two years in a row, they’ve been able to provide three grants that covered surgeries at 100% and two that covered 50%. The amount they can give out each year depends on how much they’re able to fundraise.

The nonprofit Point of Pride also started offering surgical grants for the trans community a few years ago, and they’ve given out more than $103,000 total in grants. They also have a program to help with the costs of electrolysis for permanent hair removal.

Get creative with fundraising

If you’re struggling to piece together enough money for transition-related expenses, you may turn to credit cards or a loan. But rather than getting into debt, consider fundraising first. Many trans people turn to GoFundMe, Schelling said, which allows them to raise money from their friends and family.

Some people also organize fundraisers; for example, working with local LGBTQ bars to have a percent of one night’s proceeds go toward their surgery. Schelling said he’s seen people in Texas do “plate sales,” where they hold an event and make food, like homemade enchiladas, and sell plates of it to raise money for their surgery. If you get creative with fundraising, he said, and combine it with any savings you do have, you can meet your goals a lot faster.

Explore your insurance

If you have health insurance, read your policy carefully to determine what types of transition-related care is and isn’t covered. If you’re not able to figure it out, call your insurer or ask your job’s human resources team to help you understand your coverage.

Be aware that under the Affordable Care Act, health insurers and medical providers are not allowed to discriminate against you because you’re trans. While this doesn’t mean they have to cover every procedure, an insurer cannot categorically exclude transition-related care, and providers aren’t allowed to deny you care simply because you’re trans — though unfortunately it sometimes still happens.

If you have faced discrimination from an insurer or medical professional, you can file a complaint with the U.S. Department of Health and Human Services. If you need assistance, contact The Transgender Law Center Legal Helpline or call (415) 865-0176 x306.

If you’re on Medicare, know that transition-related care that’s deemed “medically necessary” is supposed to be covered. However, attempts to get surgeries covered by Medicare are not always successful, so ask your doctor about their history with the program and whether or not previous claims have been accepted.

Consider borrowing to help cover the costs

If you’re not able to pay for transition-related costs with savings, you might be able to finance them with one of these options.

Credit cards. Credit cards offer an easy way to borrow funds. Your credit limit might not be enough to pay for an entire major surgery, but it could cover smaller procedures or miscellaneous costs. If your credit card’s interest rate is high, many credit cards offer 0% interest rates for a year or longer, giving you time to make a dent in your debt. If you go that route, just make sure that if you carry a balance, you can handle the payments once the regular APR kicks in. Also keep a lookout for annual fees, and be aware that carrying a high balance can hurt your credit score since it increases your credit utilization ratio.

Personal loans. Another option to pay for transition-related costs or surgery is taking out a personal loan, which gives a lump sum that’s then repaid with interest in fixed payments. You can take out a personal loan from a traditional financial institution, like a bank or a credit union, or from an online lender. Personal loans are typically available anywhere from $1,000 to $50,000, and interest rates vary significantly depending on credit history.

Medical financing. There are also certain financing options specifically for medical expenses. One is CareCredit, a medical credit card accepted by some healthcare providers. CareCredit often offers 0% interest for certain time periods, but if you don’t pay off your balance by the end of that predetermined “promotional period,” you will owe interest retroactively, and at a very high rate. CareCredit should only be used if you know you can pay off your balance in full before interest kicks in. Another option is Prosper — the company known for peer-to-peer lending also offers a special type of healthcare loan in partnership with some doctors. If your doctor uses their system and you’re approved, you can get a loan for up to $35,000 with no retroactive interest.

Find extra work

Another way to help pay for transition-related expenses is to supplement your income. Consider turning to the gig economy, where you can give rides, deliver groceries, charge scooters and a number of other flexible jobs.

Schelling said he’s even encountered many trans people who work at Starbucks for several years. This offers a unique opportunity, he said, since it not only brings supplemental income, but Starbucks also offers extremely trans-inclusive health insurance, even to part-time employees.

3 ways to save on transition-related expenses

Find free clothing

Some trans people slowly start building their new wardrobe over time, but others don’t start purchasing attire that matches their gender identity until they begin socially transitioning. This can get expensive quickly — not to mention, many transitioning people are uncomfortable shopping in public, Schelling said.

One way to get around this is to participate in or start a clothing swap with other members of the trans community. Some organizations put these together, but if there’s nothing in your area, try to organize one yourself. Have everyone bring some clothes they no longer wear, and swap them with those who are now looking for those types of clothes. People can also bring shoes, jewelry, bags, makeup and other items they no longer need.

“In the city next to me, there was a group of trans people who were doing that,” Sallans noted. “They were collecting binders and clothes and giving it out to people when they had a social group meeting or peer support meeting.” Beyond the immediate need, he added that it also helps build a sense of community.

If a clothing swap isn’t an option for you, consider visiting local thrift stores or online marketplaces like Thredup or Poshmark to find gently used clothes at a huge discount.

Schelling added that some organizations and businesses offer free chest binders for trans people who can’t afford one. For example, Point of Pride offers a free binder program.

Look for LGBTQ-friendly healthcare

Many trans people seek out hormone replacement therapy, but if you don’t have health insurance, accessing HRT and any other basic healthcare needs can be extremely expensive. Fortunately, more and more LGBT-focused clinics are currently opening up around the nation, according to Sallans.

“There are different non-profit organizations that can subsidize costs, whether you need access to hormone therapy or general prevention care, like reproductive and sexuality care,” he said. Planned Parenthood is one such organization, he also noted; while not every location offers hormone replacement therapy, many do.

There are also individual clinics, like Kind Clinic in Austin, Texas, that focus specifically on healthcare for the LGBTQ+ community and offer discounted services.

Schelling’s organization has also observed the increase in clinics that offer trans healthcare.

“A lot of times, the upside is there’s access to competent medical care, and some of those clinics assist you with the costs of your medications,” he said. “The downside is that usually there’s a limited amount of days or evenings these clinics are open, so once people find out, the wait list can be two to three months out.” However, he noted that if you’re looking for hormone therapy, once you have your initial blood work completed, you typically only have to go in every few months.

Access free or discounted legal assistance

If you want to legally change your name and/or gender marker, you’ll have to go through your legal system to get new IDs. “Having people who are knowledgeable in this process is extremely important since it can be extremely overwhelming and expensive,” Sallans said. While using a lawyer for this is optimal, especially since laws vary by state, it can be expensive. Sallans said he did his all himself, which was much cheaper, but it was also very daunting.

Across the country, there are law clinics that offer free legal services for name and gender marker changes. For example, in San Antonio, Texas, the local LGBTQ center, The Pride Center, provides free legal gender and name changes through a legal clinic with a local law school. If there’s a law school near where you live, find out if there are any law clinics or programs available to help.

Some individual lawyers also offer free or discounted services for transr members of their community who have these legal needs. If you’re not sure where to start, and your city has an LGBTQ chamber of commerce, see if any lawyers are members. If there are any LGBTQ publications in your city, see if any lawyers advertise in them. Sallans says some nonprofits also offer these legal services for free in various areas.

Transitioning can be an expensive endeavor, but there is an ever-increasing number of resources and organizations available to help make the process more within reach.

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Emily Starbuck Gerson
Emily Starbuck Gerson |

Emily Starbuck Gerson is a writer at MagnifyMoney. You can email Emily here

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