The Real Cost of Raising Children

By on May 17, 2017

If you are looking forward to parenthood, you already know that it’s going to cost you. From prenatal care, diapers and groceries to day care, clothing and saving for college, having a child requires some adjustments to your personal finances, financial goals, monthly budgets and savings plans.

According to the last US Department of Agriculture report, a middle-income American couple can expect to spend, on average, an estimated $250,000 on kid-related expenses from the time the child is born until they turn 18. Of course this is just an average, the actual cost is going to vary greatly based on family income and which part of the U.S. you live. In rural parts of the country, families may be able to support children by spending only $145,000, but in California or New York, a family may spend as much as $450,000.

For those becoming parents this year, you may want to estimate you need at least an additional $77,000 — for a total $327,000 — just to keep up with the rate of inflation (assuming the rate holds around 1.5 percent) until 2032. And incredibly, this 18 year estimate does not include the cost of a college education which, according to Princeton Review, may see tuitions hikes drive the cost up to 40 or 50K for four years at a public in-state university, and 90 to 130K for four years of private university education in 2030.

Where Does the Money Go?

The total cost of raising a child (after adjusting for inflation) has grown 23% since the Department of Agriculture began providing estimates in 1960. The vast majority of the increased spending represents progress in the middle class’ ability to meet the most basic needs of our children, with some leftover for promoting our children’s’ well-being through high-quality services (such as health care and early education) that were once the exclusive province of the rich.

Of the $250,000 – $350,000 parents can estimate they will spend on a child from birth to 18, the money is primarily divided among these seven areas:

  1. (30%) Housing: $75,000 on shelter (rent, mortgage, utilities, etc.).
  2. (18%) Care and Education: $45,000 on day care, sitters, tutors, school supplies, etc. (NOT INCLUDING THE COST OF COLLEGE).
  3. (16%) Food: $40,000 on food, school meals, etc.
  4. (14%) Transportation: $35,000 on transport (purchasing a car or public transport fees, insurance, gas, maintenance, etc.).
  5. (8%) Health Care: $20,000 in insurance, co-pays and medication.
  6. (6%) Clothing: $15,000 extra for clothing, school uniforms or shoes.
  7. (8%) Miscellaneous: up to $20,000 on personal care items, entertainment, camps, hobbies, gifts, etc..

It’s easy to conclude that the cost of raising children is becoming more burdensome over time, and the historical data suggests that’s right — but only half-right.

Housing, Healthcare, Food and Transportation

Since 1960, we have seen a dramatic drop in the amount parents must spend to feed a family, dropping from 24 to 16 percent of the total cost to raise a child; same goes for clothing our children, which is almost 50 percent cheaper, even after adjusting for inflation.

It is the cost of housing, transportation and healthcare which are relatively more expensive, although the services now offer much better amenities, conditions or life-saving abilities for children than than in years past. Regardless, the cost of apartments, homes, cars, electricity and gas are going to consume nearly 50 percent of what you plan to spend on you kids each year.

Child Care and Education

The next largest chunk of spending is going to go towards the care and education of your child. In 1960, parents only spent a fraction (2%) of their budget on preschool, day care or education; in the 21st century, child care and education grew to consume 18% of the family budget.

Simultaneously, the costs of these services has skyrocketed. Not only will private preschools come at a premium, but the babysitter now charges $6-15 per hour, versus the $.50 per hour they earned in 1960; that’s over a 2000% jump in cost.

A Child Grows, Spending Priorities Will Change

For each of those eighteen years, parents can expect to spend about an average of $13,888 per year (with some years requiring more money and others much less). Expenses will vary based on the needs of your children and their stage of development.

For example, when they are babies or toddlers you will spend more on care and essentials; while in their growing pre-teen years, food and extracurricular costs tend to go up; and in their teenage years, kids will want to spend more on miscellaneous gadgets or high school hobbies.

Here is an idea of where most of that money will be spent as your child develops:

  • Infancy (0-12 months): Diapers
  • Toddler (12-36 months): Daycare
  • Preschool (Ages 3-5): Education and Health Care
  • Elementary School (Ages 5-10): Extracurricular activities (music, camp, enrichment activities), Health Care and Food
  • Middle School (Ages 10-13): Electronics and Food
  • High School (Ages 13-17): Extracurricular activities (sports and hobbies) , Food and Electronics

Can Parents Do Anything to Bring Down the Cost of Raising Children?

First and foremost, parents can take the USDA estimates to a trusted financial planner. Review your current budget, retirement plans, emergency savings and financial goals to make necessary adjustments. Then, with some trusted professional guidance, brainstorm ideas for increasing income, saving more and cutting costs so taking care of your children is more affordable.

You may find both spouses need to bring in income — perhaps a part-time or full-time job — it will depend on your needs and resources for care. Some parents choose to stay at home and make money through in-home businesses or telecommuting to bring in income and cut down the cost of outsourcing care.

Others will find excellent employer-provided child care or pre-tax flexible spending accounts so parents have the peace of mind to focus on work while knowing their kids are supervised and their pocketbook isn’t empty.

Some families choose to reap cash from their investments or re-balance their portfolio to either reduce risks or take bigger risks for greater returns. And some families may need to reallocate 1 or 2 percent of their paycheck deductions for retirement into an emergency or spending account for pediatric care, baby clothes and other essentials.

A word of caution: When making adjustments to your personal finances to support the cost of raising children, many parents cut their retirement savings, however, they may be sacrificing their future for a four-year degree their child may not use. If saving for your child’s college expenses is a goal, be careful to consider your own future financial needs and the ability of your child to earn a portion of their tuition through part-time work or scholarships

Save Money at Every Stage of Raising Your Child

Finally, there are numerous ways to save on daily essentials for children, everything from coupons to buying slightly used clothing. Let’s take a final look at some ways to save on the essentials at those same stages of development:

  • Infancy (0-12 months): Babies don’t really need shoes until they begin to walk (around 9 – 12 months), so even though those mini high-tops are cute, they really aren’t necessary. And babies won’t know if they are in a $50 or a $500 stroller, so unless it’s essential for maintaining your lifestyle as a pro-runner you buy a reasonably priced strolled – or better yet, a slightly used one.
  • Toddler (12-36 months): Tots grow rapidly and will be learning to run, jump and play, so spending a lot of money on clothes is not necessary. Buy slightly used or save hand-me-downs from older siblings or cousins.
  • Preschool (Ages 3-5): Toys are starting to become more complex and expensive, but children still have a short attention span. Be sure the gifts you buy are going to be used enough to justify the purchase.
  • Elementary School (Ages 5-10): Once kids are in school they are going to get sick. Shop around for affordable health insurance so every trip to the curse doesn’t bust your budget for the year.
  • Middle School (Ages 10-13): Kids are growing again and starting to express themselves through clothing choices; rather than spend a lot on expensive designers, encourage them to seek out boutique items or discount basics since they will probably grow out of them quickly. In addition, your food spending is likely to increase, so it’s time to start buying in bulk to save money on items you go through often.
  • High School (Ages 13-17): Here the amount parents spend can actually go down a little. By now, these kids can take part-time jobs and start contributing to the cost of entertainment, miscellaneous personal items, gadgets and even transportation. On the other hand, parents can continue to find savings in their own budget to pay for essentials while teens save money to pay for college.

The Cost of Raising Children is Priceless

Even though studies try, you can’t put a number to the love and joy a child brings to a family, but having an idea of what to expect can help you plan for the future.

If you want to have children, you can adjust your personal financial plans to cover the cost of building an enriching and safe environment. If you already have children and are struggling to make end meet, perhaps it’s time to assess where every dollar in your budget is spent and how you can change your spending habits, bring in more income or save on basic services to ensure your family’s financial safety net is affordable too.

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About Ogden Harmond

FSN tax columnist - Ogden knows all too well how tedious and confusing it is to file and pay taxes, so he is offering up some savvy tips, tricks and tools to help individuals and business owners pay on time and save. With up to date news and common best practices, Ogden will help you take control of your taxes. Find Ogden on !

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