Raising a Child Costs Me How Much???

I don’t think most people refuse to bring a little bundle of joy into the world because of cost. Babies are cute enough to disarm even the most fiscally sound person. But, before launching into parenthood, it isn’t a bad idea to get some idea what your offspring will cost you so you can be prepared and the sticker shock wears off before you accidentally name your baby “Money Pit”. I came across this great article by Tim Parker with Investopedia that does a great job of breaking the costs down.

Who Calculates This Stuff?

Each year, the U.S. Department of Agriculture (USDA) releases the “Expenditures on Children by Families” report. States use this report to adjust child support and foster-care payment amounts, and other organizations use it for official business needs too. In other words, it’s the gold standard for these data. Here is a look at what parents spend their money on for their children, from the most to the least expensive needs.

The Top Cost: Housing

The largest expense, by far, is housing. Expenses include mortgage/rent payments, taxes, repairs, insurance, utilities and all of the “stuff” you buy for your home. These expenses accounted for 30% of a child’s price tag. But take heart. If you have more children, you don’t double or triple the expenses of one child because many of the resources are shared. You may have to add an extra bedroom but not a kitchen or living room. Naturally, you have to divide the housing expenses by the number of people in the home and consider that the use of these resources isn’t equal among family members. A 30-year-old dad is probably using more water and electricity than his 6-month-old daughter. Of course, the authors of the report have already made those adjustments.

There are even more variables that contribute to higher or lower home costs. For one, housing expenses vary widely by region. Monthly expenses in the northeast for a low-income family, for example, were $3,680; compare that with the costs in rural areas of the country, which were slightly more than $1,900.

Childcare and Education

As the largest monthly household expense, childcare requires that you shell out an average of $188 per week if your child is in daycare, or $477 per week if you have a nanny. Twenty-eight percent of parents reported spending more than $20,000 annually on childcare. That equates to 18% of the total cost of raising a child. One interesting fact: If you have more than two children, a nanny may be more economical than daycare because nannies tend not to charge twice the price in the same way some daycare centers do. (However, daycare centers may give a discount if you have more than one child enrolled.) For more, read Childcare Costs Across the Country.

Food

If you already have children, you know they eat a lot. If you had one dollar for every time your kid said, “I’m hungry,” you could probably offset most of your annual food expenditures. The USDA breaks expenses down into four spending levels. For lower income families or those who can stretch their budgets, there’s the low-cost “thrifty plan.” This is followed by the “low-cost plan,” the “moderate-cost plan” and, finally, the “liberal plan.”

For a 1-year-old child, costs range from $94.40 per month to $173.50, with the moderate plan running $142.60 a month. By the time a child is 9 years old, that moderate-cost plan has risen to $267. On the same plan, a male 18-year-old eats $309.50 worth of food every month, and a female, $250.50. Food expenses came in around 16% of the total over 18 years.

The Grand Total

As for the rest of the expenses, transportation accounted for 14%; healthcare, a surprisingly low 8%; clothing came in at 6%; and all other expenses, 8%. In total, once a child reaches adulthood (age 18), parents will have spent an average of $245,340. That’s $4,260, or an increase of 2% over the calculation for the previous year. If you have children, you know that as they get older, they cost more. The study came to the same conclusion: When a child is between birth and 2 years old, he or she could cost about $12,940 annually, but by age 15, the cost might rise to $14,970 – $2,030 more.

Location, Location, Location

Purchasing a home is all about finding the right location, but it’s even more of a necessity when you’re raising a child. Child-rearing costs vary by more than $340,000, depending on where you live.

If you live in the borough of Manhattan in New York City, the most expensive city in America for child rearing, you will pay more than half a million dollars – $540,514. That’s more than twice as much as the national average. Honolulu comes in at $429,635 and San Francisco will cost $402,112. In contrast, head to Norman, Okla., and you will pay about $45,000 less than the national average: It “only” costs $199,298.

Harlingen, Texas; Ashland, Ohio; Salina, Kan; and Pueblo, Colo., round out the top five least expensive cities in which to raise a child. See also Most Expensive States to Raise a Child.

Your Marital Status

Your relationship status has an impact on the amount it will cost to raise your child, too. Single parents will spend an average of 7% less than two-parent families, but that’s because single parents are more likely to be in a lower income bracket. According to the USDA, 85% of single earners make less than $61,530, but only 33% of two-parent families fall into the lowest bracket. However, although single parents might spend less than two-parent families, the percentage of their income that goes to their children is higher. For tips, see Budgeting as a Single Parent.

That Doesn’t Count College

None of these numbers take into account the cost of a college education. The average annual cost of a public college comes in at $18,390, and for a private college, $40,920 per year. If parents don’t want to see their child becoming the next graduate with a staggering amount of student loan debt, they will have to save an average of $109 monthly for a public school and $215 for a private school from the time that child is born, provided the money is invested in a 529 plan.

The Bottom Line

Nobody wants to think of their children as just an expense, but at an average annual cost of up to $15,000 (and the possibility that it could be higher, thanks to where you live and childcare), the financial side of child-rearing can’t be ignored. Luckily, frugal parents have found ways to save on the expense of having children. For money-saving ideas, see 5 Ways to Save on Childcare Costs.