The USDA has released their annual report on how much it costs to raise a child in America that was born in 2009. As a pleasant surprise, the average has only risen about 1% from last year’s report, but the number is staggering nonetheless, especially in single-earner situations with multiple kids. Some high points of the report included the following:
- Annual expenses run from about 11-13K depending on the child’s age.
- Childcare and education account for about a third of the cost
- Regional influences are noticeable – living in the Northeast is noticeably more expensive than the midwest.
- The per-child cost does decease measurable with each child. I’m glad this “economy of scale” was not overlooked. For instance, we pass on toys, clothes, buy food in bulk, etc. spreading costs across multiple children.
Child Cost Calculator:
There is an additional tool for parents that want to model characteristics more relevant to their particular situation. This calculator allows you to model your family’s situation for your particular region, income demographic, etc. From there, it spits out a report broken down by categories like travel expenses, childcare, healthcare, etc.
The figures presented in both the report and the calculator tool do not reflect our reality and I suppose that of many of you either. First of all, when I ran the model for our situation utilizing the Northeast and high income bracket, it claimed we’re spending $46,000 per year on our three children. Since most of that is presumably after-tax dollars, that means our children alone are consuming the equivalent of say, $70,000 in pre-tax earnings. So, let’s assume for a moment that this is true. For a family making say, $90K per year, if they didn’t have those three kids, they’d only need the difference of $20K per year (pre-tax, so more like $12,000 annually) to live the same lifestyle? I don’t think so. I think many of the fixed costs of living were amortized into the cost of each child. For instance, I’d live in a house one way or the other but by spreading that mortgage cost onto my children, it artificially inflates the purported cost of raising a child. Next, we drive two cars regardless. But by spreading the cost of cars, gas and maintenance onto the kids, those expenses are spread onto the childrens’ calculation.
My frustration with reports, articles and headlines like this is that it offers a convenient excuse or unfounded fear in twenty-somethings and thirty-somethings that they shouldn’t have children because they can’t afford them. The reality is that people make it work. People with higher incomes tend to spend more on their children, so those numbers are probably at least directionally correct. However, the problem with the majority of Americans is that they live as though they make more than they actually do. Kids or no kids, when you’re making $60K and living a $100K lifestyle, no wonder life seems expensive!
It’s not the kids, it’s because you’re acting like a kid with your money!
Costs drop dramatically when one parent stays home as well and this notion that both parents have to work is often unfounded as well. In virtually all the cases of our dual-worker family friends, one of the earners makes about what I make, but they say they both “have to” work. But they have monster homes and luxury vehicles. It’s really a priority thing, not a necessity. I mean, they already have health benefits and our family makes it work, so why can’t theirs? With one parent staying home, while that additional income isn’t there, the cost per child drops dramatically due to the expenses related to childcare and all the unintended consequences of working (needing a housekeeper since nobody has time to clean, constant trips to the doctor since daycare kids are sick constantly, etc.). People also needlessly send their kids to private school even though the public school is fine. Decisions like this greatly increase the “per child” cost.
When people think they can’t afford kids now, they opt to work well into their 30’s or even early 40’s and then decide, “OK, we have enough money to have a kid”, and then they potentially run into other problems ranging from the inability to conceive to increased risk of birth defects, autism and other disorders that have been proven statistically to increase with parental age. What’s the takeaway? Kids can be expensive and they will change your life. But they are not prohibitively expensive for most and the way they change your life is well worth trading your BMW for a Honda. It just comes down to priorities.
Link to USDA 2009 Report