Nobody wants to financially evaluate a child as they would the purchase of a car or home, but by the time a child reaches the age of 18, they will have cost their parents more than some houses. Be prepared to pay a lot of money for that cute little bundle. For example, parents who have a child today will spend, on average, $284,570 by the time the baby turns 18, according to Department of Agriculture (USDA) data.
The figure cited is for a middle-income married couple with two children and the USDA assumes that they had childcare and education expenses. Knowing these numbers will allow parents to better control their costs.
- On average, middle-income parents will spend $284,570 by the time a child turns 18.
- The largest expense is housing, followed by food.
- The cost of childcare varies widely and depends on where you live.
- The good news is that each additional child costs less, thanks to economies of scale.
The Top Cost: Housing
The largest expense, by far, is housing. Expenses include mortgage or rent payments, taxes, repairs, insurance, utilities, and all of the “stuff” parents buy for their home. These expenses accounted for 29% of a child’s price tag, according to the USDA study. 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 six-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. Expenses were highest in the urban Northeast and lowest in rural areas of the country, according to the USDA.
Single parents will spend an average of 7% less than two-parent families because they are more likely to be in a lower income bracket. But the percentage of a single parent's income that goes to their children is higher.
If you already have children, you know they eat a lot, so it may come as no surprise that this is the second largest cost of raising a child. If you had one dollar for every time your kid said, “I’m hungry,” you could probably offset most of your annual food expenditures. Food expenses came in around 18% of the total from birth through age 17.
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 one-year-old child, costs range from $96.40 per month to $177.70, with the moderate plan running $146.60 a month. By the time a child is nine-years-old, that moderate-cost plan has risen to $273.70. On the same plan, a male 18-year-old eats $311 worth of food every month, and a female, $248.50.
Childcare and Education
Childcare and education for parents who have this expense account for 16% of the cost of raising a child, according to the USDA. The cost of childcare in the U.S. ranges from $5,436 to $24,243 annually, according to the Economic Policy Institute (EPI). Needless to say, the cost of childcare depends on where you live.
Residents of Washington D.C. pay the most. Childcare for an infant costs $19,112 annually and $24,243 for a four-year-old. EPI data shows that in-state tuition for a four-year public college costs far less at $5,756.
Parents in Mississippi pay the least for childcare annually, which costs $5,436 for an infant and $4,784 for a four-year-old. This is less expensive than the $7,980 price tag for in-state tuition at a four-year public college.
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. On the other hand, daycare centers may give a discount if you have more than one child enrolled.
The Grand Total
As for the rest of the expenses the breakdown is:
- Transportation, 15%
- Healthcare, 9%
- Clothing, 6%
- All other expenses, 7%
In total, once a child reaches adulthood (age 18), parents will have spent an average of $284,570. This is up significantly from $233,610 for parents who had a child in 2015, based on USDA data adjusted for inflation.
The Good News: Economies of Scale
There is some good news when it comes to the cost of raising a child in America. Economies of scale also apply to the number of children you have. The USDA points out that each additional child costs less because siblings can share a bedroom and a family can buy food in larger, more cost-effective quantities. And while your offspring might not necessarily like it, clothing and toys can be handed down, and older siblings can often babysit younger ones.
The Bad News: Costs Don’t Include College
Also consider that the above numbers don't take into account the cost of a college education. The average annual cost of a public college (in state) for the 2019-2020 academic year comes in at $21,950; for a private college, it's $49,870, according to the College Board. That means saving early and utilizing a 529 plan or other investment vehicles to keep kids from graduating with a large amount of debt.
The Bottom Line
Nobody wants to think of their children as just an expense, but at an average annual cost of almost $17,000 (and the possibility that it could be higher, depending on where you live and childcare), the financial side of child-rearing can’t be ignored. But couples who know the numbers can strategize to lower the costs.