Nobody wants to financially evaluate a child as you would the purchase of a car or home, but by the time your kid reaches the age of 18, he or she will have cost you more than some houses.
Parents tend to underestimate the cost, even of that first year, as a recent survey by personal finance website NerdWallet points out. The actual cost of raising a baby in its first year is around $21,000 (for a household earning $40,000) and $52,000 (for one bringing home $200,000). According to the poll, 18% of parents thought it would cost $1,000 or less and another 36% put the price tag at between $1,001 and $5,000.
You’re going to pay a lot of money for that cute little bundle – somewhere around $233,610 by the time the baby turns 18, according to a 2017 Department of Agriculture (USDA) study. Knowing your numbers will allow you to better control your costs. The USDA assumes that you had childcare and education expenses, for example, and the figure cited is for a middle-income married couple with two children.
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 29% 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. Expenses were highest in the urban Northeast and lowest in rural areas of the country, according to the USDA.
Childcare and Education
A 2016 report from the think tank New America found that parents were shelling out an average of $180 per week per child for full-time daycare-center care. That's about 16% of your income if you make the 2016 median household income of $57,827 (Sentier Research) per year.
Needless to say, your cost depends on where you live. Massachusetts residents paid the most, around $16,682 annually or $320 per week; while the average in Arkansas (the least expensive state) was $6,590 or $126 per week. 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. (On the other hand, daycare centers may give a discount if you have more than one child enrolled.) For more, read Childcare Costs Across the Country.
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 $93.60 per month to $173.20, with the moderate plan running $141.70 a month. By the time a child is 9 years old, that moderate-cost plan has risen to $266.10. On the same plan, a male 18-year-old eats $304.60 worth of food every month, and a female, $245.20. Food expenses came in around 18% of the total from birth through age 17.
The Grand Total
As for the rest of the expenses, transportation accounted for 15%; healthcare, a surprisingly low 9%; clothing came in at 6%; and all other expenses, 7%. In total, once a child reaches adulthood (age 18), parents will have spent an average of $233,610. Overall, expenses were up $380 from 2014 with transportation accounting for the largest increase.
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.
In Washington D.C., you need $106,493 to make ends meet if you're a family of 4. In Nassau-Suffolk, N.Y., you'll need $103,606 and in New York City, $98,722.
Norman, Okla., Harlingen, Texas; Ashland, Ohio; Salina, Kan.; and Pueblo, Colo., round out the top five least expensive cities in which to raise a child. There it costs closer to $50,000. 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, 83% of single earners, but only 33% of two-parent families, fall into the lowest bracket (income less than $59,200). 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 for the 2016-2017 academic year comes in at $24,610; for a private college, it's $49,320 per year, 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 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.