How much does it cost to raise kids?

May 21, 2012 — 4 Comments


Each year the US Department of Agriculture publishes their report on “Expenditures on Children by Families“.  This report gives us the estimated costs of raising a child until age IMG_352317.  You know, the scary numbers we hear about it costing a quarter of a million dollars to raise a kid – not even including costs of college?!?

Well, it frightens me every time I hear the costs of raising a kid, but I decided to dive into to the numbers to see what they really mean (other than people with kids will be broke!).  There’s good news and bad news; which would you like first?  How about I start with the bad since it already sounds really bad!   The average cost to raise a kid born in 2010 to the age of 17 is $226,920 if you make between $57k – $100k.  If you make less than $57k, the average cost drops to $163,440; if you make more than $100k, the average cost skyrockets to $377,040!!

I’ll give you a second to catch your breath before I tell you the good news.  The good news is you’re probably already spending a lot of that money now even if you don’t have kids but plan to.  I’ll get into the full reasoning as I go through each section, but the major reason is people purchase bigger houses with the intent of filling them up with little ones… and housing costs account for 31% of total child-rearing expense.  Ignoring housing costs, it already brings our $227k down to $159k over 17 years!  Feel a little better?

When do we spend all of this money on kids?

As I pointed out earlier, the amount spent per kids varies widely based on income level.  Costs for non-discretionary items (foods, clothes, etc) tend to be pretty similar among incomes because you can only spend so much on Gerber baby food.  However, costs increase big time when you start looking at discretionary items (housing, education, etc) because people tend to spend a lot more money on these items when they have more money.  Take a look at how costs are incurred when reviewed by age and income level. (Add in expenses by family, food somewhere)

Family expenditures on a child by income level and age - USDA

Not surprisingly, the costs tend to increase as the child gets older.  One basic reason is because the USDA factors inflation into the cost equation.  However, costs also increase because the kids eats more and they want a car.  Oh ya, and maybe a cell phone, iPad, and a new computer.

When we take the average spent per year on kids by income group, it looks like this;   For those making:

– Less than $57,600 – spend $9,614 per year per kid

– Between $57,600 and $99,730 – spend $13,348 per year per kid

– Making over $99,730 – spend $22,179 per year per kid

The good news is many of these costs are controllable.  There’ s a reason costs vary so widely by income level… because they can.  If you only have $5,000 per year to raise a child, I’m sure you’re going to find a way to do it.  However, it’s also possible to let your kid cruise around in a Hummer stroller with 20″ wheels at a much higher price!

Where the heck is all of this money going?

As mentioned before, the biggest chunk of expenses on kids is from housing (31%).  The second highest expense item is pretty close between food and child care/education.  These two categories move inversely from each other because when the child is younger, child care and education costs are higher usually due to day care, but then they eat a lot more when they get older!  It scares me to hear how much some of my friends are spending on day care (over $2,400 per month for two kids); I see why some of them want to transition to a one income family.  My mom also said that we (four boys) drank 12-14 gallons of milk per week while growing up.   Wow, that translates to over $150 a month in today’s dollars!

Family expenditures by category and age - USDA

Transportation costs average $120/month per kid until the child gets older and then jumps to $125/month because apparently they want their own car.  I thought the jump would actually be higher but transportation costs were estimated by the percentage of total transportation relating to child-rearing, which the US Department of Transportation says is 59%.  These numbers may not account fully for the purchase of a new car.  On the other hand many of us bought our own first car.

Clothing stays pretty uniform for a kid at around $60/month (get it, uniform?).  This isn’t a huge surprise as I noted in a previous article that we spend $144 per month on clothes for the average family.

Does it matter where you live?

The short answer is:  Yes, the costs of raising a kid vary widely by region.  It’s highest in the Northeast  where it tops out over $16,000 per year at age 15-17.  It’s lowest in Rural America where it tops out around $10,500 per kid.   I grew up in Oklahoma where private Kindergartens and high aptitude preschools weren’t in vogue so we were definitely on the lower range.

In fact, many parents are taking out pre-college loans in order to pay for their kids K-12 schooling!  That’s one of the most ridiculous things I’ve ever heard… and I thought four years of student loans for college was bad!!

Family expenditures on a child by region - USDA

In Conclusion, maybe it’s not that bad

Not all of these expenses are going to be brand new for you for each kid.   You’re probably paying for many of them now, and the ones you aren’t already paying for are controllable to some extent.   Also, as you have more kids, the costs go down per child.  If you want to estimate how much you’ll spend per kid and additional kids, check out the USDA’s child cost calculator.

What do you think parents, are these numbers representative of what you spend?

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4 responses to How much does it cost to raise kids?

  1. Fur children cost much less than human ones. Interesting break down of the numbers that’s for sure. I read an article a couple of weeks ago about two highly-educated parents who figured they would need to save $1,200 a month to send both of their kids to college. Needless to say, the parents were struggling to make a mortgage payment and to pay on their own student loans. Not that I have kids, but I wouldn’t feel obligated to cover all of their education. I can see putting some money away, like enough to help with tuition at a state university. My parents never put away money for my schooling, but I’m lucky because I got a whole bunch of scholarships.

    • Haha, I believe that most of the time but our dog was super expensive last year because she had so many skin problems! Also, I agree with your sentiment that parents should fund their own retirements before their kid’s college education. The kid can always take out loans for school, but the parents can’t take out loans for retirement!

  2. Just as you mentioned in this, there are a number of things that a child doesn’t actually need. We don’t spend money on the latest clothes or newest tech for either of our girls.

    My youngest has a ipod4 she bought herself and she raids her cousins clothes drawer all the time (this cousin tends to have more recent clothes styles).

    My oldest bought her iphone4 and pays for the monthly charges. She is also paying her own way throw school.

    • I think the biggest eye-opener/waste of money we’ve seen during our trip is how much most people in the US spends on clothes – including how much we used to spend. We lived out of a bag for nine months with not very many clothes and we were just fine… it’ll be interesting to see how we change our ways now!

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