After you learned how much it costs to have a baby, you may have had an inkling that parenthood was going to be expensive. But, each year your kids get older, you probably notice that they’re getting more expensive to raise. It seems that the cost of raising a child is directly proportional to their activity level.
Besides having growing appetites that seemingly make your grocery bill as large as your rent or mortgage payment, growing kids increase your fuel consumption (ask a soccer, taekwondo, or ballet mom or dad), your healthcare costs (braces, stitches, etc.), your outlay for all of their activities (Little League, swim lessons, musical instruments), and so much more.
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The cost of raising a child
According to the U.S. Department of Agriculture (USDA), the average cost of raising just one child from birth to age 17 was $233,610 — seven years ago. After you factor in inflation, that number is now easily in the neighborhood of 275,000 per child.
How much does this add up to for the average family in America? Well, in 2020, the typical family in the United States had 1.93 children under 18 (down from 2.3 children in 1960). So, after we do the math, we can see that the average family in America is going to spend about $530,000 raising kids — not including college.
You might ask yourself, “How can these tiny humans cost this much to raise?”
Depending on where you live, how many children you have, and how active they are, you’re probably spending between 10% and 25% of your income raising children. Let’s break it down by:
- Personal care
It’s probably not surprising to you, but the cost of housing is your biggest expense raising children at 29% of a child’s price tag after factoring in mortgage or rent payments, property tax, home repairs, insurance, utilities, and other miscellaneous housing costs.
How much you spend on housing will vary widely depending on the region of the country you live in. For example, families living in rural areas have the lowest average housing costs ($193,000), as opposed to families in the urban northeast with the highest average cost of $264,000.
Feeding a child is the second most expensive element of raising them (18%), next to keeping a roof over their head. The USDA breaks down food costs into four different levels for nutritious diets, starting with the “thrifty plan” for lower-income or cost-conscious families up to the “liberal plan.”
Childcare expenses account for 16% of the cost of raising a youngster, and it continues to increase. According to Care.com, the average rate for having two children at a daycare center in 2021 was $420 — per week.
The increasing acceptance by employers of remote work and letting employees work from home part or full-time has eased the burden of childcare costs for many families, cutting the cost by as much as 30% for some workers.
The breakdown of the remaining expenses looks like this:
- Transportation: 15%
- Healthcare: 9%
- Clothing: 6%
- All other expenses: 7%
[ Related: How much does daycare cost in 2022? ]
As previously mentioned, none of the numbers we’ve looked at include the cost of college tuition and fees. If you plan on footing part or all of the bill for college, you can expect to see the average annual cost of college being:
- In-state public institution tuition: $9,349
- Out-of-state institution tuition: $27,023
- Private 4-year university: $35,807
According to Education Data Initiative, the average cost of college has more than doubled in the 21st century, with an annual growth rate of 6.8%.
How to save money while raising a family
As inflation rears its ugly head, everyone is looking to lower their overhead and expenses, especially families with children. Here are some ways you can save money raising children.
Have the kids share a bedroom
The rent or cost of buying a 2-bedroom or 3-bedroom home is substantially less than a 4-bedroom home with all of the extra square footage that comes with it.
Buy food in bulk
Membership clubs like Costco or Sam’s Club have food and other supplies in larger, more economical quantities. If that’s not an option for you, buy “Family Size” boxes of cereal and other food items at your local grocer.
Hand down clothes & toys
Of course, you’d like to always buy your youngest the newest and shiniest toys and never-worn clothes, but that’s not always possible. You’re not a hoarder if you keep your older children’s toys and clothes and pass them down to the younger kids. Kids grow so fast; the chances are good that most of the clothes will be “like new.”
Have the older kids babysit
If there’s enough of an age difference, older siblings can often babysit their younger brothers and sisters. Your 18-year-old can likely take care of your 12-year-old when you need them to. This can be a substantial saving over paying a sitter or using after-school care.
Start a 529 college savings plan
529 college savings plans grow free from federal income tax, and any withdrawals you use for qualified education expenses are also tax-free. Start a plan for each of your children early to keep them, and you, from accumulating a large amount of debt for their higher education.
Have adequate disability insurance
As you know, your kids depend on you for food, clothing, shelter, and security. Without disability insurance, you’re putting everyone in your family at risk financially.
To make sure your children will always have their needs met, get with an agent and make sure you have disability insurance. It will replace your income if you get injured or sick and can’t work — you need your paycheck to keep coming even when you can’t make it into the office.
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