Mar 27 2008

You say it costs $204k to raise a kid? I’m not buying it

A report by the U.S. Department of Agriculture has shown that the average cost of raising a child born in 2007 to age 18 can be expected to reach $148,000 to $298,000, depending on the family’s income.

I didn’t realize raising children was considered an agricultural undertaking. Lol.

These numbers are based on a two-parent, two-child family.

The report showed that if you have just one child, you’ll spend about 24 percent more on that child, on average, than you would if you had two children. But, if you have three or more children, you’ll spend about 23 percent less per child. I guess that’s like four children for the price of three? Lol. That’s a pretty good bargain, if you ask me.

For families with incomes of less than $45k in today’s dollars, they can expect to spend about $148k. For families earning $45,800 – $77,100, they’re in the $204,000 range, and for families earning more than $77,100, they’re in the $298k range per child, if they have two. The figures are adjusted for expected inflation.

I don’t have children yet, so I don’t have any real authority to say how much it costs to raise a child.

But still. $200k? I’m a bit skeptical.

The report points out some limitations with its findings. For example, "[u]nlike food and health care, no research base exists for allocating estimated household expenditures on housing, transportation, and other miscellaneous goods and services among family members. USDA uses the per capita method in allocating these expenses; the per capita method allocates expenses among household members in equal proportions" (page i in report).

Further, the report does not take into consideration that many parents change their personal expenditures. Parents might spend less on themselves to free up their budget to spend more on their children. 

Estimated expenses vary considerably by household income level.

If you are frugal and have kids, this is great news!

If you’re able to consistently spend less than you earn, make frugal choices regarding things you purchase for your children, then you’ll be able to spend much less than the averages listed in the report.

The report assumes that the more money you make, the more money you’ll spend on your children. However, that doesn’t have to be the case! As long as you’re not in poverty, and as long as your children have their basic needs met, you really don’t need to spend a quarter of a million dollars to raise a child, in my inexperienced opinion.

If your priorities are to only buy new clothes for you children from birth through 17, buy all the latest baby items suggested on Babies R Us, and go bananas on birthdays and at Christmas., then yes, your expenses are going to be more than if you opted for gently used clothing and keeping supplies to only the necessary.

And, don’t forget, the USDA also put out a report that showed they think a family of four could spend anywhere from $495 per month if they were on a "thrifty" plan up to $1115 per month, depending on the ages of their children and how "liberal" their spending was. Hmm. I dunno, but I think those estimates seem a bit high, don’t you think?

My point being, I think the USDA’s figures are on the high end of the scale, and should be generally ignored by people who try to live frugally.

Finally, since the report looks at expenditures, it does not take into consideration child tax credits and deductions, thereby reducing your tax liabilities, by at least a small margin.

Taxes often confuse me, and when I talk about taxes, I probably don’t really know what I’m talking about. So, read this article on the Motley Fool if you want more info on the child tax credit, and this article as well. Also, I know that my sister turns 18 this year, and my parents are bummed that they won’t get to deduct her anymore. I don’t think they’re expecting $300 for her by way of the economic stimulus checks set to roll out this summer. Bummer for them, but good news for people with younger kids.

What do you think? I wanna hear from you, parents! How much does it really cost to raise a kid?

For further reading, check out Money Common Sense, where she’s tracking the costs of her newborn (look in her sidebar).

32 Responses to “You say it costs $204k to raise a kid? I’m not buying it”

  1. 200k per kid? Can I cash that in at 18? Just kidding. I don’t have budget details but it can be expensive raising kids. Diapers, food, clothes, more food, more clothes, vacations, health care, bigger car, bigger house, etc…it all adds up. Could it be that the report takes inflation into consideration? The 200k after 18 years may not be the same as it is now?

  2. i find it hard to believe that it is $500/month on a frugal plan. Maybe they were factoring in part of a mortgage payment and medical bills or something. Because we spend about $200 on my son and all his diapers and special food and medical bills/month and i thought that was high! Once we get into older years, we will most likely spend more with sports and music lessons and field trips and such. Weird. i never thought about the entire cost of raising a kid, but i’m pretty sure this study is way off.

  3. Yes, the report does take expected inflation rates into account. I’m trying to figure out how much it would all be in today’s dollars, so I can wrap my brain around it a little better.

  4. With regard to the USDA report on food expenses, that $500 figure was for a family of four for food expenses only–not the mortgage or medical bills or the like.

  5. I surely hope I’m not spending that much! There are dozens of ways to get around it:

    1) Consignment sales. I just dropped about $175 at one, but I EARNED over $200 selling stuff! I got all the clothes Suzi needs for the next few months, toys, even an Easter and a birthday gift for her. We overshopped and still came out in the black.

    2) Cloth diapering. I spent a couple hundred dollars buying cloth diapers recently, but I’ll never have to spend $20 on a box of disposables AGAIN. We made free wipes out of old t-shirts. My diapering costs for the next child will be very low (we’ll still have to maintain a good stash).

    3) Breastfeeding. No formula to buy!

    4) Making our own baby food. Just grind up whatever you’re eating (as long as it’s safe for baby) and skip the jar of slimy goo they call baby food.

    5) Finding a way to get around using anything disposable. We don’t use paper bibs, paper wipes, take-n-toss containers, disposable washcloths, etc. These are wasteful.

    6) Bathing baby twice a week. She just doesn’t get dirty that much and I don’t want to put potentially harmful and drying soaps onto her skin anyways. For us, every night bathing is a waste of time, energy, and money.

    I do have a shopping problem but I am working on that and hopefully by the time I have another child in a couple of years I’ll be able to spend considerably less raising a baby.

  6. $500 a month sound high for a family of four. My mom was / is a coupon clipper and usually could get our food bill under $100 / week.

    We ate rather well for family of five with three very active (multiple sports / activities) teenage boys on that amount. Had she not been frugal, the food bill could have been astronomical.

  7. I can guarantee you my parents didn’t spend anywhere near what they were “supposed to” raising me. That had a lot to do with the fact that my mom cooked from scratch and sewed or tailored a lot of our clothes, my parents emphasized creative activities and imaginative games (and didn’t buy a lot of toys), and they expected me to work once I was old enough. They always provided me with necessities (food, necessary clothing, basic toiletries) but makeup, funky shoes, gas for the car, and trips to the movies came out of my own budget. I thought that was totally normal, but I’ve been shocked by how few parents actually do the stuff that mine did.

  8. Raising a little boy is pretty expensive I don’t sew but I do buy gently used clothing for him at thrift shops and such. We play sports and that is pricey as well but we try to get as much use out of his sporting equipment as we can and when he outgrowes his things we sell on e-bay or craig’s list. The main thing I found myself spending a fortune on was pictures. Everytime we turn around someone is snapping pictures of our little darling and wanting us to spend anywhere from $25-$100. I finally said enough I have a digital camera. I now buy 3 packages a year. 1 Family, 1 school, 1 sporting activity. There are ways to cut costs.

  9. It kind of makes you wonder who is in charge of these “studies.” And if they are perhaps over inflating their numbers just to make some other point. Although I don’t doubt that it COULD cost that much, but it doesn’t HAVE to.

    Fan of your site!

  10. People who have not yet had children often underestimate the cost of what it takes to raise a child. Costs are higher than you think, especially if both parents work and the children need to be in daycare. For example, let’s say you have a toddler who is still in diapers, grows rapidly and is in daycare. Your monthly costs might look something like this:

    Full time daycare – At least $600/month
    Food – Probably somewhere around $100/month
    Medical – Added insurance premium + doctor visits around $100/month
    Clothing – $50 month

    Already, just those 4 items add up to an extra $850 per month or $10,200 per year. Obviously, daycare expenses will go down somewhat when the child enters school and then even more when they can be home alone; however, other costs take their place.

    Those 4 items don’t include: Saving for college, costs of lessons/activities [such as ballet or soccer], or incidentals such as presents they take to their friends’ birthday parties.

    They also don’t take into account the costs the child adds to your housing expenses. Chances are, you will need a bigger house/apartment once you have children. With that larger house comes higher property taxes and higher utility bills [especially when the child becomes a teenager and likes to take long showers every day!].

    Another huge expense can be orthodontia. By the time my younger daughter is done, her smile will be worth almost $10,000. While she is a very extreme case [with almost everything wrong in her mouth you can imagine], my point is that there are always unexpected expenses of some nature that you can’t plan for.

    When you factor in inflation on top of all of this, I can see how you’d easily reach $200,000; especially in you live in a high cost of living state such as New York or California.

  11. 200K on the first one does not sound that high to me. However when I back out the cost, of be able to go out on a whim ( I don’t feel like cooking lets have sushi) and travel (remember when on Friday afternoon you would decide to go to Las Vegas for the weekend) then it really kind of a wash.

    Now all that being said I had kids early so I never did those things, but my friends who had kids later in life did.

  12. I can’t imagine. I know my mom spent way more than necessary on us kids but I don’t plan to do the same. My kids will not get everything they want just because something is in style or popular. I want my kids to play outside and use their imagination.

    And I do not plan to pay for my child’s school. They are also going to be expected to get a job sometime during high school and work their way through college.

    I never believe these silly ‘studies’ because everyone’s situation is always going to be unique.

  13. Thanks for your input. I think you’ve made some valid points, and have shown how the costs can quickly add up.

    And, as you’ve mentioned, it’s harder to get a good idea of true costs when you don’t yet have kids, like me.

    Still, whenever we have children (Lord-willing), I don’t think it will cost near that much.

    You mentioned that it could cost a lot more if both parents are working outside the home.

    For one, we don’t plan to pay for childcare, except for an occasional babysitter perhaps.

    If breastfeeding is a viable option, then that’s what we’ll do.

    As far as clothes go, I don’t think it’s likely I’ll pay $50 per month on clothes for a baby or child. They grow so incredibly fast, that I don’t think it’s a good investment.

    Instead, I’ll opt for second-hand items.

    Finally, and this really isn’t up to me, but I hope to always live where there’s a lower cost of living. I really loved living in the Midwest, and I hope to move back.

    So, if I’m blogging for awhile, I’ll be sure to keep track of our expenses, whenever that becomes relevent.

  14. I can believe it with daycare and possibly the cost of private schooling at some point. If one is a SAHM and frugal, I expect it’s much less.

  15. Ugh..I don’t even want to think about it! Although I am a bit indulgent when it comes to my daughter, so I know that I am spending more than I need to be. Of course I am also spending less on myself now, so some of it evens out.

    In regards to day care, I live in the midwest (central Ohio) and for the 6 months I had my daugher in day care, I paid $220/week (approx. $880/mo). And this was “cheap” compared to the other day care centers in my area. I would expect this to be the same in most metro areas. I watched a child in my home part time for 6 months and charged $35/day which seemed to be an average price.

    I do agree that the more you make, the more you tend to want to spend. Some people can control this urge more than others.

    It is all about priorities and the decisions you make. I do think it is expensive to raise a child, but obviously the actual dollar amount varies widely from family to family.

  16. Honestly, 200K is only 11K ish a year for 18 years.

    And I’ll tell you why I believe it – health care.

    Be as frugal as you’d like – but kids need health care and health care costs money. We pay $150 a pay period (so $300 a month) just for the two kids to be on my spouse’s insurance.

    My kids both each cost us $3000 just to be born in birth-related costs. ;)

    And my son had surgery at a year old to correct a birth defect – that was another $3000 (our out of pocket maximum per year). Darn he’s expensive…

    No, I don’t think we spend $1000/month per kid, we probably spend less tahn half that. We cut costs everywhere we can. But I can see how the average is high.

    There are a lot of expenses that one doesn’t think about til, well, you have a kid. And mine are only 3 and 1 – they get more expensive as they age, not less.

  17. Wow…that number is really big. It can’t possibly be accurate. LOL. I know a girl back from high school who had 12 sisters (13 kids in all). If that figure was correct, I don’t know how their parents can manage paying them for even a month!

  18. I think that number is way too high! Since having my daughter I do realize that babies are a lot more expensive than I thought they were – but I think that number is crazy.

    Your readers brought up a lot of good points though of things they may have counted in there.

  19. Nope. That number is way too low.

    I have three kids. Two are hitting teenage years. Try buying clothes for 13 and 14 year old girls. The constant begging for the latest electronic gadget, the gifts for every friend’s birthday party, the expenses are enormous.

    I have a son as well who’s 8. He loves to play sports. Baseball isn’t free, neither are the gloves and all the trappings.

    They all attend a highly regarded private school in my area. You don’t even want to know what that costs and no, I’m NOT planning to ever use government “education.”

    I would estimate it closer to $400,000 each. Figure in college educations, weddings, cars, car insurance, the wrecked car’s deductible, the jobs you give them that you would do but you pay them to do so they’ll stop hounding you for money, the sports teams, the vacations, the hospitals stays, the emergency room visits, the medical deductibles, having strep 8 times in 12 months and the ensuing tonsillectomy ($4,500), the Christmas gifts, the birthday gifts, the friends birthday gifts, the field trips, the groceries, the additional cost of eating out, the additional cost of fuel to drive everywhere, the larger home (ours is 5 bedrooms), the toys, the books, the broken stuff that you have to replace, the dog you get because they want one, the peer pressure, the additional life insurance, the school’s crazy fundraisers, the Boy Scouts, the Girl Scouts, it NEVER SEEMS TO STOP!

    The US government also said that Medicare would cost only a couple of billion dollars, the Iraq war only $87 billion, Social Security would cost only a few billion. Does anyone think these people really know how to estimate with any accuracy the cost of ANYTHING???

    Not me. I have the receipts to prove it.

  20. I wouldn’t trade any of them for $100 million though! :D

  21. I agree with Ron. The baby years have NOTHING on what the teenage years cost! And Ron: just wait til your precious little boy becomes a teenager and eats anything that doesn’t run away from him fast enough. My 14yo son is trying to claim $35 a week to feed just him is not nearly enough. (That’s $140 per month, which hubby still thinks is too high)

  22. Stuff hammers you out of nowhere, too. My son is a bruiser – almost 11 pounds when born, and very tall and big for his age (2). He was born almost completely lactose intolerant, meaning we had to ditch breastfeeding (my wife’s plan) and switch to a very, very expensive non-lactose formula called Alimentum. It’s $25 per can, and a can makes maybe 3-4 days of bottles for a big growing boy. So there’s another $2500 per year that we didn’t expect.

    We use hand-me-down clothes and toys, but it’s the big ticket stuff that kills you: a two-day hospital stay for a virus, part-time day care for $700 per month, formula, etc. It get expensive quick. That’s why I’m giving my son until he’s 10 to start working. That’s still legal, right?

  23. I don’t have kids, but I think the USDA methodology has flaws. For instance, my parents bought a house when I was in preschool and paid it off when I was in junior high. So the USDA would consider 1/4 of what my parents paid for the house an expense associated with raising me and 1/4 an expense associated with my brother. In practice, they probably wouldn’t have been living somewhere half as expensive if they hadn’t had children, and now that my brother and I are over 18 they still live in the house and benefit from that expenditure.

  24. Kacie, it is very refreshing to hear someone like yourself who doesn’t have kids not buy into all of the doom and gloom that people try to prodject onto parenting. Take it from me, who would know first hand: My husband is still finishing his business degree, we have a toddler, and I am a stay at home mom who is just breaking into the frelancing writing business….IT CAN BE DONE! Having a child and not living under a bridge. Great to hear you have a postive perspective! Take Care.

  25. 200K for 18 years? I’ll take it. In daycare alone for my 8 year old, I have paid more than $50K in daycare expenses along. If you tack on the medical, food, clothing, activity fees, diapers, formula and school fees (to name a few expenses), I have probably paid more than half the 200K already.

  26. Castocreations–I agree.

    PaidTwice–I was curious how much we could expect to pay in medical expenses under our current HMO. It would be $280 on our end for prenatal visits and delivery, assuming no complications. We’d pay that via our flexible spending account, so that wouldn’t affect our monthly budget at this point. I have to look up the figures on how much we’re paying each month for health insurance, but it isn’t excessive, from what I remember (thankfully).

    EC- great point about housing. All the more reason to buy a house you can afford, and pay it off asap!

    @ everyone who says kids just get more expensive–especially teens, I have to agree. Teenagers can be insanely expensive!

    I like the way Debt-Free Revolution is giving her son a budget for his food expenses.

    If my kids ever want a designer (or overpriced) outfit that exceeds our clothing budget, they can get a job or get over it. I’m unsympathetic in that regard. I know, I’m a meanie :)

  27. I have to agree with Jenny. We do all of those things with our son (except we do bath him every day as part of our bedtime routine). All of Goose’s new clothes are gifts from generous loved ones and all the clothes we buy come from the thrifts or yard sales. I used to think doing this was gross, but we have actually found brand new name brand clothes(as in Carter’s, Gap, Children’s Place, etc) at yard sales. In fact as I type this my husband just walked in the door with a bunch of like-new toys he found at a yard sale this morning for 2 bux! Go hubby!!

  28. @ Kacie – your health plan sounds nicer in out of pocket costs than ours.

    unfortunately, since health care is tied to employers in most regards here in the US – we don’t have a less expensive choice to make in that regard. it isn’t about being frugal or not, it is about the reality of my spouse’s employers options. Many people have similar (or worse) options.

    the 204K number is an average – I say we’ll spend less, but not so much less as I’d like. :) And 204K seems HUGE until you look at per month or per year costs, it isn’t 204K at once. :)

  29. You’re totally right.

    Right now, my husband and I are on our first health insurance plan that isn’t our own parents’.

    We really lucked out, as his employer has a really affordable plan.

    Unfortunately, that’s not the case with many people.

    I consider myself very blessed.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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