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).