Cost of Raising Children

Last week, the U.S. Department of Agriculture released the annual report, Expenditures on Children by Families, Full Report (Press Release). The report says that a family earning more than $103,000 can expect to spend $390,000 (per child) from birth through high school. This report, which was developed by the USDA Center for Nutrition Policy and Promotion, notes that family income is the major determinant of total cost and the range between what middle-income families spend and what high-income families spend is fairly significant. Middle-income parents with a household income between $59,410 and $102,870 can expect to spend about $235,000 (not including college). This is an $8,000 (or 5.4%) increase over last year.

In middle-income homes with a husband, wife, and two children, annual child-related expenses fell in a range between from $12,290 to $14,320. In higher-income households (above $102,870), annual child-related expenses were between $20,420 and $24,510. As a proportion of total child-rearing expenses, housing accounted for the largest share across all income groups, comprising 30 to 32 percent of total expenses. For families in the middle-income group, child care/education and food were the next largest average expenditures, accounting for 18 and 16 percent of child-rearing expenses, respectively.

While this report will certainly grab some headlines, it does not provide a complete insight into the total costs of raising a child. For example, the cost of saving for college is not included and the calculation for housing is difficult to relate directly to one child. How do you allocate utility bills, principal and interest to your children? Additionally, many families were excluded from the expenditure calculations because they reported no expenses for child care or education.

Perhaps more interesting is the way in which family expenditures have changed over the years. Comparing the two charts below, one can see that Child Care & Education expenses have become a much larger piece of the pie. Healthcare has doubled while the Food and Clothing categories have decreased. These results make sense–improved technology and economies of scale have increased productivity and kept the prices of basic goods and services relatively low. As more women entered the workforce and families became more mobile, there was an increased need for professional childcare.