Congratulations! You are proud new parents, holding a priceless little one in your arms. While he or she is priceless to you, the U.S. Department of Agriculture has put a price on raising him or her to the age of 18 – and the price has increased to about one quarter of a million dollars.
In the USDA Report, Expenditures on Children by Families, 2013, the average cost for an American middle-income family to raise a child to the age of 18 is $245,340. That does not even include expenses should your child live at home past high school graduation at age 17, or attend college.
The total of $245,340 does not account for inflation, either. Estimating 2.4% inflation throughout the child’s life, the number balloons to $304,480.
The expense has gone up over the last year, but not as much as you may think. The increase is only 1.8%, roughly tracking inflation.
Housing is the largest component at 30%, followed by childcare and education at 18%, food at 16%, transportation at 14%, health care expenses and miscellaneous expenses at 8% each, and clothing at 6%.
The average costs change with income level, as expected. Compared to the $245,340 for the median pre-tax income levels ($61,530 to $106,540), those with incomes above that mark are expected to spend $407,820 while those with lower incomes will spend $176,550 on average.
Many residents of the Northeast passed the $250,000 barrier some time ago, and they still retain the title of the most expensive region to raise a child. The average cost for middle-income earners is $282,480; for high earners it is $454,890; and for the lowest income residents it is still $212,430 – taking up a disproportionate amount of family income.
At all ages, the geographic order of most-to-least expensive stays the same. In order from most to least expensive, the areas are the Urban Northeast, Urban West, Urban Midwest, Urban South, and Rural Areas. Costs were sharply lower in rural areas, with low-income rural residents expected to spend “only” $145,500 to raise a child – the lowest of the categories by far.
The study also found that the average per child cost decreased with the arrival of a second or third child – depending on the category, dropping by amounts upward of 30%. Presumably, this is through things such as shared bedrooms, bulk purchases of necessities, and shared or lowered transportation costs. It is also likely that with more mouths to feed, there is a naturally greater emphasis on cutting family expenses.
Pie charts are included comparing the 2013 report and the first one from 1960, when child-rearing costs averaged around $25,230 ($198,560 when adjusted to 2013 dollars). The most striking difference is the massive increase in childcare and education costs, which were only 2% of the cost in 1960 but take up 18% of 2013 expenses. The housing percentage remained fairly constant over time.
The baseline data for this report is included in the latest comprehensive government CE (Consumer Expenditure) Survey, adjusted to 2013 dollars. If you would like to learn more about the methodology and assumptions, the full report can be downloaded from the USDA website under the “Reports and Publications” tab.
While the USDA may be able to put a price on child rearing, you really can’t – it is an unquantifiable joy of life. Plan your finances wisely, but don’t worry so much about it that you fail to enjoy your precious time with your children. It passes before you know it. The bills may last a while longer. If you want to reduce your interest payments and lower your debt, try the free Debt Optimizer by MoneyTips.