Families are putting off having children due to financial reasons now likely more than any time in modern history. In fact, research has suggested the shrinking number of families with children in Generations X, Y, and Z is a direct result of financial concerns, as many parental hopefuls are often saddled with massive levels of debt. This highlights the need for aspiring families today to properly estimate and budget for child rearing expenses before growing one’s family as not to incur financial hardship.
What I hope to do in this article is provide an objective, evidence-based starting point for determining annual estimated expenses to raise one or more children. For those who would rather not dig into the data with me and want a quick answer, I suggest you skip to the end of this article and download the easy-to-use calculator I created. It includes the various degrees of nuance I discuss in this article and should give you a budget estimate in a couple of minutes. For those who want to dig into the data with me, read on.
The USDA’s Report on Child Expenditures
The US Department of Agriculture (USDA) has compiled a periodic report on the costs associated with raising children since 1960. They do this, in addition for general knowledge, to assist them with administering food stamp (SNAP), foster care, and other public-health related programs.
Their report covers the costs of raising a child from birth up through age 17. It does not include expenses related to raising children from age 18 onward as well as college and private schooling.
Below, you can find some of the key takeaways from the report.
Takeaway #1 – Costs Don’t Vary Much With Age
With the exception of ages 15, 16, and 17, the cost of raising a child doesn’t materially change much with age. Housing, transportation, clothing, and healthcare costs more or less stay the same regardless of age. Daycare costs are significantly higher through age five (excluding any daycare tax credits), and food costs are higher from six years old on. Given these only modest variations between ages, it appears reasonable to budget a fixed amount each year for taking care of a child, only needing to account for a typical level of overall inflation.
Takeaway #2 – Costs Differ Depending on Where You Live
With different costs of living and amenities in various geographies, it comes as no surprise that the cost of raising a child varies greatly depending on where you live. Specifically, families living in urban and suburban neighborhoods in the Northeast spend significantly more than families in other regions. Families living in rural areas spend the least.
Or, you can see the same chart above, but expressed in percentage terms, below:
Takeaway #3 – Children Are Cheaper As You Have More
The first child is the most expensive. As hand-me-downs become aplenty, bunk beds are used in lieu of buying a bigger house, and the absurdly large, but discounted package of Cheez-Its at Costco seems more likely to be devoured before its expiration, additional children become significantly cheaper. See below for the average total child rearing expense per year for households with one, two, and three children.
Using the data above, the second child is 55% as “expensive” as the first and the third is 20% the cost of the first.
This also means that, using our first child’s average cost of $13,125 in the prior section (the $13,280 in the graph above is specifically for a teenager), we can determine the average cost to raise multiple children for budgeting purposes.
| US Average Annual Child Rearing Expenditures | |
| First Child | $13,125 |
| Second Child | $7219 |
| Third Child | $2625 |
And yes, as the youngest of three, I will take this moment to be petty and assert that I was the cheapest and will make sure my parents know that.
Takeaway #4 – Child Expenditures Vary with Income Range
Don’t worry, I’m including this in the calculator at the end of this so you don’t need to memorize this dense material. The cost to raise children varies significantly with income levels, with higher income families spending significantly more on their children than middle- and lower-income families. The USDA study indicates families making below $59,200 will spend 25% less than average on their children while families making above $107,400 will spend 60% more on their children than an average income family.
Can I Afford Children? Try This Calculator
The USDA data gave us plenty of information to allow us to find out if we can afford children. Since it’s a lot of data to digest, I created an easy-to-use calculator that can be used to reflect your own potential situation to predict the expenses of raising children. Additionally, if you would like to discuss other planning topics, including expenses after your child turns 18 such as college, you can always reach me at (561) 972-8011 or Chris@YourWellth.net
If you have any comments or questions about the calculator, please leave them in the comments section below!