March 17, 2008

What do children cost?

I currently have no children. But in the near future I plan to start a family. This raises the question for me of : What will the expenses related to raising children be?

In the past I've seen article headlines that say things like that it costs $180,000 total to raise a child. So that kind of number averages out to $10,000 per year for 18 years of childhood. I personally can't really see there being $10k / year in expenses for a child. But I'm admittedly pretty ignorant on the costs related to raising children. So I decided to do some quick research.

I hit Google and did a search with keywords "cost of raising children" and fittingly the first hit was this MSN article The Cost of Raising Children It presents a table showing average expenditures for children of varying ages and comparing households of differing income ranges. It has costs for individual expense categories of housing, food, transportation, clothing, health, childcare/education and miscellaneous. They get these figures based on an expenditure survey from the USDA so this is from statistical real world averages. Annually the costs range from low end of around $6,000 to high end of over $14,000. So thats the answer to the posts question, it costs $6k to 14k per year to raise a child.

Looking at the figures a little closer I'll see how I'll have to adjust my budget. I think I can ignore some of these categories altogether and others I've already partially accounted for.


Housing is accounted for and costs in the range of $2,000 to 5,0000 annually per child. This probably accounts for the fact that a single person can live in a 1 bedroom but a family of 4 generally needs 3 bedrooms and the 3 bedroom costs more than the 1 bedroom. But for me housing is a sunk cost [simply put something I've already spent/bought] and individual children will not raise my housing costs. Transportation is another figure that is probably based on increased driving and travel for additional people. I've figured generous gas costs in my retirement budget plus a family vacation budget so I don't honestly see significant increased travel spending otherwise. Housing & Transportation net change = $0

Food is an obvious expense that I've already accounted for. The tables show food costing around $900 to 2500 per year for a child. I've budgeted $1560 in groceries annually so I've got this one covered already. Food net change = $0

Clothing is shown as costing $300 to 1000 per year. I had a family budget of $500 per year for clothing and if I think I might have that I low balled that number a bit. But I don't know what clothes for kids cost so I did some looking over at Sears.com just to see. I found 5 pairs of Levis @$17.5 each, 5 shirts for $30 total and then some socks and underwear for $30. This totals out to $147.5 and its most of a weeks worth of clothing. So I think $300 per year would be a pretty healthy budget for children clothing. Clothing net change = +$175

Health cost figure is listed at about $400 to 800 per year. I expect some of this is additional health insurance premium costs but I'm not certain. There will undoubtedly be some additional health costs for children with them needing cough medicine and regular doctor visits. I had not budgeted a separate line for health costs so I'll have to add this. I'll go with a lowish figure of $500 per year. Health cost net change = +$500

Childcare and education costs are shown at anywhere from $300 to over $2000. I assume this includes daycare, babysitting, private tuition as well as any fees or other costs related to school. My fiancee and I are planning for her to stay at home with the children full time at least in their early years. So we do not expect significant daycare costs. I do not plan on private tuition so we won't have to account for that. I guess there are likely to be some misc. costs related to school and maybe an occasional babysitting bill. So I'll figure a small amount of costs here. Childcare / education costs net change = +$200

The last category and most vague is for miscellaneous expenses and they show that costing $600 to $1900 per year. Since the article doesn't say, I am not sure what kinds of expenses this figure would include. But I'm sure there are going to be some various expenses for children that are not accounted for already in the main budget categories. I'll put down a low to average number for this expense of rough guess $1000 per year. Miscellaneous costs net change +$1000

So this brings my total net change to the budget of $175, $500, $200 and $1000 = $1875 per year per child.

In order to better budget for 2 children, It looks like I'll have to raise my target retirement budget by $3750 per year.

Note that the expenses are not including college costs or anything else over the age of 18. I'll discuss saving for college in another post. Also these numbers are not perfect by any means and are still just meant as ballpark figuring and I'm sure that I'll have to tweak them in future years.



I also found a calculator How much will it cost to raise a child? on the Equifax website. Using that calculator I can zero out figures that are sunk costs or that I won't have myself. With that calculator I figured average annual costs past what I budgetted with my initial retirement budget and came out with an average figure of $1588 more per year. So now I've got two estimates using different methods with pretty big difference in result. I have high confidence that $1000 to $4000 is the right ballpark. I'll go with the larger estimate for now to have a conservative budget.

3 comments:

  1. Oh man.. just wait until the little ones arrive. You will spend so much more than you expected.
    You don't account for the fact that kids outgrow their clothing more than once a year, or any sports special activities clothing, not to mention the fees associated with those.
    Your food estimates are way off too. True when they are little they don't eat that much, but believe me the food expenses go up as the get older.
    You also don't consider car expenses for when they are teenagers. Even if you don't buy them a car you have increased insurance.
    Seriously - you should put a much bigger budget in for your kids. Someday you will look back at this budget and wonder what you were thinking.
    Other things to consider - you will spend more on photos and your kids will have friends, which means birthday presents for friends. Trust me those estimator tools are not that far off.
    Oh and don't forget all the baby gear! Strollers, cribs, portable cribs, car seats, blankets, baby monitors ....

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  2. Hi, thanks for the feedback. I stated in my article that I'm ignorant on what exactly it will cost to raise a child and that is why I'm attempting to estimate the cost for planning purposes. I'm sure my numbers will need adjustment and theres likely some margin of error.

    I should also point out that the numbers I cite in this article are above what I've previously budgeted. That may not be clear. So when I say the 'food net change = +$0 I don't mean that food won't cost more. I have budgeted $1560 annually per child. Thats over $4 a day and doesn't account for some eating out. I feel this is a reasonable budget for groceries since we can already feed two adults on such a budget. However my budget for eating out a lot less than it is currently. While I think we could keep within such a budget I'm assuming we'll probably spend more. So I should probably increase the eatintg out budget to be more realistic.

    Car expenses for teen agers only impact a couple of years. I'm also not assuming that I'll necessarily be paying for car expenses.

    My clothing budget may be relatively low. However my wife is fairly frugal and shops at used clothing stores. I'm confident we can stretch a clothing budget pretty well.

    I have a $1000 budget for 'misc.' items and I feel that should cover expenses such as school costs or photos etc. Those costs are widely variable also and are not going to be the same for everyone and they are also optional expenses we may not incur.

    Again, I'm sure this budget is not perfect and I'll find out in the future that my numbers are off. But keep in mind I'm also a relatively frugal person and I can spend less than typical consumers do on most things.

    Jim

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  3. I have a two year old, and just wanted to add a few comments (just found your blog, and I've set 50 as my target retirement date, so I've got some aggressive financial goals to hit). First, costs fluctuate wildly depending on the age. A newborn infant may have zero costs for food and toys, but much higher costs for healthcare (all those checkups, plus labor & delivery) and equipment (stroller, car seat, crib, etc.). On the other hand, a school-aged child probably has more expenses in toys, clothing, and educational costs.

    I also wanted to say that whatever you budget, things may not go as planned and you may find yourself with additional expenses you didn't plan on, I might budget some of those in. We planned on nursing and using cloth diapers, but my son ended up on formula at 5 months and disposable diapers at 6 months, so we had six months of diapers and formula. That ran us about $100/month.

    Overall, especially if your wife stays home and is frugal (as you indicate) you'll do pretty well with clothes and toys for a baby/toddler. You should be able to get a lot of that stuff free or cheap.

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