What Does It Cost to Raise a Child?
Raising a child can be expensive. There is the cost of child care. Health care. Food and clothing. A larger home. College. What is it all going to run you?
If you’ve ever wondered what it costs to raise a child, a report* by the U.S. Department of Agriculture may have an answer for you: $372,210. Of course, the actual cost will differ for each family, but the USDA figures that is what a married-couple family with before-tax income greater than $107,400 spends on average to raise their second child through age 17. And that’s in 2015 dollars. If you factor in future inflation, a child born in 2015 may cost $454,770 to raise to his or her 18th birthday.
Housing accounts for the largest share - $98,280, or 26% - of child-rearing expenses by families in the upper-income group (those with before-tax incomes greater than $107,400). Housing includes expenses such as mortgage payments, property taxes, rent, furnishings, and utilities.
Childcare and education come in a close second to housing and are estimated at $86,820, or 23% of the total amount spent to raise a child. And by the way, that estimate does not include college expenses.
Food and transportation are next in line with upper-income families spending about $50,000 on each over the years. Clothing, health care, and miscellaneous expenses are estimated to run between $20,000 and $33,000 each.
Keep in mind that these are simply estimates for married-couple families with pre-tax incomes greater than $107,400. You cost to raise a child may vary dramatically based on factors such as your income and where you live. Generally speaking, child-rearing expenditures increase as household income increases and expenses are higher for families living in urban areas particularly in the Northeast.
Also, the amount spent per year on expenses such as food, clothing, and transportation tends to increase as children age. For example, upper-income families are estimated to spend $19,770 per year on a 2-year-old child and $23,380 per year on a 17-year-old child.
After a child reaches age 18, a college education becomes one of the largest child-rearing expenses. According to a report** prepared by the College Board, annual tuition and fees averaged $9,970 at public four-year colleges and $34,740 at private nonprofit four-year colleges in 2017-18.
There is good news and bad news regarding college prices. The good news is that many students receive thousands of dollars in grants and tax benefits each year, helping to reduce the overall cost of college for families. The bad news is that college prices continue to increase faster than the rate of inflation, although, not as fast as in some prior years. For the 2017-18 school year, college tuition and fees increased around 3% from the year before while consumer prices in general increased 2.2% during the 12-month period ending in September 2017.
For many families, expenses related to their children do not stop at age 18 or after college. In fact, just over 24 million young adults between ages of 18 and 34 lived in their parents’ homes in 2016, according to a report* by the U.S. Census Bureau. Also, parents often make financial gifts and contributions to adult children who are not living at home.
Copper Leaf Financial is a fee-only, fiduciary firm and we can help you by providing advice on planning for your family’s future. We develop a customized wealth management (financial) plan designed to integrate every aspect of your financial life. This is "true wealth management" - a holistic, all-encompassing approach that goes beyond just investment advice. Call us today at (802) 878-2731 to schedule a strategy session and begin building your road map to financial success.*Expenditures on Children and Families, 2015, USDA
**2017 Trends in Higher Education, College Board
Article published in March edition of Eye on Money magazine.