Cost of Raising a Child Skyrockets
I was shocked when I heard the latest numbers that add up the cost of raising children released by the United States Department of Agriculture. For the purpose of comparison, the numbers are calculated for a family with two children, being raised by two parents, in a middle income household. As of the end of the year 2010, the cost of one child from birth through the age of 18 years is just under $227,000. This number represents a dramatic 40 percent increase over that same number 10 years ago. It must be kept in mind that these costs are for middle income families and may not represent the costs of lower income brackets. These numbers can be broken down by category, but where ever you look there has been an increase in costs. The largest increase has come in the area of housing, which has shown a 31 percent increase. Child care and education, when taken together, represent an increase of 17 percent. Food prices have created a 16 percent increase with transportation costs coming in third at 14 percent. Clothing and health care rose six and eight percent respectively. Health care costs seem a bit surprising with the increase only being in single digits. But this is consistent with other studies showing an increase in health care costs relating to the aging of our society and the increase in this study pertain to children.
With the total cost of raising a child increasing by 40 percent, the effect on families becomes a two edge sword when the income levels for the middle class have dropped by seven percent during the same ten year period. However the study is not clear as to how much of the increase in housing was due to the house bubble. It wasn’t until 2008 that the prices began to plunge. Granted many middle income people were stuck paying a high monthly mortgage payment. But for those middle class families who have yet to buy, the housing costs may be significantly lower than they were over the previous ten years. But regardless if the housing number is distorted, clearly the cost of raising a child has gone up and in all likelihood will continue to rise. People will continue to have children, so the question becomes one of saving money and keeping costs down.The first place to start looking to save money is on daycare for children. In a two parent family this cost is usually the result of both parents working. It may be best to make a calculation as to whether it is even worth it to have a two income family. The parent that is making the lower income may be better off staying at home and taking care of the children. There are still opportunities to make money from home while saving on daycare.Saving on housing costs have probably been taken care of due to the real estate crash, but it still may make more financial sense to rent rather than buy. You need to calculate both the short term and long term housing costs. Although difficult to foresee, living in the same area for long period of time can save a lot of money.Transportation costs have a lot to do with the price of gasoline. It is best to assume the price will be high over the next decade and to purchase a car or cars which get good gas mileage. Also try to live a close to work and school as possible to cut down on the cost of fuel. Any other suggestions? Or tell us what you and your family are doing in these tough times.
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I think just planning more can sometimes help. Planning menus for example has cut way down on my budget. If I need to buy ricotta I make sure that sometime in the next two weeks I will use ALL of the ricotta in my meals. Less waste and saves money. Setting aside a certain percentage of each paycheck has also helped us a lot.
Thanks for the great post.
This is why my boyfriend and I feel we’ll never have kids. In DC – there was no market bust – the housing market stayed the same. We really can’t afford to buy with the price of rent etc going up. 🙁