Raising kids, while difficult, is rewarding work. However, it’s also incredibly expensive when you sit down and do the math. If you’re thinking about having kids and wondering about the financial impact of doing so, then we’ve got the info you need.
Exactly how much does it cost to raise a child? Hint: More than a quarter-million dollars. Of course, costs can vary and are spread out over 18+ years. Even so, it’s important to consider the cost of raising kids before making the decision to start a family. This article will delve into a number of expenses involved in raising a child.
How Much Does It Cost to Raise a Child?
According to the U.S. Department of Agriculture (USDA), it costs $233,610 to raise a child to age 18. Adjusted for inflation, that figure is likely closer to $288,094 (see below for details).
This figure includes the costs of food, housing, clothing, school supplies, healthcare, and more. It does not, however, include the cost of attending college.
It is important to keep in mind that this USDA data was gathered for children born in the year 2015, as this is the most recent government data available related to the cost of raising kids.
Due to rising costs and inflation, this number is no longer accurate. Inflation means that a dollar 10 years ago could buy more goods and services than it can today.
We can find the estimated cost for a child born today by calculating the inflation-adjusted figure.
Since 2015, costs have risen 23.3% on average due to the effects of inflation. This means that the estimated cost of raising a child is likely 23.3% higher today than it was back in 2015.
If we take the $233,610 figure and adjust it for inflation, then the current average cost of raising a child is $288,094.
The average cost of raising a child
As of 2022, raising a child from birth to age 18 costs roughly $288,094. This figure will continue to increase every year due to rising costs.
Of course, this is a national average. It should be taken with a grain of salt, as many factors influence how much it costs to raise children. Here are some of the key factors that affect this cost:
Geographical location: It costs much more to raise a child in New York City than it does in rural Minnesota. The USDA data accounts for the national average, but figures can vary significantly based on area.
Childcare: Childcare and education costs can account for up to 16% of total costs, according to USDA data. However, this figure can vary significantly depending on the situation. For instance, a family with a stay-at-home parent might spend next to nothing on childcare, while a household with both parents working (and no nearby family) might spend a huge amount on childcare. 2022 data shows that 51% of parents spend more than 20% of their household income on childcare alone.
Number of children: Some costs, like housing, don’t necessarily increase in a linear fashion with additional children. For example, having one child may require a family to move from a less expensive apartment to a more expensive single-family home. But that single-family home could likely accommodate two children for the same cost. For this reason, raising two children doesn’t necessarily cost twice as much as raising one child.
Lifestyle choices: Lifestyle choices, like the decision to send children to private school vs. public school, can greatly impact total costs. Just as households spend drastically different amounts on entertainment, dining out, etc., spending on children varies substantially.
How much does raising a child cost yearly?
The $288,094 figure can seem incredibly intimidating — but remember, that cost is spread out over 18 years.
Taking a rough average, that’s around $16,005 per year — or approximately $1,334 per month. While that’s still a hefty figure, it seems far more attainable than $288,094!
Of course, costs will vary significantly from year to year. Some years may be quite high, while others may be much lower.
It’s also important to keep in mind that overall costs will likely continue increasing over time as a result of inflation, eating away at buying power.
How Will Costs Change in the Future?
The latest official figure we have is for a child born in 2015, and the estimated cost is $233,610 total.
For 2022, the inflation-adjusted estimated cost is around $288,094 total, or approximately $16,005 per year.
But what about the future? It’s difficult to predict how fast the cost of living will rise, but increasing costs are almost inevitable due to inflation.
Looking at long-term average inflation rates from 1960 through 2021, we can see that costs rise around 3.8% per year, on average.
This means that the cost to raise a child should increase at a rate of approximately 3.8% each year. To conceptualize this, it’s helpful to look at the yearly cost.
We estimate an annual expense of $16,005, based on 2022 figures. Theoretically, this figure will rise by around 3.8% per year — meaning the cost will be $16,613 in Year 2, $17,244 in Year 3, and so on.
There are two problems with this approach, however:
- The cost of raising children varies from year to year
- Nobody knows what future inflation rates will be
Suffice it to say that costs will likely increase over time — and if history is any guide, we can expect long-term inflation of around 3.8% per year.
What Are the Highest Costs of Raising a Child?
There are many different costs associated with raising kids, from diapers to daycare to groceries. Some of the most significant costs are housing, food, childcare, and healthcare.
As always, these costs vary significantly from household to household. We can look at USDA averages to determine a rough estimate for the top costs of raising kids.
Housing: 29% of total costs
According to USDA data, housing accounts for around 29% of the costs associated with raising kids. Using the inflation-adjusted $1,334-per-month figure calculated above, that’s around $387 per month in increased housing costs.
For the most part, this cost is associated with the increased cost of renting or owning a larger home. Children generally need their own bedroom, and families may also opt to seek out more living space to accommodate children.
Housing costs vary significantly by region, however. USDA data indicates that the annual housing expenses for urban households was $3,900 higher per child, while rural households paid an extra $2,400 per child. (Note: These numbers are not adjusted for inflation.)
Food: 18% of total costs
Food accounts for around 18% of the total cost of raising a child, and food costs typically increase as the child gets older. Here’s 2015 data from the USDA:
Adjusted for inflation, these figures will be higher — but the graphic gives new parents an idea of how much they might expect to spend each year as their child gets older.
Childcare and education: 16% of total costs
The USDA data groups childcare and education together, for a combined 16% of total costs.
For most families, the cost of childcare accounts for the bulk of this figure, as costs to attend public school (most of which are for supplies) are low. Of course, if a child is sent to a private school, education costs rise substantially.
Childcare costs vary dramatically depending on household structure, whether both parents are working, and whether the household receives help from family members.
For many households, childcare can account for a much higher portion of costs. This 16% is an average, but many families spend far more.
In fact, more than half of families plan to spend more than $10,000 on childcare each year. Fifty-one percent of parents spend 20% or more of their household income on childcare, while 72% spend 10% or more. That’s a percentage of total income, not the total cost of raising a child.
Transportation: 15% of total costs
On average, transportation accounts for around 15% of the cost of raising a child. This figure includes the purchase of gas, plane tickets, larger vehicles, etc., and it varies depending on location and lifestyle factors.
Other: 22% of total costs
The remaining 22% of costs is broken down as follows:
Healthcare: 9% of total costs
Healthcare costs vary dramatically; they typically depend on health insurance coverage.
Clothing: 6% of total costs
The cost of clothing may be lower for multi-child households, as clothing items can often be used as hand-me-downs.
Miscellaneous: 7% of total costs
Miscellaneous costs include hobbies, gifts, sports, and household supplies.
What About the Cost of College?
It’s important to note that the USDA data does not include college tuition. Parents will need to account for this cost separately.
The average cost of attending college is now $35,331 per student per year, and this figure includes living costs as well as tuition. Tuition alone is $9,349 per year for in-state, and $27,023 for out-of-state.
This means that the minimum cost for a four-year degree is around $37,396 for tuition-only at an in-state school. The average cost to obtain a four-year degree, including living expenses, is a whopping $141,324. And college costs are rising yearly at a rate of around 6.8%.
Fortunately, many students receive some sort of financial aid that helps to reduce these costs. Even so, it is recommended that parents plan ahead if they wish to help their children with college expenses.
Parents can greatly benefit from investing their children’s college savings. This can be done via a 529 account or a UGMA custodial account. 529 plans offer tax benefits if the money is used for qualifying educational expenses, but custodial accounts offer more flexibility in how the money is used.
By investing early, parents can plan ahead and benefit from the power of long-term investment gains. Investing just $100 per month for 18 years will result in a balance of around $42,429.81, assuming 7% average stock market returns.
Want to get started investing for your child? EarlyBird is an investment platform that makes it simple to invest with zero experience required. Within just a few minutes, you can get started building a balanced portfolio of stocks, bonds, exchange-traded funds, and more.
By any measure, raising kids is expensive! As of 2022, the average cost is around $288,094 total, or $16,005 per year.
Of course, there’s no one-size-fits-all. Costs will vary with each household, and the per-child cost may be lower for you if you have multiple children.
Want to save for your child’s future? EarlyBird is an investment app that can help you open a custodial investment account to start investing on behalf of your child. Once your child reaches adulthood, they gain full control of the account and can use the money for college, a down payment on a home, or any other purpose. Download EarlyBird today to get started.
This page contains general information and does not contain financial advice. All investments involve risk. Any hypothetical performance shown is for illustrative purposes only. Actual investment performance may be different for many reasons, including, but not limited to, market fluctuations, time horizon, taxes, and fees. Please consult a qualified financial advisor and/or tax professional for investment guidance.