Understand the Expenses of Your Child

Michael Sheehan

Physician's Money Digest, January31 2004, Volume 11, Issue 2

The decision to have a child is seldoma financial one, but understandingthe fiscal realities of raisinga child can be a useful planning tool.While numbers don't offer advice, theydo provide a dose of reality, which canpush procrastinators into action.

Lifetime of Expenses

According to the US Department ofAgriculture's (USDA) Expenditures onChildren by Families Annual Report, theaverage cost for an upper class couple(ie, one with an average annual pretaxincome of $100,000) to raise a child frombirth to age 18 is $254,400. This figureincludes adjustments for inflation andchanges in family size, but it does notfactor in the economic impact of onespouse taking time away from work toraise the child.

Financial Breakdown

Calculations for child rearing shouldinclude childcare, food, shelter, transportation,clothing, health care, and miscellaneousexpenses. College costs arenot included in the figure. In addition,the actual totals will vary by income leveland lifestyle.

• Childcare. Childcare is often at thecrux of whether it makes sense for bothspouses to work. When the secondspouse is not highly paid, the cost ofchildcare can reduce the net value of thesecond income to the point where it maynot be worth it. According to the USDA,upper class parents of a child youngerthan age 5 spend an average of $2300per year on childcare, with the 18-yearaverage totaling $29,730. This does notinclude the expense of a full-time nanny,which can average $500 per week.

Room and board:

• Food and shelter. The USDA estimatesthat it costs about $1500 per yearto feed a child younger than age 2. Duringteenage years, parents shell outabout $2500 per year for food. On average,it costs $37,470 to feed a child untilage 18. The USDA estimatesthat an upper class family willspend an average of $95,250 to providea child with shelter until age 18.

• Transportation. These expenses arenot as easily attributable to the existenceof a child, but they can add up quickly.The USDA estimates that the averageupper class family spends about $33,000over the course of 18 years for one child.Parents with teenagers spend an averageof 50% more on transportation thanparents with younger children.

• Clothing. This expense first comesto mind when discussing raising children.Families spend an average of 20% moreon clothing for girls than for boys, accordingto the US Bureau of LaborStatistics. Generally, $13,230 will keep achild adequately clothed until age 18.

• Health care. Physicians can readilyassess this item with available data. Thefigure varies depending on where youlive and work. According to the USDA,the average out-of-pocket cost of keepinga child in good health until age 18 is$14,640. This estimate assumes that thechild is covered by a reasonably goodhealth insurance plan.

• Miscellaneous. These costs cover awide range of items, including toys,entertainment, reading material, personalcare items, and house pets. Accordingto the USDA, throughout an 18-year period,these items average $1750 per yearper child.