Cost of Raising a Child: 2014

Care for the latest price tag on those kids you love so much? Or are you afraid to look at the cost of raising a child in 2014?

Spirits may be high when we’re expecting a baby, but that’s before we begin to process what lies ahead – including the expense of raising a child in the US – from infancy through high school.

I last considered this issue in 2012, and the figures released in August 2014 tell us we should now plan on spending $245,000 (approximately) in order to raise one child.

Naturally, college is NOT included.

But hey. Don’t worry. Be happy.

As this CNN Money brief likes to frame it – there are economies of scale if you have more than a single child. Let’s hear it for the volume discount!

How to Prepare for a Quarter Million Dollar Price Tag?

Generally, the figures released by the US Department of Agriculture on family expenditures offer averages for a two-parent “middle income” household, and allow you to adjust those figures if your income is below or above, and likewise if you are a single parent.

While I find the USDA’s mention that it’s important for parents to have “an indication of expenses they might want to be prepared for” – can anyone be prepared for a dollar sign with all those zeroes?  – I doubt many of us can “save” for a child as we might for a down payment on a house.

Moreover, that $245,000 may not reflect your situation; my own estimates (two years ago) were closer to $400,000/child, and in that same year, I referenced articles putting New Yorkers’ estimates exponentially higher. Note – I had healthy children. What if they hadn’t been?

Other than the pie-in-the-sky notion that we could prepare for the expense of having a child, it’s worth noting that this annual exercise is helpful in so far as:

…the report is a critical resource for state governments in determining child support guidelines and foster care payments.

Middle Income? Huh?

In case you’re wondering, income levels are defined as follows:

Middle-income** parents with an income between $61,530 and $106,540 can expect to spend $245,340; and a family earning more than $106,540 can expect to spend $407,820.

Okay, then. Mum’s the word on where I would have fallen on this spectrum. More precisely, single mum’s the word, which doesn’t necessarily mean that one’s expenses are actually less – only that the parent in the picture is required to do some (next to impossible) heavy lifting.

Suffice it to say, I wasn’t pulling in over a hundred grand, yet I was incurring the associated level of expenditure! Sure, when we have more, theoretically we spend more. When we have less to spend, that doesn’t mean we aren’t borrowing against the future in order to make the “current payments” for the necessities for our kids.

It’s also interesting to me that the $61,530 figure is used as a low-end starting point for middle income, as the median household income in the US hovers at around $52,000/year. This higher amount appears to be the mean, which is easily skewed by the growing income gap.

What’s Included in Figuring Cost of Raising Children?

How to categorize your child-rearing expenses?

We have these items taking top (costly) honors – housing ranks first in household expense (roughly 30%), followed by childcare and education, then food. And the total expenses per year, should you care to know, are roughly $12,800 to a hair below $15,000/year, depending on your  child’s age.

Other categories include transportation, clothing, and healthcare.

I wonder where they put items like car insurance once a teen hits 16, especially important in regions where there is little or no public transportation. And what about braces and general dental / vision care? I’m somewhat challenged to imagine them in the figures that are given.

Incidentally, in the details, there’s a good deal more information that reflects a pretty thorough understanding of the basics in today’s world, though I seriously doubt the availability of these “basics” in our poorest areas.

Regional Differences

The data reflect that the Northeast is more expensive and the Southeast less, with rural areas less expensive still.

However, as one who raised her children in the “urban Southeast,” I daresay that hardly feels like the case; my childcare costs alone were in the $1,000/month range for one child, and of course higher when there were two.

Also worth noting:

Health care expenses for a child have doubled as a percentage of total child-rearing costs during that time [since 1960]. In addition, some common current-day costs, such as child care, were negligible in 1960.

Can any of us afford to raise a child?

Can any of us afford to raise a child alone?

Single Parent Gender Gap

Single parents doing it all on their own? And single mothers in particular?

In fact, 2012 census data shows median income for single mother households was $25,493.

That’s right. Just over $25,000/year. From this same report, for purposes of comparison:

median income for single father families was $36,471…

Note, too, that single parent households are headed predominantly by women, and do continue to read the summarized data until you reach the section on gender and income, where I call your attention to this:

According to the US Census Bureau persons with doctorates in the United States had an average income of roughly $81,400. The average for an advanced degree was $72,824 with men averaging $90,761 and women averaging $50,756 annually.

Sticker Shock? Calculate Your Basic Kid Costs

A deeper dive into the USDA’s report will take you to the Center for Nutrition Policy and Promotion, offering resources on nutrition and fitness, among others. Additionally, you will find a calculator for determining the cost of raising a child according to information you can enter – size of family, location, and so on.

I ran several variations of my situation through the calculator – what if I had never divorced, for example – and I find myself with a number of unanswered questions including how a single parent can manage to do anything other than work multiple jobs and go into debt, unless no bumps in life occur relative to employment, exes, health and so on. And that assumes a robust income.

By the way, the calculator allows you to adjust with actual data as you know it. (My own calculations explained a lot…) Also interesting is the assumption of a $61,500 to $106,000 range defining middle income.

Particularly in light of figures on median household incomes in the US, which vary widely by state from roughly $35,000 to $66,000. And of course, size of household and education come into play – as does gender.

Education, Gender, Income…

On a somewhat tangential note, I was recently in a disagreement with a (male) friend who balked at figures I cited on the discrepancy between earnings of men and women with MBAs. The bottom line: He was stunned (and incredulous) at data reporting a surprising gap – female MBAs with starting salaries at roughly $4,600 less than men, a statistic I have cited before, and mid-career MBA women earning $30,000 less than their male counterparts (Bloomberg Businessweek).

You could argue that disparities in pay are the result of differences in chosen industries; in fact, the Bloomberg Businessweek article posits exactly this. However, also shown are comparisons within industries:

Bloomberg found that among the six categories with the largest gender gap in pay were insurance agents, personal advisers, and securities sales agents. Women in those jobs earned 55¢ to 62¢ for every $1 men pulled in…

And I wonder why my pockets have never been as deep as – theoretically – one might be inclined to believe. Try shallow. Very shallow.

As suggested above in the single parent gender gap – cue divorce, cue gender, cue the recession and yes… cue kids.