The amount of money you spend on your children depends on many factors, but the most important thing is to have a budget within which you can operate-lest you be in financial straits before you know it. The costs of raising a child-or children, for that matter-depend on where you live, the child's age, your marital status, your household income and the more amorphous notion of your lifestyle. The U.S. Department of Agriculture regularly publishes a report entitled "Expenditures on Children by Families," which chronicles the various ways people raise their children and manage their budgets effectively. I like this report, and read it intently whenever it comes out, because it provides an in-depth analysis of the different types of costs you would have once you step into parenthood, but also tells you how your marital status and residence area ultimately affect how much you fork over for child expenses.
It is important to note that when specialists talk about child-rearing expenses, most of them distinguish cash you dole out to take care of a newborn or infant, from money you spend on an older child. In fact, it is helpful to separate both expense categories because a newborn has a set of recurring expenses-think diapers, for example-that you don't see with older offspring, says Dr. James E., a retired pediatrician who over several years has provided budgetary counsel to public-health officials in New York State.
This is why, in this article, we will explore both cost categories, so you can have a better idea of how much you would set aside every year for child rearing, especially if you have a good mix of toddlers, infants, pre-teens, and teenagers.
What Do We Mean by Child-Rearing Costs?
Typical expenses you incur when raising a child include:
Housing-Think about everything from mortgage payments and property taxes to insurance and rent. Then, add things like utilities and house equipment as diverse as furniture, major appliances, and floor coverings.
Food-Include in this category things like food and nonalcoholic beverages you buy at convenience or grocery stores along with money you spend at restaurants (and on popcorn at movie theaters). Plus, you should include school meals, whether you pay the school a food surcharge each month or prepare the meals yourself.
Transportation-Indicate here expenses like gas, public transportation, maintenance and repairs, driver's licensing and car registration. Other costs you would incur here include airline fares as well as down payments and monthly remittances on car loans.
Clothing-Clothing expenses run the whole lifestyle gamut, from dresses and suits to diapers and pants. Also, count footwear as well as cash you would fork over for dry cleaning and alterations.
Healthcare-Even if you have medical insurance, you would still have things like deductible and co-pay to remit whenever you and your loved ones visit a physician or spend time at a hospital. Other healthcare costs include medical supplies and prescription drugs along with dental work not covered by insurance.
Childcare and education-Include in this category everything from tuition to babysitting and school supplies. Also, indicate expenses like books and day care.
Other expenses-This category includes a jumble of costs running the gamut from toothbrushes and portable media players to magazines and nonschool books.
Example 1 – The Costs of Raising a New-Born Baby
Dr. James E. recommends that you use Baby Center's cost calculator to estimate first-year baby costs. Besides the calculator, the portal also provides insight into things you can expect as your little one becomes bigger. For example, the site nicely breaks it down for you, showing you the cost category for a baby, a toddler, a preschooler, and a big kid.
Now, back to where we were. Let's calculate how much dough you can expect to dole out during your first year of parenthood. Note that you generally would spend fewer dollars in subsequent years, especially as your cutie pie becomes more independent and he or she gains more physical coordination.
Let use Baby Center's calculator to estimate your annual child-rearing costs. Be thorough and include all items; that way, you know upfront what's awaiting you and your pocket, from a financial perspective.
(I don't know where you live, so pardon me if some of these costs seem exorbitant or rather laughably low compared to what you would pay in your residence area. My goal here is just to give you an estimated amount.)
I will use a daycare center: $500 per month x 12 = $6,000
I will use a babysitter occasionally: $25 per month x 12 = $300
I will use disposable diapers: $50 per month x 12 = $600
I will occasionally use wipes: $25 per month x 12 = $300
I want to breastfeed: $0 per month x 12 = $0
Occasionally I will use formula: $50 x 12 = $600
I plan to also feed my baby solid foods: $50 x 12 = $600
I plan to spend $50 per month x 12 = $600
Saving for college
In a college fund, I will set aside $50 per month x 12 = $600
I'll probably spend $25 per month x 12 = $300
I'll probably dole out $25 per month x 12 = $300
Toys and books (yes-a 6- or 11-month old can be drawn to a book)
I plan to fork over $25 per month x 12 = $300
I plan to buy the following items in each respective category:
Infant car seat: $100
Basic stroller: $150
Play yard: $50
Front carrier: $50
Diaper bag: $50
Bouncer/bouncing seat: $50
Play mat/gym: $50
Changing table: $100
Crib mattress: $100
Baby monitor: $50
Bottles and nipples: $50
Plates and bowls: $10
Cups and sippy cups: $25
Burp clothing: $15
Bottle brush: $10
Ice packs, extra breast shields, breast pads, milk storage bags: $75
Nursing bras: $75
Nursing pillow: $25
Manual breast pump: $25
Baby towel with hood: $25
Infant bathtub: $25
Baby washcloths: $15
Baby nail clippers: $10
Childproofing supplies: $50
Safety gates: $100
Diaper pail: $25
Birth announcements: $50
Baby book or scrapbook: $25
Photo printing costs: $125
Adding all these expenses up, your baby's first year will cost you $12,650.
Example 2 – The Costs of Raising a Child
Using the USDA's Cost of Raising a Child Calculator, let us now turn to how much you can expect to spend on your older children.
In the below example, I will assume you have 2 children and live martially in Fort Lee, New Jersey, and that both your spouse and you are fully employed.
Age of first child: 3 Age of second child: 5 Is yours a single- or two-parent household? Two Parents Where do you live? Northeast-urban or suburb What is your annual before-tax household income? $59,790 to $103,530 By clicking on "Calculate," you would see that each child would cost you $8,490 per year, for a total of $16,980. The USDA tool also shows you a nice graph about where the money would go. For example, here is your expense breakdown in our hypothetical scenario:
- Housing: $6,000
- Food: $2,500
- Transportation: $2,000
- Clothing: $1,000
- Healthcare: 1,500
- Child care and education: $3,500
- Other: $480
The calculator also tells you how costs in your residence area stack up against national averages, and the other beauty of the tool is that you can recalculate your child-rearing costs and exporting the results into Excel or printing them.
My Grandpa used to say that being a parent, in itself, is already a full-time job-work to which you must devote energy, resources and time, sometimes more than what you typically apply at your day job. I couldn't agree more with Grandpa. When it comes to child-rearing costs, pay attention to your budget and use online tools to determine how much your children cost you each year. Child-rearing expenses are as diverse as healthcare, clothing, child care and education, transportation and food.