The US Department of Agriculture said in a 6/14/12 report that a middle-class family with a child born in 2011 can expect to spend about $295,560 in the next 17 years on food, shelter and other necessities with projected inflation factored in.
Meanwhile, projected private college tuition and public college tuition is expected to rise to $450,000 and $200,000, respectively.
In total, we can expect a total cost of roughly $500,000-$750,000 to raise a child through the age of 22 if parents are to pay for everything!
Sounds scary right? The annual expense is therefore about $23,000 to $34,000 compared to the median US household income of roughly $58,000 a year GROSS. Given half of Americans don’t pay federal income taxes, the $23,000-$34,000 a year annual child-raising cost is probably no more than $25,000-$40,000 in gross income a year.
Still, how does one spend 40-60% of their after tax income every year on one child and manage to pay for rent, food, entertainment and save? Having a kid, based on this report by the government says that the median household only has about $25,000 a year in after-tax money to spend!
DOES THE GOVERNMENT WANT TO DISCOURAGE PROCREATION?
Now that you know that the median household can barely afford one kid on their $58,000 a year gross household annual income, we should come to the following conclusions:
* The government doesn’t want the median household to have more than 1 kid, because having two kids would wipe out all after-tax annual income.
* The government doesn’t want a household who makes less than $25,000 to have kids because someone is going to be starving.
* The government is telling us that there’s nothing really they can do about rising kid-raising inflation costs.
* Americans expect too much out of their children.
* Americans spend too much on their children.
* America is doomed!
BREAKING DOWN GOVERNMENT PROPAGANDA
I know many families with more than two kids who make less than $80,000 a year. I’m sure many of you know many of the same as well. They aren’t in debt. They save at least 10% of their after-tax income ever year and are on the right course for a comfortable retirement.
Meanwhile, I know a couple families who make less than $60,000 a year and have three kids! Three kids would dictate an annual cost of $69,000 after-tax = $80,000 gross according to the government. So where on earth does the missing $20,000 in gross income come from? Furthermore, once we make up for the missing $20,000 in gross income, what about the at least $15,000 or more in gross income the parents need to just survive?
The logical conclusion is that kids don’t cost the $17,000 a year up until 18, and $23,000-$34,000 a year if taking into account four years of college that the government says they do!
Based on the median household income of $58,000 with 2 kids one can actually calculate how much kids cost.
Income (Year)
$58,000 gross = $49,000 after-tax assuming a 15% effective total tax rate.
Expenses (Year)
Food: $6,000
Shelter: $15,000
Savings: $5,000
Vacation: $2,000
Car: $2,000
Gas and Energy: $1,500
Entertainment: $2,000
Miscellaneous: $1,500
Total Expenses Pre-Kids: $35,000
Total Disposable Income Pre-Kids Expense: $14,000 for 2
CONCLUSION – GOVERNMENT IS OFF BY 70%
The median cost per kid for the median household making $58,000 a year is therefore $7,000. The total cost of raising a kid for 18 years is therefore a more digestible $126,600. If one adds on the cost of education of $200,000-$400,000 for a college degree, then we come up with a total cost of $326,600 to 526,600, or $15,000-$24,000 a year per kids.
Spending $7,000 a year to raise a kid for 18 years sounds much more realistic and reasonable. Just as a goldfish grows to the size of his bowl, so do parents adjust their spending amounts on their children depending on the size of their income. Unfortunately, once we add on the estimated college tuition costs, things go to hell!
Solutions to counteracting college education costs:
* Have smart kids.
* Be disciplined parents who make sure they study enough to get straight A’s and therefore scholarships.
* Go to a public school.
* Go to community college then transfer.
* Don’t have many kids.
* Don’t have kids.
* Take anti-horny medicine.
* Start saving $7,000 a year for kids before you have any kids. Save $7,000 a year before kids for 10 years buys you 10 years of kid expenses and then continue to contribute in a 529 plan.
* Move to Georgia and make sure your kids get at least a 3.0 GPA so they can get a full ride to Georgia Tech or University of Georgia through their brilliant HOPE Program which needs to be adopted by all states.
* Ask the government to give you more than $1,000 per kid for tax credit.
Readers, what are your thoughts on the REAL cost of raising children? Doesn’t $7,000 a year sound more realistic vs. $22,000 a year according to the US Department of Agriculture? I have no kids and am just pontificating, hence, I’d love to hear what the real annual costs are of child raising from parents. Any other tips?
Recommended Reading:
Do Soaring Tuition Costs Matter If The Returns Are Even Greater?
Don’t Have Kids If You Can’t Take Care Of Yourself
Regards,
Sam
I think a lot of people aren’t ideal and go into debt with kids. I think it is probably somewhere in the middle but near impossible to know as each parents raises their kids differently.
I agree with you when it comes to breaking it down. And I totally agree about going to a public school vs. a private one to save money!
You can really go to Georgia Tech for free with a 3.0 or better? Wow.
Good stuff huh? I’ll bite the bullet if public schools do indeed cost $200,000 over 4 years in 18 years!
I definitely think $7,000 is more realistic. Over the last year (our son is 2), we spent about $200 a month–no more–on things specifically for him, including health insurance. When he was younger the total was higher, but not by much. I think the stats are skewed by things like private school and over-extra-curricular-ification.
Good to hear and thanks for your feedback. So perhaps $3,000-$4,000 a year for you? If that’s the case, child raising sounds pretty good up to 18 years old if they attend public schools!
I think it varies year to year. Certainly, when things like orthodontics come into play, there will be a different level of costs. But if the last 3 years are any indication, I think the official estimates are way overblown.
The real cost is daycare OR loss of income from one parent staying at home. We paid $15,000 for daycare last year and that’s with after tax dollars. When I become a stay at home dad, the loss of income is a lot more than that. But, I was going to quit anyway so that doesn’t really count.
That is a real cost, but I’m not sure the gov’t is taking into account the loss of income in their analysis. If that’s the case, then the costs totally make sense. Anybody know?
I heard that the main reason the figure is so high now is because of the cost of childcare and the cost to have health insurance on the child.
Each child is an after tax deduction of about $1,600 and if you are a single income family of three, you’ve got a reasonable shot at the earned income tax credit. So even $7,000 is a bit high. The research from the government also includes a portion of your house regardless of whether you’d be buying less house if you didn’t have children.
I’ve got two young one’s and they haven’t been very expensive at all. However, I also don’t pay for daycare, extra curricular activities or college yet. I expect that these expenses will push up the budget greatly. I’d say apart from the food budget, they really haven’t been that noticeable.
I’ve got two young ones and they have not be large expenses. I imagine the biggest expenses really aren’t regular things like food and clothing.
Great to hear that you don’t find having kids expensive. I’m just so bewildered why the government and other studies have such HIGH estimates then? Seems totally off! Didn’t know about house costs being included.
The Hope scholarship in Georgia has changed from it’s original design. We live in GA and our daughter will be starting college at UGA this year. If a student’s gpa is 3.0 or higher, they can get the hope scholarship to a public university in GA. It pays a percentage of the tuition. It currently pays 83% of the tuition. However, the tuition is only a part of the estimated cost of attending the school. For example, GA Tech’s estimated cost of attendance is $22,254 per academic year. The tuition portion of that is $7,718 so the hope scholarship would award a student approximately $6400 per year. Families would be left with $15854 to pay.
There is a higher level of hope scholarship, the Zell Miller scholarship, that pays 100% of the tuition. However, you are still left with the remaining costs of attendance. To get the Zell Miller scholarship, a student must have a 3.7 gpa or higher or must be the Valedictorian/Salutatorian of their high school class in Georgia.
Pam,
Great color. I’m moving to George or whatever state that has such great educational benefits for state residents!
83% of tuition is still fantastic. Have to pay for food and shelter anyway. Tuition is the new cost. Good to hear about the Zell Miller scholarship. If I was a parent I’d crack the whip to 3.7 GPA or no soup for you!
Is raising kids cheaper than the $23,000+/year per the government survey?
The Hope scholarship is definitely one of many reasons that we stay in GA. We are very fortunate that our daughter is quite the perfectionist when it comes to grades. She earned the Zell Miller scholarship. Our boys are really good at school also so hopefully the Hope will still be around when they graduate. We have four kids so we are embarking on 16 years of college payments.
My first thought about the government study is that it was a bit high, even with college tuition added into the figure. However, it is like most things in life, it depends on your choices. Some things are optional: travel sports, name brand clothes, band instruments, various private lessons, and a car. Other things are not optional: medical and dental expenses (wisdom teeth removal is running around $2k; braces around $3K), school costs, shelter, food, etc. Let’s just say, “it ain’t cheap!”
Oh no, is wisdom teeth removal and braces not covered by dental insurance? Considered cosmetic? Pricey!
We are self-employed so we have to buy our own insurance. Dental insurance for a family of 6 is really expensive and it takes about 18 months to build to full benefits. It has been financially better for us to go with a dental plan which gives discounted rates for each procedure.
Great information! Thank you for sharing.
In England you’re better off financially and more secure finacially if you have kids. If you’ve got children the government will make sure you have enough to get by if you fall on hard times. I’m not saying it will always be this way though.
Its kinda interesting to read so many posts that rail on social security and other social net programs (or “government propaganda”), then to read posts that state the value and necessity of public education. … interesting.
Interesting numbers! It is all about choices. What kind of parent do you want to be? Some parents can and will do things to help their children do better which may or may not cost anything, If both parents work, you must pay for a lot of outside services. We emphasized education and it paid off big. My children received either full or partial scholarships.
Any idea how much you think you ended up spending per kid from 0-18, and 0-22 inflation adjusted?
Roughly $75-100K per child (2) through college,
Unless you factor in daycare, I’d say the $7,000 figure is closer to what most people really pay for the basics. We could have bought another house for what we paid per month in daycare.
Which is why I’m curious how come the government estimate is off by $15,000-$25,000 a YEAR?
I think having kids will make you paint a different picture. In theory it sounds right but when you have kids and you start weighing a public school education to a private school (totally depending on where you live) you find you do what is best for the child. Fortunately for me we live in a zone that has a great public school but if I want my children to fully learn a second language (we speak spanish at home) we will have to go out of the PS system as language doesn’t start until middle school. Like I said in theory I think you are right but in experience I have to disagree.
How much are you finding your kid(s) costing a year then? thx
My husband and I have this conversation a lot (no plans for kids yet though). I am from the Northeast, and the public school systems are generally good there. We live in Texas now, and he is convinced that the public schools are bad and that we would need to send children to private schools. I really wouldn’t want to! But we haven’t looked into public schools at all–these are really based off of what we have heard from others with children.
The common theme is everybody around the country thinks public schools are bad. I just don’t know. I think it’s a lot of undue fear from parents worrying their kids will be dead beats. I went to private and public, and I found public to be just fine.
I’d say $7,000 is on the cheap side, but much closer to realistic. Your kids don’t have to cost a lot, but it all depends on the lifestyle you lead and encourage them to lead. Pittsburgh Public schools run something similar to HOPE, but not as amazing. It’s the Pittsburgh Promise, and as long as you graduate you get a certain amount of money towards your college tuition. It’s in its infancy, though, so we’ll see how it pans out long term. Definitely a step in the right direction, though it’s probably one of the worst school districts in the county.
It’s interesting though, because I swear every parent says their public school district is one of the worst in the country! They say that in San Francisco, Honolulu, LA, and Chicago where I have friends. Of course they can’t all be correct, can they?
The cost of education is one of the things that scares me the most about having kids. It’s so messed up that we pay so much in taxes and we don’t even have safe, high standard public schools. Student loan debt is a serious problem all over the world and it’s only getting worse.
My wife and I make lower than your numbers and we have two kids. We get by. Shop at thrift stores, do free recreation stuff, etc. I think a large problem people have is what you said, “Americans spend too much on their children.” People buy designer labels for their kids, they try and do expensive vacations each year, and it’s just craziness. My wife and I decided long ago that we’ll provide the basics that our kids need, but if they want designer labels, then they will need to get a job and buy them themselves. And for college, we’re saving a little, but again, we’re letting our children know that their education after highschool is their expense. Get good grades and it’ll be cheaper, and we’ll do what we can, but they need to take control of their own lives and be able to handle/understand finances well before they hit 18! Are we being too rough?
Well, hopefully you’ll have some firepower to help em out for college, even if they don’t know it!
“Get good grades, and it’ll be cheaper.” ABSOLUTELY! In a way, a child not getting good grades is being selfish, don’t you think?
Sam, I live in Georgia. My both daughters were accepted by GA tech, but neither stayed in Georgia. I wish they did because HOPE is a wonderful program.
Ah yes, one went to UC Berkeley right? What a difference out of state UC tuition vs. subsidized tuition in Georgia!
around 35K as I have to pay 23K just for the out of state tuition. UC is a great school, but time will tell if it can bring good return.
In New Mexico, the state lottery provides a scholarship to all New Mexico residents that received a 2.5 GPA or higher and covers all tuition for 8 semesters. This doesn’t pay for fees and whatnot, but NM schools are super cheap. I attended my Eastern New Mexico University for a cool $21,826.58 total. I lost the lottery scholarship the first semester because I was young and foolish. But! Came out in four years completely debt free anyways.
[…] One of the biggest worries is whether our children will have the same opportunities as us. In a highly capitalistic, laissez fair government world, the answer is no. With tuition costs spiraling out of control, massive government debt, generational cronyism running rampant, and a shrinking government safety net, I fear for our children’s future. Sure, the best solution is to have hard working, smart kids who take nothing for granted and get scholarships. But, that’s a rarity. Instead, we should all expect our kids to be entitled dumbasses who disappoint. (See, The Cost Of Raising Children Is Cheaper Than You Think) […]
[…] One of the biggest worries is whether our children will have the same opportunities as us. In a highly capitalistic, laissez fair government world, the answer is no. With tuition costs spiraling out of control, massive government debt, generational cronyism running rampant, and a shrinking government safety net, I fear for our children’s future. Sure, the best solution is to have hard working, smart kids who take nothing for granted and get scholarships. But, that’s a rarity. Instead, we should all expect our kids to be entitled dumbasses who disappoint. (See, The Cost Of Raising Children Is Cheaper Than You Think) […]