$233,000 to raise a child? Not mine…

CNNMoney recently posted an article stating that it costs over $233,000 to raise a child citing a report from the Department of Agriculture.

In our house, I can tell you right now that I don’t expect us to spend anywhere near that amount to get our kids raised and through high school. We have three children and the oldest is about to turn 6 and so far, we aren’t on track to spend that much for all three let alone for each one.

Just for kicks, I went back and looked at our household expenses in 2010 (the year before we started having kids) to 2016 (when we had three kids at home). Here is what I found:

  • Our total out of pocket housing costs are roughly the same. We live in a larger, more expensive home but aren’t making as much extra principal payments. Interest and taxes are around $200/mo higher. Even if we didn’t have kids, we would have upgraded houses from where we were living in 2010 so any increases really can’t be blamed on them.
  • Auto expenses are up $65/mo, mostly from having insurance on 2 vehicles instead of 1 and my longer commute increasing gas. We don’t shuttle our kids all around town to participate in every possible activity and we would have purchased a second whether or not we had children so this is also unaffected. Yes, we have an Expedition for carrying a lot of people but even if we had no kids our second vehicle would be a large SUV or pick-up truck with similar ownership costs.
  • Utilities are up ~$150/mo, mainly due to electricity, garbage, and needing pest control in our new home. We moved to a warmer climate, use the air conditioning a lot more throughout the year, and consider pest control a necessity where it wasn’t before. Garbage pickup is just plain more expensive in our new area, we aren’t paying any extra for having more trash. So again you can’t really attribute this to having kids. Are you seeing a trend here?

To be fair, there are a few areas we do spend more:

  • We now spend $375/mo more on groceries and restaurants. $125 of this is related to eating out, something we pretty much didn’t do at all before we had kids, but only because we were paying huge tuition bills for my MBA. Since whenever we do eat out our kids don’t actually eat anything (darn the pickiness), almost none of this increase can be pinned on them. The $250/mo increase in groceries is probably mostly due to having more mouths to feed (and diapers, which we file in this budget category).
  • In 2010 we lived in a house we had built just a few years earlier so our home improvement projects were mainly just cosmetic and very inexpensive. Now we live in a house that is a bit older and came with a long list of things we’re working on changing to make it our own. In 2016, we spent $12,000 more than 2010 on home repairs, maintenance, and furniture. Can we blame this on kids? Not really. Maybe $500 for the whole year was furniture for the kids’ bedrooms, but we would have furnished rooms as a guest bedroom, office, man cave, etc. if we didn’t have kids. I used to have an affinity for high-end entertainment systems that I no longer purchase/own so you could make an argument that kids are saving me money in this area since I would want to be buying much more expensive home entertainment equipment if I weren’t worried about kids destroying things.
  • We spend $575/year on life insurance now that we didn’t have before we had kids. When it was just me and my wife, no one truly depended on my income so we didn’t bother getting life insurance. As soon as we started having kids, we took out a term life insurance policy on each of us and we pay the premium annually right around the time of our oldest child’s birthday.
  • Our clothing expense is up $70/mo from 2010. A lot of this is from kids’ clothes, but we’ve increased spending on clothing for ourselves as well. We were spending very little on clothing for ourselves while we were paying grad school tuition each year.
  • Travel/Entertainment is up $4,000/yr from 2010 to 2016. We would undoubtedly travel even more if we didn’t have kids, it takes so much energy to go anywhere with our little people. So whatever we spend on travel for them, I feel like we would spend that and maybe beyond on ourselves if it were just the two of us. I like to be able to show our kids new places and to have them experience new things, but all of this definitely falls in the discretionary category and wouldn’t be what I consider a core cost required to raise a child.
  • We put $200/mo into a 529 last year. We wouldn’t do that if we didn’t have kids, but it also isn’t a cost that will help ‘raise’ them as outlined in the study since really it is intended for use after they are supposedly off on their own.
  • Our charitable giving is up $7,000 from 2010. Again, not because we have kids.

The way I see it, our expenses are up roughly $600/mo more now on things that I consider directly attributable to the (three) children. Multiply that out 18 years and you get $130,000, or roughly $43,300 a child…a fraction of the amount stated in the article. Even if you assume the costs double (as things will certainly get more expensive as they get older), it’s still nowhere near the costs they assume. Any other increases in our expenses are for things we would have done whether or not we had kids. This also ignores the substantial tax credits we receive each year for each child.

The study assumes that you need to purchase a larger home with an additional bedroom for your child but I question that logic. We owned two separate three-bedroom homes before we ever had our first child, and simply converted one room to be a nursery when we were expecting our first. We didn’t go out and buy a larger house just because we were starting a family. We wanted to own a home whether or not we had children in order to build equity and to stop sharing walls. Our current home is somewhat larger than we would buy if we had no children, but if we had a smaller home it would likely have more expensive finishes and furnishings instead of a more ‘kid-proof’ décor and more square footage.

Lastly, the author cited that one of the big expenses for raising children is child care, which averaged $37,378 per child. The way I read this, they are referring to direct costs paid for child care, something that we do not pay at all. I understand that this is a very large expense for many households and that $37k might even seem a bit low, but we are fortunate to have created the option for ourselves that my wife is able to stay home with our children. This option is not without a cost. Although we don’t pay anything out of pocket, the opportunity cost of my wife not working is substantially more than $233,000 over 18 years. If she were still in the workforce I have no doubt that her income would exceed $100,000/yr but we have made the conscious decision to allow her to stay home and raise our children.

In conclusion, I think the author and the study completely miss the point. Kids can be as expensive as you let them be, but don’t have to be very expensive at all. If you’re trying to raise kids the way you see others are doing on social media, you can easily get caught in the modern day version of keeping up with the Joneses and think that raising kids is extremely expensive. I recently read Rachel Cruze’s new book Love Your Life, Not Theirs where she talks about how to gain contentment and avoid the trap of comparing ourselves to others, and I think the concepts are extremely applicable to this.

I know people who are so intimidated at the cost of having children that they significantly delay having them, and others who go so far overboard saving for future college expenses or spending obscene amounts of money on activities that they can spend significantly more than this article alleges. I’m glad we waited a couple of years after we got married to have kids, but I’m also glad we didn’t wait much longer. It was important to us to be financial stable, but if you wait until you feel 100% ready, you’ll do nothing but wait. On the other hand, if, when you do have kids, you lavish every extravagance on them you’re not doing them any favors either. All things in moderation.

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