As you may know, USDA recently issued its Expenditures on Children by Families, 2011 report, which analyzes the costs of raising a child born in 2011. USDA has been tracking the cost of raising a child annually since 1960. Expenses are examined by the age of the child, household income, budgetary component, and region of the country.
Middle income parents of a child born in 2011 can expect to spend about $234,900 ($295,560 if projected inflation costs are factored in*) for food, shelter, and other necessities to raise a child over the next 17 years. Let’s look at the breakdown:
- A middle income family, defined as a married couple with two children and a before-tax income averaging $79,940, spent approximately $13,050 per year on each child for their first 18 years of life.
- Expenses averaged about $760 less for younger children from birth to 2 years old, and averaged $1,270 more for teenagers between 15-17 years of age.
- Teenagers are more expensive because they have higher food costs, as well as higher transportation costs when they start to drive.
- Housing accounts for the largest expense (30 percent) for a child. Housing expenses escalate with the need for additional bedrooms and bathrooms. This is followed by child care/education (18 percent) for those with this expense, and food (16 percent).
Why does USDA compile this report? The report provides valuable information to help families plan for overall expenses including food, or to purchase adequate life insurance. It is a valuable resource to states in setting child support and foster care payments, and developing family education programs. The report has also become a teaching tool in high schools to show students how much children actually cost in the hope that the students will wait until they are older and more financially secure to have children.
Not surprisingly, families with more income spend more on a child. However, these expenses do not increase by the same percentage across the board. For instance, expenses on food and health care do not vary as much among income groups as expenses on more discretionary items, such as entertainment and travel.
If families are looking to relocate to save money, consider a rural area. Families in the urban Northeast had the highest child-rearing expenses, whereas families in rural areas had the lowest. The main reason rural families had lower child-rearing expenses is because of much lower housing costs.
As any economist will tell you, children are subject to economies of scale. That is, with each additional child, expenses on each declines. For example, going from two to three children reduces expenses on each by 22 percent. This may be known as “cheaper by the dozen.” Each additional child costs less because children can share a bedroom; a family can buy food in larger, more economical quantities; clothing and toys can be handed down; and older children can often babysit younger ones.
For more information on the Annual Report on Expenditures on Children by Families, also known as the cost of raising a child, go to: http://www.cnpp.usda.gov/ExpendituresonChildrenbyFamilies.htm
*Projected inflationary costs are estimated to average 2.55 percent per year. This estimate is calculated by averaging the rate of inflation over the past 20 years.