For financial advisors helping couples plan for the cost of children the USDA report, Expenditures on Children by Families, will to be a great resource to help estimate costs. The report found the average spending to raise a child to 18 is projected to be about $235,000 (in today’s dollars).
Expenditures on Children by Families, 2011.
U.S. Department of Agriculture, Center for Nutrition Policy and Promotion.
Miscellaneous Publication No. 1528-2011.
June 14, 2012
$235,000 is the projected total cost for an average, middle-income, family. Figure 1 from the report, shown below, illustrates the projected cost is much higher for high-income families, defined as earning $102,870 or more annually. The total projected cost to raise a child in a high-income household is just under $390,000. Though households with higher income spend a significantly higher dollar amount, the percentage of the household income spent on child costs actually decreases. For the low-income households, defined as earning $59,410 or less, child costs amount to 25% of their income. For high-income households, the costs drop to 16% of income. You can also see from the graph costs remain about the same as the child ages until age 9, and then expenses start steadily increasing until 17.
The costs included are broken into categories displayed on Figure 2 from the report, shown below. The largest portion (30%) of the costs to raise a child goes to housing, averaging just over $70,500. The housing cost was estimated by evaluating the cost of an additional bedroom for the child, not factoring in other possible housing costs that could be related to a child, like paying more for a house in a good school district or a big yard. Rounding out the top three spending categories are childcare and education (18%) and food (16%). Half of the households included in the survey did not report any spending on childcare and education. The reported cost amount only included households with reported childcare and education expenses. Not surprisingly, the cost of education and childcare expenses rose with increased household’s income. The costs include only the direct costs of raising a child by the child’s household.
The report also looked at the cost to raise a child based on location. Costs to raise a child were highest the urban Northeast, followed by urban West. Costs were the lowest in the South and non-urban regions.
If you need to help plan for college costs, which falls beyond the amount estimated in this report, make sure to take advantage of the college cost estimator and education funding reports available in Money Tree Software’s financial planning programs – Silver Financial Planner, Easy Money and Golden Years. If you are not a current user, download a free trial and start planning today!
