Month: September 2014

Since 1960, the U.S. Department of Agriculture has produced a report annually that estimates the yearly expenditures parents could face in raising a child from birth through age 17.

The most recent report, released last month, projected middle-income parents will spend $245,340 on average to raise a child born in 2013 until that child turns 18. This is a 1.8 percent increase from the projection for children born in 2012.

Expenses incurred include housing, which made up the largest share of child-rearing expenses across income groups at 30 percent. Child care-education (18 percent), food (16 percent) and transportation (14 percent) were the next largest expenditures. Parents spent 8 percent of total expenses on health care, which is double the percentage from 1960. Other expenses included clothing and other miscellaneous personal care and entertainment-related expenses.

Child care and education expenses have increased the most over time, as those expenses accounted for only 2 percent of total expenses in 1960. Elizabeth Kiss, family resource management specialist for K-State Research and Extension, said this increase makes sense for a variety of reasons.

“In the 1960s, fewer women were working outside the home,” she said. “There weren’t daycare expenses for a majority of people.”

The child care and education component, Kiss said, included costs for daycare or babysitting, elementary and high school tuition, as well as any books, fees or supplies children might need in public or private schools.

While the child care and education expenses portion was one of the highest in the report and continues to rise from year-to-year, she said people could look at it as a good sign rather than a rising expense.

“Many parents are concerned about the cost of child care, but it is an investment in their children,” Kiss said. “They’re investing in their child’s education and development. We always want to minimize money we spend on any product, but we also want to do that quality-quantity comparison. Investments in children can be thought of in a similar way.”

Although food remains among the top three expenses in raising a child, it has actually gone down from 24 percent of expenses in 1960 to 16 percent today. So even in the today’s noted challenges of rising food prices, Kiss said families are spending less as a percentage on food. Food is also one of those general household expenditures in which parents could try to save money.

“You can manage your food and housing expenses to save,” she said. “Don’t have a bigger house than you need. You can cut back or be more efficient on items such as food, utilities and transportation. Although you don’t want to necessarily cut back on child care and education, maybe you can save by buying used books rather than new ones.”

Planning for the future

The USDA report was based on data from the 2005-2006 Consumer Expenditure Survey made possible by a collaboration of U.S. government entities and updated to 2013 dollars using the consumer price index. The report authors have a method of allocating costs that are specific to children.

“The report is based on the actual expenditures, so the actual amount of money families did spend on children,” Kiss said. “It’s a good indicator of, on average, what families are actually spending. Then it helps us to imagine what families might spend in the future.”

Kiss said she realizes the decision to have children, or to expand a family, is most times based on more than the cost of raising a child, but it is important to keep the cost in mind.

“Obviously, you might not have the full amount of the average, $245,340 from birth through age 17, when the child is born, and that’s ok,” she said. “We do need to know what our income is and spend less than we make, and we need to consider that these expenses are making investments in our children.”

The average cost is based on a middle-income, two-parent household, but the report breaks down specific costs by income, region, number of children and if the household includes one parent. In this report, middle income refers to before-tax incomes ranging from $61,530 to $106,540 in 2013.

Not surprisingly, the report found that parents who make more money tend to spend more on their children. Annual child-rearing expenses were highest for those living in the urban Northeast, followed by those living in the urban West and urban Midwest. Families living in the urban South and rural areas had the lowest expenses.

The report also showed that parents tend to spend less on the second child in the family and any other subsequent children. Families with three or more children spend 22 percent less per child than families with two children. Parents tend to spend 25 percent more on a single child. Annual expenditures tend to increase with the age of the child.

While expenses for a child in single-parent families similarly followed patterns of a child in two-parent families, total expenditures on a child from birth through age 17 were, on average, 7 percent lower for single-parent households.

– Story from K-State Research and Extension