We’re not in the business of advising people to buy a baby but here is an astonishing fact: if you do have a baby it will cost you on the average $245,340 to raise it over an 18-year period. At least, this is according to the data published on USDA.gov.
You might remember that the Facebook billionaire Mark Zuckerberg and his wife Priscilla Chan-Zuckerberg honored the recent birth of their daughter by announcing that henceforth they will donate to charity 99% of their holdings in the website which is now worth about 45 billion (NYTimes.com).
Of course, you’re probably not an Internet billionaire like Mark Zuckerberg but you’ll be forced to face the prospect of child-raising expenses for the first time just like Mark. These expenses start with things such as formula, diapers, baby furnishings, childcare and other miscellaneous gear and they don’t end until your child turns 18 and lands a full-time job – if you’re lucky.
From the US Department of Agriculture
The Department of Agriculture is the one responsible for crunching the numbers and came up with the $245,340. It says this is the amount that an average middle-income family is likely to spend over 18 years on a child born in 2013. This is according to the USDA’s “Cost of Raising a Child” report. It also reported that child-rearing costs such as food, childcare, education, housing and other expenses have increased 1.8% from 2012. The costs associated with the pregnancy or expenses incurred after the child turns 18, including higher education, were not included. However, when you factor in inflation the cost of raising that child jumps to about $305,000.
Faster than inflation
The government first released the Cost of Raising a Child” report back in 1960. Since then the cost of raising a child has risen faster than inflation. Back in the 1960s, a middle-income family would have spent about $25,000 to raise a child from birth to age 18. This would be about $200,000 in today’s dollars or much less than the $245,340 quoted above.
The single largest expense
If you are a middle-income family and have children then your single largest expense is housing. This averages 30% of your total cost. Following this is childcare, then education, and food. And you might not be astonished to learn this that healthcare spending on kids has also shot through the roof when compared to those costs in 1960.
Who spends the most and who spends the least
The cost of rearing a child is lower in the urban South and much higher in the urban Northeast. It’s not surprising that wealthy families tend to spend more on raising their kids – an average of $407,820 for households that earn more than $106,820.
If you’re about ready to plunge into the world of child-rearing the USDA has a Cost of Raising a Child calculator that will help you learn something close to your exact number. The way It works is that you type in the age of your first child, whether yours is a single- or two-payer household, where you live and your annual pre-tax income. Click the button titled Calculate and be prepared for at least a mild shock when you see what that child is likely to cost you.
As an example of this calculator, we selected one child less than a year old, living in the west with two parents and a combined annual income of $80,000 to $96,000 and learned that it would cost $17,33 a year to raise that child or a total of $208,056 in today’s dollars. And remember this doesn’t include the cost of a higher education. So if you intend to send that offspring to college you can factor in maybe $100,000 or more.
The USDA also has some other helpful child-rearing resources including the ChooseMyPlate.gov with dietary guidelines for a healthy eating lifestyle.
Advice that even the Zuckerbergs could use
If you’re about to be a new parent here are a couple of pieces of financial advice That even the Zuckerberg’s could use. First, don’t try to keep up with the Joneses. According to an article published on USNews.com, you should not look at your neighbors because you do not really know if they are keeping up appearances too. Don’t shower your little bundle of joy with everything that her or his heart desires – especially if you’re just trying to keep up with friends or family members. Spend only what you can afford to spend on that little darling. There are things where you won’t want to go cheap such as the baby’s crib, layette, and sleepers or sleep sacks and a digital thermometer. But there are a lot of other things like clothing and toys where it’s not necessary to spend big money.
Second, you need to begin putting away money in a tax-friendly savings account to pay for your child’s college education, which despite what some presidential candidates might want you to believe won’t be free 18 years from now. In fact, it will probably be priced even ridiculously higher than today.
Using credit to spend on your child should happen on a case to case basis. If it is a necessity, you should have the foresight to save up for it. If not, then do not spend on it. Your child does not need you to go into debt. In case you have current debts, get rid of it. Consolidate your debts or refinance it. Your financial security is also their own.
If your baby is less than perfect
If your child is born with a disability, especially one that will limit his or her ability to care for themselves when they become adults you need to think carefully about this. Today’s medical advances have made it possible for adults with severe disabilities to live much longer than ever and whether you want to think about this or not you’re not going to be here forever.
Make a plan
If this is the case you need to make a plan for taking care of that child that will also protect your retirement. It would also be a very good idea to talk with a lawyer who specializes in planning for special needs adults for help in drawing up your estate plan. A knowledgeable attorney can help you navigate through the maze of rules for the public benefits that would provide income, health care, and community services for your child with disabilities. When you’re not longer here your attorney should also be able to help find housing for your adult child, which could be an assisted living or group home. Some parents have purchased a house or condo for their adult child sometimes finding a roommate with a disability so that the two could combine their Medicaid resources to finance their caregiving and other services.