According to this article on CNN Money, the USDA sent out a report that a middle-income family with 2 kids will spend over $233,000 on EACH child by the time they get to college. (That means college is NOT included in this estimate). And this article, by Parenting.com, reports on another USDA study from 2010 that the average family will spend $12,000 during a baby’s first year. Here is the actual 37 page USDA report. The following is a summary of their findings and my response to them.
Let me start off by saying that I think this is absolutely nutso. That is going to be the bias by which I address this study. I think that it sets people up to expect to spend far more money than they really need to. However, let it be known, that I have not run the numbers yet so far. So at the end of this post, I will have to give an honest assessment and my feelings might have to change.
The definitions in the study
“Average Family “ – Married with 2 kids.
“Lower-Income” – Under $60,000
Cost per year, per child – $9,500
“Middle-Income” – $60,000-$107,000
Cost per year, per child – $13,000
“Upper-Income” – Over $107,000
Cost per year, per child – $21,000
Single parent spending per child was nearly identical to the lower income spending per child for a married couple.
29% – The cost spent on housing
18% – The cost of food
16% – The cost of child care
15% – The cost of transportation
10% – Healthcare
6% – Clothing
7% – Other
My Analysis of Each Category
Before I continue, let me explain where I fit into this personally. I am married with 1 child. The child is only 7 months old. We live in a city in the pacific Northwest where the average home price for a 3 bed 2 bath is about $225,000. Our annual income is on the lowest end of the middle-income spectrum (we make right at about $60,000)
We own our own 4 bedroom 2.5 bath home in a slightly above average neighborhood. The home is worth about $270,000. The mortgage payment is about $1,800 per month (taxes and insurance included) on a 15-year mortgage. If we had the typical 30-year mortgage our payment would only be $1,300. We pay about $400 per month in utility bills.(It is worth noting that we have a basement apartment in our home. There is a single adult living there. So the portion that we actually live in is 3 bed 1.5 bath and 1500 square feet.)
According to the study, about 30% of a child’s costs are directly related to housing (mortgage/rent, utilities, furnishings and equipment/appliances). That means that $3,900 per kid goes toward extra housing. That is $325 per month. Or $650 per month if we had two kids.
We recently made a very large move up in house. This was with the anticipation that we would start a family and wanting something that we could live in and grow into long-term.We were in a unique situation.
However, we were in a unique situation to begin with. We lived in a single wide mobile home that we owned and paid $450 per month to rent the space the house was on. The $450 covered water/sewer and property taxes. Our utility bills were about $175 per month.
So, by us moving, we increased our housing expenses from $625 to $2,200. That’s an increase of $1,575 per month. (If you subtract what we rent the basement apartment out for that would drop to a $950 increase. And if you figure in a 30-year mortgage instead of a 15-year, the difference would drop to a $450 increase).
So, since the example of our housing is so extreme and so unique, I’ll have to look at it from a different perspective. My brother and his wife have 2 young kids. They live in a 2 bedroom 2 bath townhome that they rent for about $1,000 per month. I don’t know what their utility bill is but I would guess around $200 since their water/sewer/garbage would be covered by their rent.
This is a typical price range for a small home or apartment in my city. If they were to upgrade to a 3 bed 2 bath, their rent would go to about $1300 and their utilities would probably go up about $100. That’s a $400 increase.
I can accept the increase of $325 for the second child. But I don’t know about $325 increase for the first child. I think what is more likely is that the first child won’t increase the housing expense hardly at all. For a new family, a 2 bed 1 bath home is sufficient and doesn’t require a move up to a 3 bed 2 bath home. But with the second child, I could definitely see an increase of $300-$500 by moving into a larger, more permanent home.
So for the sake of easy comparisons, I’ll figure about $250 increase per month, per kid.
Cost of Food
According to the report 18% or $195 per month, will go towards extra food…per child. They define food as all purchases at a grocery store, school meals, and eating out at restaurants.
I can totally call this one out. We have been married going on 7 years. Our food budget has never been above $200 per month. This includes all food and toiletry items (shampoo, toilet paper, etc). If we include eating out and summer produce (we pick a lot of berries in the summer) it would be closer to $300.
Let me do the math for you…that is $150 per adult and has been sustained for over 6 years. The idea that a child is going to cost $195 per month on average over the course of 17 years is way too high for our family. I can see that once they get to be teenagers, they will eat as much as we do, but certainly not for the first handful of years of their lives.
You know how much we will have spent on food for the first year of our daughter’s life? I figure it will be about $50 (total). This will be the cost of a few vegetables to ground up, a banana here and there, some baby friendly crackers, etc.
I’m going to estimate $50 per month age 0-5, $75 per month 5-10, $100 10-12, $150 12-17.
That comes to about $90 per month, per kid.
Child Care Costs
The study defines childcare as all babysitting and educational expenses (books, fees, and supplies). It says that 16%, or $175 per month, will go towards these expenses.
I’m going to have to be the most lenient on this one because I know that this varies greatly from one household’s situation to the next.
What I can tell you though is that we won’t be paying nearly this much. My wife and I both work from home so babysitting/childcare costs will be very negligible. That alone is a saving of about $10,000 over the first 5 years compared to a dual income family where both parents work outside the home.
$175 per month, while our kid is in school, seems a little excessive to me. I know there will be school fees and supplies that come up but it seems high. My wife was homeschooled and I did some alternative schooling during my high school years as well. Homeschooling would likely cost more than $175 per month because all the curriculum and supplies would have to be purchased.
Childcare Costs Conclusion
I’m going to concede $175 per month during their school years. But that is only 9 months out of the year. I am also going to reduce childcare costs to $25 per month because with our situation we have grandparents who would love to watch our daughter whenever we let them.
That will average out to $100 per month, per child.
The Cost of Transportation
According to the study, 15% or $165 per month, per child, will go towards the cost of transportation.
Once again, the majority of this is totally unnecessary. Our personal budget is $250 per month for gas and $200 per month for car repair/car replacement. (Because we both work from home, we rarely use all the $250 we budget for gas). We have two cars in the 125,000-mile range that are both older than 10 years. We have no car payment and we never will have a car payment. $5000-$8000 buys a perfectly good car that will last for 5-10 years.
Having two kids may mean that a little Honda Civic is inconvenient, I’ll grant you that. But it doesn’t mean you have to go out and drop $30,000 on a new Honda Odyssey either.
The simple fact of the matter is that having kids will make very little change on our transportation costs. We will spend a little more on wear and tear. We will spend a little more on gas. We will probably spend some on airfare a few times. And we will probably spend a little more to get a car that has more space.
I am going to figure $0 extra for the first 5 years. Having a young kid is not going to increase our monthly transportation budget at all. It won’t require a new car purchase. The extra miles driven will be so negligible it’s not going to increase our gas budget.
For the next 12 years, I’ll figure in 3 trips that require airfare, $1,500 total. I’ll figure an extra tank of gas per month for extra trips, sporting events, etc. So $30 per month. The extra driving will add about 1,000 miles per year to the vehicle so I’ll figure an extra $250 per year for added maintenance.
I figure an extra $45 per month, per kid.
They figure 10% or about $110 per month.
Ironically, I think this is a low estimate. With the high cost of healthcare these days, I don’t understand where this number comes from. I suppose they figure the average middle-income family has their health insurance paid for by their employer.
Our family participates in a Christians Healthcare sharing program. It isn’t technically insurance but it qualifies as an exemption to Obamacare. We pay $85 per person for a $1,000 deductible. Because of the low cost of the premiums, the sharing program doesn’t cover anything under $1,000. That means that every routine trip we take to the doctor’s office comes out of our pocket.
For the first 7 months, we have taken our daughter to the doctor five times for routine visits. We will take her one more time at 12 months. These cost us about $300 per visit. So the first year will cost us about $1,800 in routine medical bills and another $1,020 in insurance premiums.
We haven’t looked into the cost of dental, eyecare, and other medical services.
This is a hard one for me to estimate but I’ll figure it this way. $85 per month for health insurance premiums. $1800 for the first year in medical costs. I’ll figure in one routine medical visit per year plus one other visit (dental, vision, etc.) at $300 per visit. I’ll also figure in four emergency visits over 17 years that result in maxing out the $1,000 deductible.
That comes out to $160 per month, per child.
The study estimates 6% or $65 per month.
I realize that children grow out of their clothing a lot faster than I go through mine. But I think I buy one pair of shoes a year, a couple pairs of jeans, a few shirts, and a few miscellaneous items. My wife buys a few more items than that, but not many.
We don’t have a specific clothing budget. These purchases usually come out of our $200 spending category or come from gift money that is given at Christmas or birthdays. I’m guessing I spend less than $250 per year on clothes for myself. And my wife probably less than $400.
Baby’s clothes are not that expensive to buy new and they are very cheap to buy used. Baby clothes are often the gift of choice for Christmas and birthdays.
Put simply, the clothing expense can be about as much or as little as you want it to be.
I know my wife likes to buy kid’s clothes so I’m guessing that we will spend quite a bit more on kid’s clothes than on clothing for ourselves.
I’ll estimate $40 per month, per kid, for clothing expenses.
They figure 7% of the expenses will go to miscellaneous. Basically, this is the catch-all category that everything goes into. 7% would be $75 per month.
This is very similar to the clothing category. You could spend as much or as little as your family budget can handle.
There isn’t much point spending a lot of time discussing this category. These expenses are mostly extra. You can choose to spend the money or you can choose to not spend the money. $75 per month is close to $1,000 per year. That seems maybe a little bit rich to me considering another $500 will be going to clothing.
I’ll estimate $50 per month, per kid.
My Estimated Costs
$250 – The cost spent on housing
$90 – The cost of food
$100 – The cost of child care
$45 – The cost of transportation
$160 – Healthcare
$40 – Clothing
$50 – Other
Total Cost for the first 18 years = $735 per month = $8,820 per year = $158,760
That’s almost $75,000 lower than the USDA estimate. That means for two kids the difference is $150,000. That’s a full 3 years worth of our entire income.
Kids are expensive. There is no doubt about that. And each stage has its own unique costs. I’m experiencing that with the cost of diapers right now. (I have been able to save a LOT of money by buying diapers in the 200 count boxes through Amazon. And if you buy through their subscribe and save it costs even less. What would cost me $50+ at Walmart or Target only costs me about $30 through Amazon.)
Even so, many of my expenses could be lower if I really needed them to be.
My problem with magazines and online blogs proclaiming these huge numbers is that it scares people away from being parents. I also believe that it creates a false level of “necessary” spending. Just because this is what the average family spends, it doesn’t mean that it is the best use of money.
I would much rather spend less money ON my kids and spend more time WITH my kids.
What about you? I’d love to hear your thoughts on the matter.