Kids aren’t cheap. That’s the consensus among both the government and parents. The U.S. Department of Agriculture pegs the cost of raising a child born in 2015 to a middle-income, married couple at $233,610. That number may seem staggering, but some parents think it’s right on target.
“I live in New York City. This is not a surprise to me,” says Kathleen Reynolds, a 34-year-old public relations professional and mother of two. Reynolds lives in Queens with her husband, 3-year-old son and 10-month-old daughter. Child care makes up the bulk of her costs, and she says children can be expensive right from the start. “Just to have my daughter in the hospital, that was $2,000 off the bat,” Reynolds says, referencing her insurance deductible.
[Read: Thinking of Having Kids? 4 Ways Your Expenses Can Skyrocket.]
However, not everyone is sure the government numbers are right. What’s more, many parents, including Reynolds, say the figures only tell part of the story.
What the numbers say. The USDA comes to its figure by using data from the annual Consumer Expenditures Survey. Of the cost, the largest chunk — nearly one-third of the total — is devoted to housing. Child care, education, food and transportation also figure in as major expenses. Of the $233,610 expected to be spent raising a child, the USDA estimates $12,680 of that will come in the first year of life.
NerdWallet, however, thinks that number for the first year might be a bit low. The personal finance website used a different methodology to determine that a baby’s first year might cost anywhere from $21,248 for a household earning $40,000 a year to $51,985 for a household making $200,000 annually. Those numbers were derived using information from a variety of public and private sources and include some expenses, such as life insurance and college education, not factored into the USDA formula.
While publishing average costs can be helpful for budgeting purposes, some people worry the data may paint an overly bleak picture of parenting. “You don’t want to scare [young couples] away from children,” says Gina McKague, president and CEO of McKague Financial in Livonia, Michigan. “Those numbers are daunting.”
[Read: 8 Financial Gift Ideas for Children.]
Parents are confused about costs. The USDA and NerdWallet aren’t the only ones with widely different estimates on the cost of raising children. Parents also differ significantly when estimating their expenses.
Adults estimate that the average cost to raise a newborn to age 1 is $24,131, according to a 2017 Bankrate.com survey of 1,003 adults. That’s about double the USDA figure for the first year. NerdWallet conducted its own survey and found 18 percent of Americans who expect to have a child in the next three years believe the first year will cost them less than $1,000.
People may have significantly different estimates because of varying priorities. “It’s easy to get distracted by the diapers and the cute clothes and miss the longer term goals,” says Amy Danise, an insurance expert at NerdWallet. In that case, people may be forgetting significant expenses such as college savings.
Plus, adults may not foresee some of the realities of parenting before they are in the thick of it. “We’ve had the double whammy of having two children who use two different types of care,” Reynolds says. Her son is enrolled in a private preschool while her daughter is cared for by a nanny three days a week. Prior to the start of preschool, Reynolds says it hadn’t occurred to her that she would ever be in a situation in which she was essentially paying double child care costs.
Some expenses may be forgotten, others overstated. While cost estimates can be a helpful benchmark for parents, they may overstate certain costs while ignoring others. McKague, a mother of four, says she sees parents shelling out a significant amount for kids’ activities and electronic devices. “I don’t know a child under 12 anymore who doesn’t have a device with a data plan,” she says.
Those expenses, which can add up quickly, typically aren’t included in child cost calculations. However, the USDA does count housing, which McKague says people would be paying even if they didn’t have children. “Almost everyone I know who’s single has a two-bedroom house,” she says.
However, Danise says the data do support an added housing cost after the birth of a child. She notes the NerdWallet study uses numbers from the Bureau of Labor Statistics. According to that government agency, married couples with a child do spend more on their homes than married couples without a child. “It looks like couples with kids are saying they need a bigger house or want to move to a family friendly neighborhood,” Danise says.
Claes Bell, a data analyst for Bankrate.com, says the government may be missing something even bigger in their calculation. “The USDA doesn’t factor lost income. That’s a huge issue,” he says. “Women may take a less-demanding job so they could have time to care for [children].”
[Read: 7 Ways to Save Money During Your Baby’s First Year.]
Budgeting for baby. For would-be parents, the various numbers come with bad news and good news. The bad news is that the savings they have prepared might not be enough. “It’s great if you have $10,000 banked for a baby, but it won’t even take you through the first year,” Danise says.
However, the good news is the reason there is wide variation in the cost estimates is that so many expenses can be optional. “The cost of raising a child can be whatever you want it to be,” Bell says.
McKague agrees, saying kids don’t have to be as expensive as the numbers suggest. “The reason our upper class is spending so much is we feel obligated to keep up,” McKague says. Rather than buying expensive gadgets, upsizing the house for more space and insisting on new items, parents can keep costs down by making due with what they have already.
Kids can’t be looked at as business transactions. “You can’t calculate return on investment,” Reynolds says. “We’ve had our share of tense moments, but we’ve never had regret.” Both McKague and Reynolds agree there is only one word to describe the cost of kids: priceless.
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The Truth About the Cost of Kids originally appeared on usnews.com
