The fulfillment of the traditional American dream often includes a family surrounded by all the comforts of home. We take satisfaction in buying our first house, leasing a second car, or finally replacing the couch that's been around since college, but can we afford the children that go along with it all? Rarely do prospective parents give any real consideration to the total cost of raising children - from the first diapers they wear to the car insurance they'll need before they back out of the driveway.
Every year since 1960, the U.S. Department of Agriculture has estimated the cost of raising a child. Their latest Expenditures by Children with Families report puts the average cost from birth through age 17 for a child born in 2013 at $245,236. In less intimidating terms, a middle-income two-parent household will spend around $14,000 a year raising a child.
Demographics, your family income, and the number and age of the children in your household greatly can influence the amount you'll pay in child-rearing costs. Due largely to higher costs of living, an affluent family living in a major city in the Northeast can pay as much as $455,000, while a single parent in the rural South might pay as low as $145,000, with Mississippi being the least expensive. It really can be cheaper by the dozen, because the more children you have, the less each one costs to raise. Expect to pay more as your brood gets older, though, due to higher food and clothing bills and those dreaded car-related expenses.
Eight categories of household expenditures are considered when coming up with the estimate: household, food, transportation, clothing, health care, child care, education, and miscellaneous expenses such as entertainment and personal care. It's worth noting the estimate does not include prenatal care costs, college tuition, or expenditures covered by others, like Grandpa buying Junior that iPad.
According to the study, housing is by far the largest outlay in raising a child. However, military personnel typically are eligible for a basic allowance for housing (BAH), if they don't live in no-cost government quarters. Your BAH is determined by your duty location and pay grade, and you'll receive a higher allowance if you have dependents. The calculation is based on local rental rates and is updated annually; protection against rate decreases applies in many cases. The BAH is based on civilian standards, while government quarters are assigned based on grade and family size. Depending on your personal housing choices, you might have your entire rent or mortgage payment covered. To determine your BAH, visit www.defensetravel.dod.mil/site/bahCalc.cfma.
Child care costs take the next biggest piece of the pie. For some, annual child care expenses can cost more than some college tuition and fees, but a recent study by Care.com showed half the families surveyed didn't even budget for it. With prices having increased 70 percent from 1985 to 2011, it's no wonder the Pew Research Center cites child care costs as one of the primary reasons for the recent increase in stay-at-home moms.
There are numerous ways to manage the costs associated with raising a child. With respect to housing, consider relocating to a nearby area with lower housing costs or have the kids share bedrooms. Potential ways to save on child care include nanny-sharing or a babysitting co-op. DoD oversees child development centers on many military bases, and fees are determined by family income. You might also be eligible for subsidized off-site care through the military or your spouse's employer. Save bundles by purchasing gently used second-hand clothing and toys. If you have a large family, buy food or household items in bulk. Plant a vegetable garden or raise chickens - a trendy money-saver!
Don't overlook potential savings at tax time. The Child Tax Credit, Earned Income Credit, or Child and Dependent Care Tax Credit can total thousands of dollars if you qualify. Consider setting up a tax-free flexible spending account to pay for dependent care and medical expenses with tax-free dollar if you qualify.
The decision to have children is a complex one and goes well beyond dollars and cents, but understanding these costs and some proper planning will let you focus on the rewarding sides of parenting.