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Insurable Interests

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Insurable Interests may offer general financial, insurance, tax and business ideas. However, due to the ever-changing tax laws as well as the complexity of the financial industry, you should seek professional advice before implementing any of the ideas contained in this newsletter. The Bensman Group, Bensman Associates Ltd., Bensman Risk Management, Inc. or Schemata, L.L.C. assumes no liability whatsoever in connection with the use of this newsletter.

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Insurable Interests

Vol. 12, Issue 10June 2017


Cost of Raising a Child Might Surprise You

While you may not be able to put a value on your love for your child, you can put a price on the cost of raising the little darling: an average of $233,610 -- per child -- through age 17 for a middle-income couple with two kids. And that does not include any costs related to pregnancy or birth.

The U.S. Department of Agriculture annually releases an estimate of the cost of raising a child through age 17. This year’s estimate, for babies born in 2015, is 3 percent higher than the estimate for last year. When the department first did the survey, in 1960, the average cost was $25,230.

The actual amount varies to some degree based on where you live and how much money you make. For example, the most expensive geographical area is the urban Northeast ($253,770), followed by the urban West ($235,140), urban South ($221,730) and urban Midwest ($217,020). In rural areas, the cost averages $193,020 per child.

The average of $233,610 per child is for middle-income parents, with a pretax income of between $59,200 and $107,400. Lower-income families spend about $174,690 to raise a child through age 17, while upper-income families spend $372,210.

These totals include:

Housing. The cost of housing represents 26 percent to 33 percent of the total cost. This estimate is based on the cost of an extra bedroom. However, the department notes that its estimate probably understates the real housing cost in many cases, because parents often choose to spend more to live in areas that have better educational options or other opportunities for children.

Food. Next to housing, food is the highest cost for parents, making up about 18 percent of the total.

Education and child care. Each of these components represents about 16 percent of the total cost of raising a child. The costs of both have risen significantly since the start of the survey in 1960, partly as a result of more women entering the workplace. It is also important to note that, since the department’s estimate only covers raising a child through age 17, it does not include the cost of college – which averages $45,370 a year for a private college and $20,090 for a public one.

Although new parents often are amazed at the cost of diapers and all the assorted gear it takes to have a baby, the truth is that babies cost less per year than older children. The average is $12,680 a year for a child up to 2, but $13,900 a year for a child between 15 and 17.

There are some economies of scale in child-raising, though. According to the department, families with three or more kids spend an average 24 percent per child less. Mostly that is because children can share rooms, hand down toys and clothes, and the like.

However, families with only one child spend an average of 27 percent more on that child.

This article was created by Osmosis Digital Marketing for use with permission by The Bensman Group.

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