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Insurable Interests

Bensman Risk Management, Inc.
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Insurable Interests

Vol. 7, Issue 1September 2011

FINANCIAL INTERESTS

The Cost of Raising Kids

A recent report from the U.S Department of Agriculture confirms what parents already know: The cost of raising kids keeps going up. In fact, middle-class parents will spend an estimated $226,920—that’s $286,860 if you factor in expected inflation--to raise a child born in 2010 to his or her 18th birthday. That’s up 2 percent from 2009.

For the year 2010 alone, middle-income two-parent families spent from $11,880 to $13,830 per child, depending on the age of the child. The study defines middle-income families as those earning more than $57,600 and less than $99,730 a year.

These figures include food, shelter and other necessities. They do not include costs related to pregnancy, and they don’t include the cost of college, since they only cover the child for the first 17 years. The biggest increases over last year were in the areas of transportation, health care, education and child care; the costs of housing, food, clothes and miscellaneous expenses were little changed.

Overall, though, housing is the largest expense, accounting for 31 percent of the total from birth to age 18. Next are child care and education, which account for 17 percent, and food, which accounts for 16 percent.

The more money parents have, the more they spend on raising a child. Low-income parents, making less than $57,600, can expect to spend about $163,440, in 2010 dollars, to raise a child born in 2010 to age 18. Parents who make more than $99,730 will spend about $377,040.

The cost also varies by region of the country. Children are most expensive in the urban Northeast, followed by the urban West and the urban Midwest. They are least expensive in the urban South and in rural areas throughout the country.

The good news is that the more children you have, the less it costs you per child. Families with three or more kids spend 22 percent less per child than smaller families. This is probably because families with multiple children are more likely to benefit from shared rooms, hand-me-down clothes and toys, shared child-care costs, etc. In addition, they can buy food in larger quantities, which is usually cheaper, and many private schools offer discounts for multiple children.

The USDA has been doing this survey for 50 years. It is based on federal Consumer Expenditure Survey, and it is used by courts and states in determining things like child support payments and reimbursement for foster parents.

So how much has the cost of kids gone up since the first survey, in 1960? A lot. The middle-class parents of a child born in 1960 could expect to spend $25,230 to raise a child through the age of 17; that’s $185,856 in 2010 dollars.

Then, as now, housing was the largest expense. However, health care costs have doubled as a percentage of the cost of child-raising since 1960, and child-care costs were nonexistent for many families 50 years ago.

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

Photo: iStockphoto.com

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