How Much Does It Cost To Raise a Child? Here’s a Breakdown of Expenses and How To Save Up
Deciding when to have a baby is an intensely personal decision and one that couples should not enter into lightly. There are many factors to consider, not the least of which is how much it costs to raise a child. The U.S. Department of Agriculture estimates that the average cost to raise a child who was born in 2015 through age 17 is $233,610.
Fortunately, you don’t have to have all that money saved by the time the child is born. There are some upfront costs, however. GOBankingRates looked at the average cost of a baby in their first year, including expenses related to food, clothing and healthcare. Read on to find out how much new parents can expect to spend in their baby’s first 12 months.
Average Cost To Raise a Child by Region
Before breaking down the specific expenses related to child-rearing, it can be helpful to note that while the average cost of raising a child is $233,610, that cost can vary depending on which region of the U.S. you live in. According to the USDA, the Urban West and Urban Northeast regions are the most expensive regions to raise a child, while the outlying rural areas of the U.S. are the cheapest.
Here’s a quick look at the differences in costs between regions:
| U.S. Region | Average Cost |
|---|---|
| Urban Northeast | $264,090 |
| Urban Midwest | $227,400 |
| Urban West | $245,460 |
| Urban South | $232,050 |
| Rural Areas | $193,020 |
| Source: U.S. Department of Agriculture | |
Groceries, Baby Apparel and Diapers
According to the Bureau of Labor Statistics Consumer Expenditure Survey, the average American family spends $688 per year on clothing, diapers and wipes for a child under two.
Groceries for a family of three average $5,373 per year. If you live in an expensive city, you can expect the cost to be higher. This doesn’t factor in what you may end up spending on takeout, delivery, fast food or full-service restaurants that you’ll most likely indulge in at some point throughout the year.
How You Can Prepare for This Cost
These first-year baby expenses will typically come out of earned income, so you’ll pay as you go. But you should adjust your budget to account for the added cost of a child.
“I have found that a 50/20/30 budgeting method can be a straightforward budgeting guideline that sets young people up for a successful transition,” said Kateri Turner, a certified financial planner with Government Employees’ Benefit Association and a mother of two. “This method allows for 50% of take-home pay to be designated to needs, such as rent, food, transportation, utilities and debt repayment. Twenty percent is designated for savings, and 30% for wants, like cable, vacations, dining out, etc.”
Family Health Insurance and Healthcare
The average family will pay $5,813 per year for family healthcare and health insurance. Babies require a lot of doctor visits during the first year, but most preventative care is fully covered by health insurance, which can help reduce costs.
How You Can Prepare for This Cost
Understanding your health insurance is critical to keeping costs down. Know how much you have to pay out of pocket, which includes premiums, deductibles, and co-payments or coinsurance. Be sure to use physicians who are in your insurance network. And if you have a choice of plans from your employer, review them to make sure you are enrolled in the best one for your growing family.
Child Care and Education
The average cost of child care for baby’s first year can vary, depending on what type of care you choose. According to a Care.com survey, as of 2020, the average weekly cost for infant child care is $340 for a child care center, $300 for a family care center and $612 for a nanny. The survey also found that 57% of families spent over $10,000 of their annual household income on child care.
Good To Know
Good news is on the horizon: When you file your taxes for 2021, your babysitting and day care costs could help you get an $8,000 refund.
How You Can Prepare for This Cost
To reduce your infant day care cost, or avoid it entirely, try to have one parent stay home with the child, even if it means you have to work part time or telecommute. If the nature of your work won’t allow this, and leaving the workforce entirely isn’t an option, perhaps you and your spouse or partner could work opposite shifts, so someone is always at home.
You could also explore a nanny share option, where two or more families join together to hire one person to care for multiple children. Research your neighborhood or surrounding area online, too, for nanny referral services or nanny agencies that might be able to assist you in hiring a nanny.
To prepare for the cost of college, it’s never too early to consider starting a 529 plan. According to College Board, in 2020-2021, tuition and fees alone cost $10,560 per year for in-state students attending a public four-year institution and $27,020 for out-of-state students. Costs are even higher for private school tuition. “These plans provide tax-free growth of your investment, and there are no income, age or contribution limits,” said Turner. “The funds are transferrable among family members, and grandparents and others can contribute as well.”
Consider the Big Picture Before Having a Child
Having a baby involves many different types of sacrifices. You likely won’t have as much time to dedicate to hobbies or your favorite television shows, your social life could take a serious hit and you definitely won’t get as much sleep.
There are also financial implications. Because of the high expense of childbirth and other medical expenses, the first year of a child’s life is typically more expensive than subsequent years. In fact, on average, you can expect to spend over $20,000 during the first year alone. That’s something couples need to seriously consider before having a child.
If your finances could use some work, consider taking the time to prioritize paying off debt and build up your savings before having a child. When looking for the best type of savings account to earn the most interest, consider a high-yield savings account, a money market account or a certificate of deposit.
By making a choice to pay off debt, watch your expenses and add to your savings, you will be better able to provide for your family and will teach your child an important lesson at the same time. Turner says, “While I have found that there is no ‘perfect’ time to have a child, it is important to consider and create a new financial plan that will ensure you start your life as a parent on the right foot.”
Cynthia Measom contributed to the reporting for this article.
Methodology: GOBankingRates found the cost for the first year of having a child by using the following factors: (1) average annual expenditure on apparel for “children under 2” for a family of three (defined as a “married couple with oldest child under 6”), sourced from the Bureau of Labor Statistics Consumer Expenditure Surveys for the third quarter of 2019 through the second quarter of 2020; (2) the annual cost of “Food at Home” for a family of three as sourced from the Bureau of Labor Statistics Consumer Expenditure Surveys for the third quarter of 2019 through the second quarter of 2020; (3) the annual “Healthcare” costs for a family of three as sourced from the Bureau of Labor Statistics Consumer Expenditure Surveys for the third quarter of 2019 through the second quarter of 2020; and (4) the annual cost of child care and education as sourced from Care.com data on national averages for 2020.
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- U.S. Department of Agriculture. "The Cost of Raising a Child: $233,610."
- College Board. "Trends in College Pricing."
- Care.com. "This is how much child care costs in 2021."
