Why Children are Expensive and Yet Essential in Life - (W2:D4) Debt Free Millionaire Podcast

Real Life: There is only one way to keep from having children - and that is to be discussed with your parents. This simulation is to show you the average price of having children, and how expensive they can be if they are not planned for. 

According to the U.S. Department of Agriculture (3), the average cost of raising a child from birth to 17 years is $233,610. That number was calculated from 2015 numbers; now, it would cost around $284,570, or more with inflation. They calculated childcare costs alone to be around $37,378 per child. You will spend roughly 9-22% of your income on childcare.

Raising a Child (Location)

Expenses Include

Cost per year (married)

1. Urban North east - $264,090 

2. Urban South      - $232,050

3. Urban Midwest - $227,400

4. Urban West       - $245,460

5. Rural Areas       - $193,020

1. Housing – 29%

2. Food – 18%

3. Education/

Childcare – 16%

4. Transportation – 15%

5. Health Care – 9% 

1. Birth to 2 years - $12,680
2. 3-5 years old     - $12,730

3. 6-9 years old     - $13,180

4. 10-15 years old - $13,500

5. 15-17 years old - $13,900

Now children are even more expensive to you if you have them without being married. There are five statistical options that come in this scenario: 1) you marry the other parent, or raise the child together, 2) your partner takes the child and you pay child support, 3) your partner leaves and makes you the sole caretaker, and 4) you put the child up for adoption because you don’t believe you two can raise the child, or 5) you share the child with equal time sharing and each of you have time with your child. According to the Brookings Institute, 70% of cohabiting parents who are not married will break up, and one of the other four options will happen. Are you ready to have a child? If not, you may not want to do the things that make babies. (We refer this talk, where babies come from, to your parents). 

Child Support is not cheap. It differs according to your location, how much you make, how much time you have with the child, etc. The more you make over the lifespan of the child, the more you will pay. The idea is that child support is to be the equalizer between what both parents make or have the ability to make: if you make a lot of money and the other parent does not, you will pay the difference, to some extent. There is also something called alimony where the courts could also increase the support, to the other spouse, based on the standard of living they experienced before the divorce. The U.S. average is $430-$1,000 a month. Times that by 12 months, times that by 17 years, and you come to $87,720 in child support alone - on the low end. Again, this payment goes up as your revenue increases and time with your child decreases. 

Savings: There are some ways to save money and plan for the child’s future. Think of these options when considering having children. First, there is a great write-off on your taxes for each child you have (Child Tax Credit). Next, when thinking of a college fund, try a 529 College Savings Plan (make sure you control how it’s invested). Then also be sure to check into the Uniform Gift to Minor Act and Uniform Transfer to Minors Act.

Note: CDC reports that as of 2017, the U.S. birthrate has declined to its lowest amount in 30 years and continues to decline. Think about it from this point of view: without increased birth rates, total tax revenue will decrease, social security won’t be funded, and tax rates will increase dramatically, to make up the difference, because the U.S. Government won’t stop spending, even with less revenue being generated.

Note: The statistic on birthrate per woman is found here at: https://www.aaastateofplay.com/which-world-countries-have-the-most-and-least-children-per-family/#:~:text=Based%20on%20the%20data%20from,Middle%20East%20%26%20North%20Africa%3A%202.6