Bringing up baby costs big money


Congratulations, you're a proud parent.

Now please open your wallet a little wider.

Experts estimate the average American family will spend a total of more than $150,000 on each child by the time he or she reaches the age of 18. Actual expenditures vary widely due to lifestyles, income and number of children, and many families spend double or triple that amount.

It's a safe bet that bringing up your young ones will require at least 20 percent to 25 percent of your annual household income, or 30 percent to 40 percent when two children are present. An even bigger percentage bite is taken out of the income of single-parent families.

Each family must understand such financial responsibilities and take them into account when planning for the future of both the children and parents.

Money doesn't go as far as it once did. Two salaries are frequently needed, adding child-care costs to the process. Schools, extracurricular activities and health insurance all require that parents foot more of the bill than in the past.

"I encourage my children to enjoy opportunities in the astronomy club, Cub Scouts, Brownies, dance, and so forth, but it's surprising how many added costs such activities bring," noted Mary Beth Harvey of Detroit, who with husband, John, is raising Nicolas, 10, and Kelsey, 7. "We figure roughly 28 percent of our combined income is spent on the children, including school, food, clothing, classes, clubs and medical."

One major help is that Mary Beth's mother watches the children during the day without charge, a growing trend among American families. In addition, "split-shift" parenting, in which one parent is always home with the child, is rapidly gaining popularity.

"We've been computing the cost of raising a child since 1960 and initially there wasn't even a category for child-care expenses," observed Mark Lino, consumer economist for the Center for Nutritional Policy of the U.S. Department of Agriculture in Washington. "Now, child care has become a major component of a family budget."

The government has found there are "economies of scale," with the most money spent on an only child, while fewer dollars are expended per child in two- or three-child families.

The treadmill of spending begins early.

"The cost of birth is more than $6,000, depending on the family's insurance situation," explained Susan Lapinski, senior editor of New York-based Child magazine. "Then the first year requires another $2,000 in terms of cribs, strollers and other items."

"Some countries actually give an expert's opinion that a child should annually only get one coat, three dresses and two pairs of shoes, and then a specific budget is specified," said Robin Douthitt, professor and chair in the department of consumer sciences at the University of Wisconsin at Madison.

However, the biggest determining factor on the amount spent on children is always whether or not both parents work and have more money to spend, he added. You don't get a free ride once a child is nearing adulthood, either.

"Costs really go up in the teen years, when you have greater clothing costs, car expenses and car insurance, such as the $279 a month I pay in car insurance for my son and daughter," said Cynthia Conger, a certified financial planner with the Arkansas Financial Group Inc.

The International Association for Financial Planning urges parents to begin planning before a baby is born, setting specific financial goals for the entire family, examining cash flow to make sure needs can be met, reviewing medical insurance and life insurance needs.

Begin saving and investing immediately. Also realize that you're now entitled to a tax deduction. Always use common sense in dealing with the financial side of raising children.

"I've found in my practice it's helpful if from an early age you teach children not to expect too many things," said Ms. Conger. "For example, when they reached their teens, I gave my children a clothing allowance that must be budgeted carefully, because when it's gone, it's gone."

Save money by buying used sporting goods, making use of the library for book sales, swapping toys with other families, joining frequent buyer clubs and using outlet stores, Ms. Lapinski said.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad