In general, upper class parents spend twice as much on their children when compared to lower class parents. This statistic comes from the USDA’s 2015 report entitled “Expenditures on Children by Families.” The USDA has been tracking these costs since 1960, and the trends are very telling. We are spending far more on children today than we did sixty years ago, primarily on childcare since two-income households became more standard.
For lower class parents making a combined annual income of less than $59,200 (before tax), the total cost of raising a baby to the age of 17 was $212,300. On the other end of the economic spectrum, the costs were twice as high. Upper class parents making a combined income of more than $107,400 per year spent nearly half a million dollars ($454,770) to raise a child to adulthood.
Interestingly, this class disparity becomes apparent immediately after birth. Upper class parents spent $20,000 on their infants during their first year of life while lower class parents spent just under $10,000.
To make matters more complicated, we have far more child-related expenses today than we did in 1960. This is true regardless of class. We are simply spending more on our kids, even when adjusted for inflation. In 2015, middle class income earners (between $59,200 to $107,400) spent closer to the lower class amount at $284,570. In comparison, middle class parents in 1960 spent $195,690 (adjust for inflation in 2012 dollars). So where does this extra $90,000 go?
And when it comes to the class disparity, the question is this: On what are the upper income parents spending more? Are they buying more things for their kids? Are they buying higher quality items? Are they paying for more experiences, like dance class and vacations? Do they splurge on organic foods each week at the grocery store?
The way the numbers break down is quite interesting. The average percentage of household expenditures that can be attributed to kids 17 and under varies by family size. For married couples with one child, 26% of their household expenses are attributable to their child. With two children, the share goes up to 39%, and with three the share is 46%.
Let’s take a closer look at where this money is spent.
Note: These figures from the USDA are calculated as a percentage of total costs to raise a child to 17. That is, if you spent $250,000 on a child over 17 years, what percentage was put toward each category? This helps make the figures more fair in comparing higher and lower class expenses.
Housing – 29% of total child-rearing costs
Where you live greatly affects your cost of living, whether you have children or not. Yet when kids are added to the mix, the costs can balloon. For middle class earners, 29% of the total cost of raising a child to the age of 17 is spent on housing. Higher income earners often spend a larger percentage of their income because they can afford larger housing in more desirable areas.
The biggest determinant of your cost to raise kids is whether you live in a rural, suburban or urban area. As you could guess, rural areas have the lowest cost of living and urban areas have the highest. Suburban areas tend to fall somewhere in the middle.
Of course, the primary factor in this low or high cost of living is the actual housing. Property prices and taxes are typically higher in more densely populated areas. That’s simply because of the market’s demand—the more people who want to live somewhere, the higher the demand. With a limited supply of housing options, the competition drives the costs of housing up.
We see this effect in high housing price areas such as the urban Northeast, where parents spend the most money raising their kids. The urban West and urban Suth come close behind, while the urban Midwest and rural areas throughout the country trend toward the lowest costs to raise a child.
Included in this housing cost are other expenses like electricity, natural gas, water, and other utilities as well as insurance.
Where you choose to live doesn’t just affect the cost of housing. High cost of living areas also tend to pay more for gasoline, food, taxes, and other utilities. Of course, it is possible to be a lower class family in a HCOL area or an upper class family in a LCOL area—both of these scenarios would greatly impact the generalizations issued by the USDA.
Food – 18% of total child-rearing costs
The next biggest expense in raising a family is food. On average, nearly one-fifth of all parenting costs go toward food, with some spending as much as 25% of their child-rearing costs on food. Single parents of two children spent 34% since the costs were spread across one less adult.
Luckily, this expense is also variable, meaning parents can get creative and find ways to reduce their spending on food. The USDA actually classifies the choices in food budgeting habits into four “food plans”: thrifty, low-cost, moderate-cost and liberal (high-cost). Low-cost food plans are typically half of the liberal food plans. As one would expect, higher class families tend to be more “liberal” with their food budgets and often end up spending a larger percentage of their total child-rearing costs on food than is strictly necessary.
The age and gender of the child affects the costs significantly. As of March 2017, a monthly moderate-cost food plan for a one-year-old is $141.40. For boys 12-13 years old, this “moderate cost” becomes $296.50 per month; for girls of the same age, this figure is just $244.80.
Overall, a family of four with two children under 5 can expect to spend $557.40 per month (on the thrifty plan) or up to $1088.90 (on the liberal plan) to feed all four people. For couples with two older children between 6 and 9 years old, this figure jumps to $638.50 per month on the low end and $1273.10 on the high end. And that’s before the kids reach the expense of food-induced growth spurts!
Many parents-to-be might be shocked to learn that these high figures are calculated by the USDA as providing every meal and snack at home. Eating out at fast food or even fast-casual restaurants, as many higher class families do, or paying for school-provided meals will raise this cost of child-rearing significantly.
With some planning, though, it is not difficult to keep these costs on the thrifty or low-cost side for lower income families. Buying dry and frozen goods in bulk from big box stores can help, as can “couponing.” Smart meal planning can save hundreds per month by taking advantage of weekly grocery fliers that advertise certain cuts of meat or types of produce as being on sale.
Transportation – 19% of child-rearing costs
When calculating transportation costs, the USDA excludes transit to work. The child-rearing costs were only counted if a child was being transported to school or daycare or if a child was benefiting from the transit, i.e., a mother driving alone to grocery shop. If the child was benefiting from transportation, even if he or she was not in the vehicle, the cost was divided with 50% going toward the parents.
As kids get older, their transportation costs increase. They become involved in more activities and have more places to go. Higher class families tend to have more activities to which they taxi the kids, which can increase their share of transportation costs.
Once the kids are old enough to drive, the figures also include the cost of their car, gas and automotive insurance. Since higher class families are more likely to provide a car and insurance, these costs tend to be higher than they are for lower income families.
Not all transportation costs are associated with cars. Many lower class families, particularly in urban and well-developed suburban areas, rely on public transit. Overall, public transportation costs are lower than those of maintaining and driving a vehicle—for one person. When older kids are take transit, the costs are multiplied, and lower income families can end up paying more for transportation for their kids than higher class parents.
Clothing – 5% to 7% of total child-rearing costs
Both higher and lower income families spent about the same share of their child-rearing budget on clothing, averaging 6%. This means a middle income family averaging $70,000 per year in income would spend $4200 per year on clothes for one child. A lower income family at $40,000 per year would spend $2,400, and a higher class family earning $110,000 annually would spend about $6,600.
The USDA includes all ages in this average, and this is skewed by the fact that they count disposable diapers as clothing. Still, the number is quite interesting because the percentage is nearly identical across all classes.
To review – Housing, food, clothing and transportation alone now account for approximately 72% of all money spent raising a child from birth to 17 years old.
Child Care and Education
The cost of child care in 1960, when many mothers were stay-at-home, was negligible, according to the USDA. Today, though, these costs account for a significant portion of the increase in the cost of raising a child. Still, only half of families pay anything towards these categories. Families with a stay-at-home mom or state assistance toward child care often pay nothing. (This calculation does not include incidental expenses like infrequent babysitting; instead, it focuses on regular, recurring costs.)
Higher class families are more likely to send their children to private schools, which incurs an additional expense via tuition. Dual-income households in which both parents work are more likely to incur daycare costs for children under 5, but the need for this expense is shared across all economic classes. However, higher class parents are also likely to spend more on daycare costs since they tend to live in higher cost of living areas.
Children’s healthcare costs as a percentage of family spending has doubled since the USDA started tracking these numbers in 1960.
For a family of four with two parents and two children, the share of total child-rearing costs spent on healthcare ranges from 15% to 20%. The higher the income, the higher percentage of the total budget was spent on children’s healthcare via insurance payments and out-of-pocket costs.
Lower class families often receive more government assistance and more reasonable insurance rates, allowing them to lower their percentage of healthcare-related costs.
Number of Children
While the overall cost of raising a family increases with each additional child, the expense per child decreases with each additional child. This is because siblings are able to take advantage of the same housing, utilities, toys, and clothing. They can share bedrooms, too. Even food can be cheaper per person with more children since bulk deals are widely available at big box stores.
In addition, childcare, education and even healthcare costs can be decreased per child with sibling or family discounts. Even having an older child available to watch a younger sibling can reduce overall costs.
The USDA found that families with 3 or more children had costs per child reduced by 22% compared to two-child families. Again, the total dollar amount is, of course, higher—but the breakdown means adding a second child doesn’t necessarily double child-related expenses.
Optional, Discretionary Expenses
With all of the above ‘essential’ categories, a child can be raised to the age of 17 with housing, food, healthcare, education, transportation and child care included. As you have seen, there are already significant differences between what higher class and lower class families spend on these essentials, both as whole numbers and as percentages of their total child-rearing costs. Many of these cost differences can be attributed to residing in a high or low cost of living area, with the exception of priate education and food, which can vary quite a lot based on individual choices.
However, the rest of the cost difference may be attributed to optional expenses. These can include extracurricular classes, sports, vacations, and other non-essentials. Higher class families are more likely to allocate a generous portion of their budget to these kinds of experiences. For lower class families, they may pay zero percent toward these extras, but middle and high class families may pay around 5% to 10% of all of their child-related costs toward discretionary expenses.
Remember that the grand sums of raising a baby to the age of 17 was $212,300 for lower class families and $454,770 for higher class families. These numbers do not include the cost of college or other post-secondary education, for which many parents pay. Including these numbers could raise the costs by tens to hundreds of thousands of dollars.
Lower income students may qualify for Pell grants, need-based scholarships and subsidized loans to help cover the cost of their attendance. They may also be more likely to pick schools that are more affordable, typically in-state public universities or community colleges. Thus, lower class parents tend to pay less, both as a whole number and as a percentage of their total child-rearing costs, for their children’s college education.
On the other end, higher income students often do not qualify for any grants or subsidized loans. They must pay for the cost of higher education through unsubsidized loans and, in many cases, help from their parents. They may also be able to attain merit-based scholarships. Thus, a higher class family will pay more as a percentage of their spending toward their children’s post-high school education.
Lost Opportunity Cost
There is no doubt that having children can put a damper on career opportunities that, over time, could provide higher income. Parents sometimes forego working late, take leaves of absence, or turn down jobs with more responsibilities in order to give their best care toward their children.
Stay-at-home moms, in particular, struggle with this lost opportunity cost. They may spend years at home, which affects their ability to build up career experience.
The USDA does not calculate this cost, but it is a real concern for many families. This lost income becomes a double hit when combined with the increase costs associated with having kids.
The Final Verdict
The cost difference between raising an upper class baby versus a lower class baby comes down to a few main factors:
- Where you live (HCOL or LCOL area)
- Whether both parents work
- How well you budget at the grocery store
- How much you spend on discretionary categories
While raising kids is more expensive than ever, parents of all economic classes can benefit from smart budgeting. Many parents even find they have a net financial gain after certain tax benefits are applied.
Keep in mind that the USDA performs these studies as a survey. They simply learn how much, on average, families are actually spending, and not necessarily what they could be spending with some savvy, money-saving tricks. So there is always hope to spend quite a bit less than what the USDA reports it costs.