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The Cost of Kids

As the father of three kids - one teenager and two soon-to-be teenagers - you never really think about how much your children cost you

By: Dave Owens

IRA Insights

By: Dave Owens

As the father of three kids - one teenager and two soon-to-be teenagers - you never really think about how much your children cost you in terms of total dollars spent annually. Basically, a parent's wallet is an ATM machine, constantly spitting out twenty dollar bills.

Every few years the US Department of Agriculture puts out a chart of how much it costs to raise a child. I do remember seeing this chart a few years ago (back in my twenties) and the number was somewhere around $100,000. Well, things have changed. If you are parent with newborns and your combined family income is over $77,100, it will cost you on average $298,680 to raise a child to age eighteen. The scary part of this equation is that it does not reflect the current round of inflation we are seeing. Gas prices are up fifty percent in the last year and food costs are up over twenty percent.

So where is all that money being spent? Basically, a third of this money is spent on housing which includes mortgage interest, insurance, real estate taxes and furnishings. I find it funny that mortgage principal is not included in the equation under housing. They must think that since I get to keep the house after the kids leave, principal does not really cost me anything. Another thirty percent of the costs are split evenly between food, transportation and child care/education. Another ten percent is for miscellaneous, which is a category I really like. I would have guessed that miscellaneous number would be higher. I just spent $250 to get all the supplies for my kids to go to camp and $50 to go to the movies; I would assume that is all considered miscellaneous.

The good news is if your family income is between $44,000 and $77,100, the cost to raise a child is only $204,000.

All reports reviewed vary by family income and geographic region. The numbers used in this article are averages and will also vary by lifestyle. While doing research for this article, I found many other articles where supporting a lower cost to raise kids, especially in larger families. I would assume larger families share clothes, bikes and eat in more often which save money.

Now the bad news - these cost figures only go up to age eighteen. Now that we have all done such a great job raising our kids, we get to send them to college. The average price for a four year public college in the United States is $13,500 per year, over four years that is approximately $54,000. The average cost for a private college is $32,000 or $128,500 for four years. College costs are increasing at roughly the rate of five percent annually. The University of Florida just raised their tuition five percent, University of Maine is increasing tuition ten percent, and the University of California is going up by 7.4 percent. I have a motto regarding college, "College is an investment in their future, not mine."

Now the best part - I call this the "dessert." Now that you have raised your children and helped them through college, parents will spend an average of $2,200 per year, per child after they leave our homes. I am not sure what this is for. Maybe a really nice holiday gift?

While our children are priceless, raising them costs a lot of money, so I had better get back to work.

Dave Owens, CPA, CES, is the managing member of Tax Strategies Group in Southwest Florida, specializing in 1031 exchanges and Entrust IRAs.

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