Tahoe-Truckee Market Beat: How to estimate the costs of raising a child
June 9, 2015
Anyone who has raised kids knows that they can get pretty expensive. Young people who are thinking about starting families often wonder if there's a good way to estimate how much their kids will cost them.
The U.S. Department of Agriculture publishes a report on the costs that can be a handy financial planning tool. The report is titled, "Expenditures on Children by Families" and is available on the USDA website.
According to report, the average cost today in the United States is $245,340. Those costs are from birth until age 18, and do not include the cost of college.
The average public college will cost $18,390 annually, and an education at a private university will set you back $40,920 per year.
The USDA's numbers also do not factor in the rate of inflation. If you use an inflation rate of 2.4 percent and make an inflation adjustment the cost rises to over $304,000.
That may seem like an overwhelming number but if you break it down, it appears to be more manageable — $245,300 divided by 18 is $13,627 per year, which breaks down to $1,135 per month.
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The report shows that on average 30 percent of the total cost is for housing, while child care and education accounts for 18 percent of the cost, and food comes in third at 16 percent.
Those three items will be almost 2/3 of your budget. The report also factors in transportation, clothing, and health care and has a miscellaneous category.
Costs will vary considerably depending on where you live. The urban northeast is the most expensive and rural areas are the least.
The average cost of raising a child in rural areas drops to $193,590. Housing is quite a bit more affordable in rural areas than urban ones.
Some good news for people who want to raise several kids is that the per-child cost will decrease as you have a larger family.
The USDA website also has a calculator available to help you estimate your costs based on your location and your situation.
Kids can certainly be expensive, but as a parent who has raised three of them beyond the age of 18 right here in Truckee, I can say it has been well worth every penny and then some.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.