How Much Does it Cost to Raise a Child?

By Lindsay Frankel
Inside Subprime: August 28, 2020

Starting a family is a common goal for young people, but many are delaying the milestone or foregoing having children altogether. About a quarter of survey respondents in a Morning Consult poll for The New York Times said they had or planned to have fewer children than what they believed was ideal, and their primary concerns revolved around money. 64 percent said they made the decision not to have a child because child care was too expensive, 49 percent had concerns about the economy, and 44 percent delayed having children because they worried about affordability. 

Their concerns are well-founded. According to the U.S. Department of Agriculture, the estimated cost of raising a kid born in 2015 from birth to age 17 ranges from $174,690 for low-income families to $372,210 for high income families (that’s up to $454,770 when accounting for inflation). A middle-income family is expected to spend $233,610 in 2015 dollars. That’s a three percent increase from the previous year, meaning that the rising expense of raising a child is outpacing inflation. 

Keep in mind that this doesn’t include the cost of a college education. Families spent an average of $30,017 on college during the 2019-2020 school year, and the greatest share of that cost came from parent contributions. Parent income and savings accounted for 44% of the funding. 21% of that amount came from loans, but it wasn’t just students that were borrowing; 8% of the cost came from loans that parents applied for. 

Where Is the Money Going?

Across all income groups, housing represented the greatest expense. The lowest income group spent 33 percent of their total child-rearing costs on housing, and the middle and high income groups spent 29 percent and 26 percent, respectively. 

Food was the next largest share of the expense for low and middle income families, while child care and education costs made up the second largest spending category for high income families. 

For the lowest income group, transportation was the third largest cost, making up 14 percent of the total. For the middle income group, it was child care and education costs, and for the highest income group, it was food. For the lowest income group, child care and education costs accounted for only 12 percent of the total expenses, likely because lower-income families tend to rely on relatives more often for child care. 

ExpenseShare of Total
Housing29%
Food18%
Child care and education16%
Transportation15%
Health care9%
Miscellaneous7%
Clothing6%

The annual cost of raising a child increases with age. Across income groups, expenses for transportation, clothing, food, and health care increased as the child got older. Transportation expenses were most costly for children age 15 to 17, likely because insurance costs for young drivers are so high. Child care expenses, on the other hand, were highest for children under the age of six, who have yet to enter full-day school. 

Expenditures varied by location; some regions were notably more costly for raising a child than others. The urban Northeast was the most expensive region for married-couple families to raise a child, followed by the urban West and urban South. Rural families had the lowest child-rearing costs. 

The cost per child decreases in families with more than one kid. Only-child households spent 27 percent more than what two-child families spent per child. And families with three or more children averaged 24 percent less in expenditures per child than two-child households. 

Ongoing Expenses

While an increasing number of parents expect their children to pay for college, the fact is that parents still foot a large portion of the bill for their children’s education. And it’s not just parents’ savings accounts that are getting emptied out; many parents are also borrowing. 

Parent PLUS loans help fill the gap between other types of financial aid and the cost of college, and they’re becoming increasingly popular. 11 percent of families use Parent PLUS loans to cover education costs. During the 2017-2018 academic year, Parent PLUS loans accounted for 23 percent of all federal lending for college, and parents who borrowed took out an average of $16,452, according to research from Urban Institute. 

More parents are having difficulty repaying loans for their children’s education. Only 45 percent of Parent PLUS borrowers in Texas were able to consistently keep up with payments and successfully repay the loans, according to a study from Trellis Research. 

Furthermore, most parents don’t stop supporting their children at age 18. Only 24 percent of young adults become financially independent at age 22 or younger, according to Pew Social Trends. And about 45 percent of adults ages 18 to 29 reported getting some or a lot of financial assistance from their parents in the previous year. 

Saving for a Family

All of these costs add up to one important piece of advice: Americans need to budget and save for having a child, just like any other major expense. Without proper planning, adding another member of the family can cause significant financial distress. 

In addition to keeping child-rearing expenses in a high-yield savings account or certificate of deposit, parents should consider using a 529 plan to save for college. This type of tax-advantaged savings plan allows parents, relatives, and friends to make contributions to a child’s college fund. The money can be used for a variety of educational costs, including student loan repayment. 

Having a savings account in your child’s name is a strong predictor of your child’s future academic achievement. Children from low or moderate-income households with a savings account in their name, even in an amount less than $500, are more than three times more likely to enroll in higher education and four times more likely to complete their degrees when compared to a child without a savings account. 

Early on and as your child grows, you should also teach healthy savings habits that will better prepare your child for a financially independent future. 

For more information on the middle income consumer, subprime loans and payday loans, see our city and state financial guides including states and cities like California, Texas, Illinois and more.