Spoiler alert: Kids are expensive.
The most recent estimate from the U.S. Department of Agriculture puts the average cost of raising a child to adulthood at $233,610, and $284,570 factoring in inflation. That doesn’t include college education, if you plan to help your kids pay for college.
But these numbers are just averages. How much you actually spend to raise a child depends on factors ranging from where you live to your health insurance to just how much you plan to spoil your children. Keep the following broad expenses in mind, and remember that you have more control over most of them than you probably assume.
Can You Afford a Baby? – 5 Expenses to Consider
My wife and I waited until relatively late in life to have our first child, partially out of fear of the cost. But our daughter hasn’t cost us as much as we feared. It helps that we have good health insurance, which covers most medical costs. But we bought a secondhand crib and changing table, and we spend little on clothing and extra food. The wave of extra costs just hasn’t hit us the way we worried.
The cost of raising a child does spread out over 18 years, plus nine months of pregnancy. And much of it depends on where you live — which you do control, even if you don’t necessarily want to move for a more affordable cost of living.
Still, having a child can seem financially overwhelming. The expenses break down broadly as follows.
1. Pregnancy & Delivery Costs
Pregnancy involves more doctor’s appointments than you ever wanted to have in your life. All leading toward the dramatic climax of giving birth.
Plan on monthly checkups with your obstetrician, but the costs don’t end there. You’ll also have a battery of lab tests and ultrasounds, all of which cost money.
Insurance Coverage for Pregnancy, Delivery, and Neonatal Care
Your out-of-pocket costs depend heavily on your health insurance coverage. Your health insurance plan may cover nearly all pregnancy-related expenses or it may require you to cover most expenses until you reach your deductible.
Federal law does require insurance companies to include delivery, prenatal, and maternity care as essential medical services, but your deductible, copays, and co-insurance costs can still vary based on your policy.
If you’re an expecting mother under 26 and remain on your parents’ health insurance policy, different federal rules apply. Your insurer must still cover pregnancy and maternity care, but they’re not necessarily required to cover delivery or neonatal care. And they won’t cover your child once they’re born. Read more about these rules at the Kaiser Family Foundation if you’re still covered under your parents’ plan.
If you don’t have health insurance, look for ways to enroll before getting pregnant. Explore your options for getting health insurance without employer coverage, and you can even look into part-time jobs that offer health insurance. Depending on your income, you may also qualify for Affordable Care Act premium subsidies or Medicaid coverage.
As for delivery, nationwide it costs an average of around $15,000 before insurance. But it varies wildly by state: New Jersey hospitals charge an average of $29,048, more than three times Nebraska’s average of $8,805. Consider it your first taste of how where you live affects the cost of raising a child.
What portion of the hospital bill you pay depends, of course, on your insurance.
Fertility Treatments & Adoption
Remember that fertility treatments add another slew of expenses. If you plan on medical help to get pregnant, look into ways to reduce the costs of fertility treatments.
Adoption doesn’t necessarily cost less than having a child yourself, either. Do your homework on adoption costs and how to reduce them if you’re considering that route.
2. First-Year Costs
After your family adds a new member, the costs just keep accumulating.
You’ll need a certain amount of basic supplies, including:
- Car seat
- Baby blankets & bedding
- Diaper changing pad
- Onesies and other clothes
- Breastfeeding supplies such as a pump, nipple pads, and nursing bras
That says nothing of disposables like diapers, wipes, and baby formula. Or any of the optional-but-you’ll-feel-pressured-to-buy items like a diaper bag, changing table, rocking chair for nursing, baby books, and a hundred other things that The Joneses buy.
You can save some money on these items, by using family hand-me-downs and buying used. Since babies outgrow their clothes, furniture, and other necessities so quickly, buying used usually makes sense, as baby items tend to have plenty of usable life left in them. Read up on ways to save money on newborn expenses before going on a shopping spree.
In their uncertainty and anxiety, new parents tend to overspend. But the more you know going in, the better you can judge what you absolutely need and what you can skip. Do your homework on how much it costs to have a baby, and as importantly, how to prepare financially for kids.
3. Child Care
Many new parents find that their largest cost isn’t in material supplies or even medical bills, but in childcare.
That could mean paying for daycare or a nanny, once maternity leave ends. Or it could mean one parent ceasing to work for years, until the child reaches school age. Either way, it can cost your family thousands of dollars each month.
Nationally, childcare averages $216 per week for an infant, according to an analysis by Move.org. That comes to 17.1% of the median U.S. income. But like every other expense in the US, it varies enormously by location. In Washington DC, families pay an average of $21,678 per year, while in Alabama, they pay roughly a quarter of that at $5,593.
Daycare tends to cost less than hiring a nanny or au pair, but if you have multiple children, a single nanny can watch several children. They may charge more for a second child, but not double the cost of watching a single child. That “economy of scale” might make sense once Number 2 comes along.
It certainly helps if you have extended family who can watch your children. But beware of moving across the country solely for more affordable childcare. You might trade in one set of costs for higher housing costs and other boosts to your cost of living.
If you’re thinking about becoming a single-income family, don’t ignore the cost to your career. Leaving your career for several years doesn’t just hit the pause button — it can lead to permanent damage to your earning potential. While there’s little solid research on the subject, a 2018 study in the UK found that people who took a five year hiatus from their career went on to earn $12,894 less per year on average.
Start exploring ways to save on childcare costs long before you actually need to make a decision about where Junior will spend their days.
4. Ongoing Costs
As expensive as it is, at least childcare only costs you money for a few years.
Many other costs of raising a child keep nipping your wallet at every turn however. Costs like larger housing, larger cars, food for more mouths, and clothing for more backs.
Higher Housing Costs
Of these, larger housing puts the deepest dent in your pocketbook. A one-bedroom apartment sets you back an average of $1,670 in the US, according to Apartment Guide. A two-bedroom unit costs nearly $300 more per month at $1,951. In other words, that extra bedroom costs you $3,372 per year on average.
Once again, your location matters. For example, in Long Beach, CA, you can expect to pay an average of $965 more for a two-bedroom apartment than a one-bedroom. That’s an annual cost difference of $11,580.
The same economics apply to homeowners. In 2018, homebuyers paid nearly $70,000 more on average for a two-bedroom home than a three-bedroom, according to RealtyHop. If you put down 20%, that means a higher down payment of almost $14,000, which can delay your dreams of homeownership.
Then there are education costs, which location also impacts. Some school districts come with phenomenal public education for your tax dollars, while the quality of education is so poor in others that every family with means sends their children to private or parochial schools.
My hometown of Baltimore offers an example of the latter, where high local taxes and close to the highest per-student spending in the nation continue to produce atrocious schools. Middle- and upper-middle class families strain their budgets to spend upwards of $30,000 per year in tuition in Baltimore and its surrounding counties, on top of their high tax bills already funding public schools.
Of course, you can move into a school district with better public schools. But you’ll pay for them in dramatically higher housing costs.
If you choose to help your kids with college costs, you could spend up to hundreds of thousands more on education. Some parents handle this by contributing a certain amount each month to a 529 plan or ESA, and telling their children that they’re on their own above the amount in the account once they reach college age. You may qualify for tax benefits on your contributions; read up on 529 plans and Coverdell ESAs for details.
Entertainment & Travel Costs
Then come the higher entertainment and travel costs for a family with children. When you go out to dinner, you buy three meals instead of two. When you go out to the movies, you buy three tickets — and more popcorn and drinks. And when you book travel, you pay for another airline ticket and eventually another hotel room.
My wife and I live abroad with our daughter, and we travel internationally several times a year. When my daughter turned two, our airfares jumped by 50% as most airlines charge full adult fares for two-year-olds.
Of course, you can and should get scrappy in the fight to find savings, even as you add more mouths to feed and backs to clothe. Start simple in your search for money saving ideas for families, but don’t be afraid to seek larger savings through tactics like house hacking.
5. Health Insurance
Larger families pay larger health insurance premiums, as the policy must cover more people.
One the simplest level, health insurers offer individual plans and family plans. A married couple, or a single parent with one child, or a family of ten, all require a family plan. The distinction matters because most health insurance companies charge double the deductible and out-of-pocket maximums for family plans compared to individual plans.
However insurance companies charge monthly premiums based on the number of covered family members. So when your family of two becomes a family of three, your premium goes up accordingly.
That said, many health care policies cap the premium at a certain number of children under 21. For example, Blue Cross Blue Shield caps premium pricing at three children under 21 in a family plan, so having a fourth child wouldn’t raise your premiums — you’d still pay for five people despite having six on the policy.
Moderate-income families may qualify for the Children’s Health Insurance Program (CHIP) as well. As the name suggests, CHIP provides low-cost health coverage for children, in families that earn too much to qualify for Medicaid but which fall below specified income limits.
Financial stability helps relieve the stress of bringing home a new baby. A stable job, a stable domestic partnership, and stable health insurance all make the transition easier.
You don’t need to wait until 40 before becoming a parent, like I did. But beware of rushing into it before you’re financially ready.
You won’t hear any motivational speakers say it, but there’s an ideal window for becoming a parent. This window arrives after you’ve achieved a foothold in your career and gained a measure of financial stability. It begins to close as fertility risks take off exponentially.
That doesn’t mean you have to pay off every cent of student loan debt or buy a house or reach some arbitrary net worth. Just start practicing good personal finance habits: paying down debt steadily each month, building an emergency fund in an FDIC-insured savings account, and saving and investing money automatically. Do that, and you’re already ahead of the average would-be parent on the planet.
Besides, having kids isn’t all financial doom and gloom. You get to claim an ever-expanding child tax credit, and you get a backup retirement caregiver in case you run out of money in retirement!