A USDA report pegs the total cost of raising a child at $233,610, or $284,570 if you factor in future inflation. That includes only the basics however, and excludes costs like helping with college education, birthday parties, and holiday gifts.
Include those, and you’re looking at $745,634, according to a report by NerdWallet — a jarring amount, no matter how much you earn.
Most of us know that kids come with extra costs like clothing, food, and possibly college tuition. But what about the hidden costs of raising a child? Kids require more than food and clothes, and often the less obvious costs get lost in estimates of just how much children cost to rear.
As you consider having children or plan your finances for an existing family, keep the following costs in mind. Just remember that although these expenses are common, they’re not written in stone, and you do ultimately control how much your own children cost you.
Hidden Costs of Raising a Child
Many parents, particularly mothers, take a career break to raise young children in their first years and often up to school age. It’s not like pressing the pause button and resuming play where you left it. Taking an extended break comes with significant costs, some less obvious than others.
1. Lost Income
On the obvious side, you lose out on the income from those years spent outside the workforce.
Imagine a family where both partners work, and upon having their first child, the mother decides to take a career break. They have a second child three years later, and the mom decides to stay at home until the youngest starts kindergarten at age 5.
That’s eight years of lost income. At a median full-time salary of $52,312 calculated by BLS, that comes to $419,496 in lost wages, not including wage growth over the next eight years.
This says nothing of lost retirement benefits, such as 401(k) matching, or lost returns on your own contributions to investments you could have made with that extra income. Compounded over the next 30 years, those lost returns can amount to millions of dollars.
2. Lost Career Momentum & Potential
Beyond the lost years of income, becoming a stay-at-home parent can stunt your career potential.
By the time you’re ready to reenter the workforce, you’ve fallen vastly behind your colleagues who have had many years to climb the corporate ladder. They’ve been advancing and winning promotions, while you’d be lucky to reenter your industry at the same level where you left.
The opportunity cost doesn’t end there, either. In today’s world of disruption and fast-paced change, eight years of falling out of touch with industry trends, best practices, and technological innovations puts you at a deep disadvantage compared to people still in the workforce and up to speed.
The bottom line: parents who take a break of several years from their career may reenter the workforce at a lower level than they left, and advance less over the remainder of their career. While there’s surprisingly little research on this effect, one study by Adzuna found that Brits who took a five-year career break took an average annual salary loss of £9,660 (about $12,500).
3. Less Time for Side Hustles
Even among parents who don’t take a career break, they simply don’t have the same free time to build extra income through a side hustle.
Historically, I spent much of my Saturdays working on either my business or writing. When my daughter was born, that came to an abrupt end, first because I was so sleep-deprived and later because my wife wouldn’t hear of it.
My father told me growing up that the 40-hour workweek was a baseline for survival, and it’s what you do outside those hours that determines your success, particularly in your 20s and 30s.
Although I believe in creating passive income streams and pursuing financial independence, you need to save a lot of money in the beginning to build momentum. That comes from a high savings rate and a high income, which often requires side gigs.
It’s not so easy to run a business on the side of your full-time job when you have young children.
4. Higher Housing Costs
A family of two can share a one-bedroom apartment. A family of three, four, or five? Not so comfortably.
At the time of this writing, Apartment Guide lists the average one-bedroom apartment rent at $1,621, compared to the average two-bedroom apartment rent of $1,878. That’s a difference of $257 per month, or $3,084 per year, just to add one more bedroom.
Larger homes cost more money, whether you rent or buy. And with the extra square footage comes higher utility costs to light, heat, cool, and power the property and everything in it.
They also require more maintenance for homeowners. The larger the roof, the more square footage there is to spring a leak. The larger the lawn and grounds, the more time and/or money they cost to maintain. And so on.
Expect to pay thousands of dollars more each year for a home that can accommodate your children, not just you and your spouse.
5. Transportation Costs
The same logic applies to transportation.
According to Kelley Blue Book, the average cost to buy a new compact car is around $20,000. The cost to buy a midsize SUV? A hefty $33,000, representing a 65% increase in cost.
As with housing, the difference in costs doesn’t end at the sticker price. It costs more to insure and fuel a beastly SUV than an efficient compact. When your kids reach their teenage years and start driving, they’ll need car insurance, which many parents pick up.
(Personally, I had to pay for my own as a teenager, and I recommend you do the same with your kids to give them practice earning and budgeting for real world expenses. But I digress.)
Some parents even go so far as to give their teenage kids a car, whether a hand-me-down or buying it for them as a gift.
Again, these costs remain voluntary. But it’s harder to drive your kids, their friends, and their gear to hockey practice in a sporty compact than in a minivan or SUV.
6. Medical Costs
People of all ages need medical care. And in the United States, medical care is expensive, no matter how you approach it.
Higher Health Insurance Premiums
Adding more people to your health insurance plan adds to your monthly premium. Period.
Well, not quite period. Some insurers, like Blue Cross Blue Shield, charge for each additional child up to the first three, then stop charging extra and only charge for the three oldest under the age of 21. Regardless, expect to pay more for family health insurance when you have children than you’d pay as a couple.
You may also decide you need more coverage as a family with kids than you did as a couple. For example, you may opt for dental coverage, or more inclusions, or a lower yearly ceiling on out-of-pocket expenses.
Higher Out-of-Pocket Expenses
Kids get into trouble, break their arms playing soccer, step on rusty nails while running around the neighborhood barefoot. And before they do that, babies require plenty of checkups and medical care of their own.
Every time they visit a doctor, need a prescription filled, or look cross-eyed at the health care system, you can expect to get hit with an out-of-pocket bill. Few health insurance plans cover 100% of all medical expenses with no deductible, and those few charge outrageous premiums.
And kids come with other medical costs. If you don’t want your kids to have crooked teeth, suddenly you find yourself with orthodontist bills. Eye exams, contact lenses, glasses — the list goes on.
Your kids will need plenty of medical care between birth and when they enter the workforce, and you’ll be on the hook for every penny.
7. Lessons, Tutoring, and Other Extracurriculars
If your child has dyslexia, they may need special tutoring to help them learn how to read. Many children need speech therapy as young kids. Many others require academic tutoring at some point or another.
Parents always forget to budget for these sorts of expenses until they strike, but kids — and just as often their parents — may want or need more than what resources their school offers for free. And when it happens, you need to be prepared to open your wallet.
8. Baby Paraphernalia
I was shocked and appalled at the amount of baby paraphernalia that flooded our apartment when we had a baby.
At every turn, I fought my wife to stop buying so much stuff. And at every turn, I lost the battle. She insisted on buying every gadget, every “cute” piece of baby clothing, every piece of nursery furniture she could get her hands on. From infrared baby monitors to smart chips that attach to diapers to track vital signs, we have it all.
As a minimalist, it drives me insane. Like so many middle-class parents, we have far more baby items than we need. Eventually, I stopped tallying the cost because it was pushing my cortisol levels through the roof.
You may consider yourself a reasonable human being, vigilant against unnecessary spending. But new parents get both anxious and excited — and their response to both is usually to buy more stuff. When you or your spouse gets pregnant, budget extra for spousal splurges when you try to predict how much it costs to have a baby.
9. Toys and Gifts
Again, parents all too often go wild buying gifts, toys, and unnecessary clothes, all in the name of spoiling their children.
It’s so insidious that many parents go into debt each holiday season. Between gifts, swag, and travel, the average American family spends $1,050 at the holidays according to a 2019 National Retail Federation study reported by USA Today.
You can and should fight the urge. But parents overspend on gifts and toys all the time, so it bears including here.
Increasingly, kids need electronics for schoolwork, not just as frivolous gifts. In the era of COVID-19, they’ve become mandatory learning tools.
Laptops and tablets aren’t cheap though, and they come with notoriously short lifespans as they slip into obsolescence after a few short years. Between the time a child is old enough to use one and the time they move out and pay their own bills, they’ll likely go through dozens of devices between phones, tablets, laptops, and gadgets that haven’t been invented yet but will be all the rage 15 years from now.
Added together, that comes to tens of thousands of dollars.
11. Travel Costs
My wife and I once looked up the cheapest flights for the following week from our then home. We booked flights to Bulgaria for $160 round trip per person and spent only a few hundred dollars over the entire next week.
That doesn’t happen when you have kids, for several reasons.
First, you can’t just up and go during the travel offseason when you feel like it. Your kids have school, so you have to travel when everyone else and their mother travels: during school holidays. Which means always traveling during the expensive high season.
Second, you have to pay for more, well, everything. More airline tickets. More hotel rooms, or a larger home on Airbnb. And then come the meals, entertainment, entrance passes, and so forth. All of it costs more money.
When you travel with an infant, you can avoid many of those costs. But they don’t stay infants very long, and soon you find yourself traveling with teenagers who insist on doing the exact opposite of what you want to do. So you end up paying to do both.
And good luck doing low-key travel like backpacking or hiking trips with social media-addicted kids and teens.
If you really want to travel the way you used to with your spouse, you end up either having to hire a nanny or ship your kids off to summer camp — both of which cost an arm and a leg in themselves.
12. Life Insurance
Add children to the mix, however, and you have more mouths to feed — plus all the other expenses outlined above. Losing one spouse, particularly a primary breadwinner, could tip the family into poverty or at the very least require a massive, painful change in lifestyle.
Having children doesn’t necessarily require you to buy life insurance. I don’t have it, as one of the many side benefits of the FIRE lifestyle. But when you have children, you need to plan for contingencies like losing a spouse, and making sure your family can survive without them.
Often that means a life insurance policy, and even when it doesn’t, you still need a plan in place.
Having children is not all financial doom and gloom. Yes, some expenses remain unavoidable, no matter how frugally you live. But many of the expenses above represent average expenses among parents with little financial literacy. You can minimize many of them with a little more awareness, and avoid others entirely.
The costs of raising children also operate on an economy of scale. While you and your spouse don’t want to share a bedroom with your child after the first few months, you can put two children in the same second bedroom, for example. Younger children can benefit from hand-me-downs such as cribs, strollers, and clothes. And once you bite the bullet to buy a minivan, having a third child doesn’t change your transportation needs any further.
It doesn’t have to cost $745,634 to raise a child. But it certainly can if you’re not careful.