The numbers are always staggering. Every January the U.S. Department of Agriculture releases its analysis of what it costs to raise a child. In 2017 the figure was $233,610 (before inflation) for a two-parent, middle-income family to raise a child to the age of 17.
And every January parents hear these numbers in the news and shake their heads. There’s no doubt it’s worth it but...wow! The question, then, becomes: does it have to be this way?
Can you beat this trend while still raising your child in the way you feel best? The answer is a definite yes.
Reducing the cost of a raising child takes a combination of long-term planning and everyday discipline. The USDA bases this estimate on the Bureau of Labor Statistic’s annual Consumer Expenditure Survey, which draws a picture of an average American consumer. So it’s up to you to diverge from the average, starting with the top three costs the USDA names, in descending order: housing (29 percent of the total cost), food (18 percent) and child care/ K-12 education (16 percent).
Housing and Education
These two are tied together because the old adage about real estate--location, location, location--applies to both. Consumers typically pay a premium for homes or rent in districts with higher quality schools. If you are inclined to home school or send your child to private school anyway, it doesn’t make sense to also pay this premium.
When you’re home shopping, it’s worth running the numbers of what a private school costs versus the added cost of buying in a higher-priced--and presumably higher quality--school district. If you have more than one child, public school will likely come out cheaper, but single-child families might actually save.
It also doesn’t make sense to pay this premium before your first child hits school age. The urge to move to a bigger house and settle in for the long haul is strong when your first child is born. The longer you wait, though, the more you will reduce your cost of raising a child.
Location is not just about individual school districts. It’s actually 27 percent cheaper to raise a child in a rural area than in an urban area in the Northeast, mostly due to the lower costs of housing and child care. Of course, moving to a lower cost of living area has a lot more ramifications than just dollars and cents. However, when there are other benefits, such as being closer to family or the opportunity for a different lifestyle, parent do make the decision to move. When parents work from home, the lack of a tether to the workplace makes this an even more viable option.
Child care can be a huge expense for new parents, but thankfully it decreases as children grow and perhaps even goes away completely when they reach school age. But in those early years reducing child care expenses means reducing your overall kid-related costs. Every family is different, but here are some possible ways to reduce child care costs:
Be a stay-at-home parent. If one parent’s job is fairly low paying, it may make sense to simply quit and eliminate child care costs, especially after the birth of a second child. Of course, to do this you may need to take other cost-cutting measures such as moving or cutting your overall spending. Also keep in mind that you won’t save money in the long run, if you don’t go back into the workforce when child care is no longer needed.
Be a work-at-home parent. Parents who work from home don’t necessarily eliminate all child care costs, but they can usually reduce them. Working part-time from home is also a good way for parents to keep their resumes up to date, making re-entry into the workforce smoother. Working from home also saves money in other ways such as commuting and clothing.
Have a grandparent or relative watch your child. This approach might not necessarily be free child care, but it is usually cheaper than daycare. It can be difficult to find part-time child care that is economical, so this is a good solution, if you reduce your hours to part-time.
Unlike child care, the cost of feeding your child only increases as your child grows. That’s why the USDA estimates it cost more than $200 a month to feed a single teenager! Food expenses are second highest cost, so this is a place to save.
The best way to save money on food is to cook your own. Pre-cooked foods, take-out and restaurants all cost significantly more than it does to cook your own fresh food. Easier said than done because one thing that parents lack, often more than money, is time. It can be daunting to come home from work and start cooking. This is where the self-discipline comes in. But here are a few tips to keep you cooking:
Devote a day (or at least the better part of an afternoon) to cooking. This can be once a month, once a week or somewhere in between, but set aside some time to cook ahead. When you do this, you will have the option to pull an easy dinner out of the freezer on a busy weeknight or put a slice of banana bread in your children’s school lunches instead of a pre-packaged snack.
Double your recipe. Then put half of it in the freezer for another night.
Plan your meals in advance. Make a weekly menu, figuring on a freezer meal for the nights you know you will be busy. Coming home from work and having no clue what you might cook is the easiest route to takeout.
In the USDA’s child-rearing estimate, costs decrease with each additional child, with what it calls the “cheaper by the dozen effect.” It states, “For married-couple families with one child, expenses averaged 27% more per child than expenses in a two-child family.”
However, the USDA’s cost estimate stops at age 18, so the big expense--college--is not included. And there, certainly, is no cheaper by the dozen effect on college tuition.
To reduce this huge cost in raising a child, you should start early, so as to spread out the hit on your income and to take advantage of the wonderful phenomenon known as compound interest. Ideally, you should start saving when your child is born.
But as we have covered early, it’s expensive to raise a child so this can be tough. Wherever you are in your child-rearing journey, it’s not too late to start!
So how much should you save? Consider the one-third rule which states parents should save one third of the costs, expect income, scholarships and financial aid to cover one third and loans for one third.
Saving gets you prepared for college and eases the big financial hit when kids enroll. However, to actually reduce the amount you spend:
Encourage your teenage get a job and save for college too.
Get to know the financial aid process. Talk to guidance counselors and do your own research about scholarships and financial aid.
Carefully analyze the cost of public versus private schools. Public schools are usually much cheaper, but a good student can get private school scholarships making it competitive or possibly cheaper than public. But be wary of excessive loans from private schools.
Consider two years of community college followed a transfer to a four-year school.
More Ways to Save
Generally, having children forces people to be thriftier. It's not just the big ticket items mentioned above, but it's the small things too that add up as a family grows, e.g. vacations, holidays, clothing, etc. Taking the time to think about ways to reduce these like saving on back to school shopping or holiday shopping is an important part of the equation.