A Comprehensive Guide On The Costs Of Raising A Child

Raising a family and having children is fulfilling and challenging. It’s also expensive! Many people want to get a handle on the true cost of raising a child in order to plan for the future. Of course there are many factors at play, but there are certain expenses you can count on. From the cost of childbirth itself, to childcare expenses and college tuition savings, it all adds up quickly.

We’ve done the research to compile this comprehensive guide to the average cost of raising a child. We hope this is helpful for you as you begin planning for your future family.

Pre-Baby Expenses

There are expenses that come into play well before a baby is born, and even before she has been conceived. It’s hard to put an exact number on this type of expense because it will vary depending on your unique family building situation.

Possible expenses can include your prenatal care and the cost of labor and delivery, but they can also include the cost of fertility treatments, adoption, or surrogacy.

Fertility Treatments And Adoption

Many people need to pursue fertility treatments to have a successful pregnancy. 1 in 8 couples in the United States struggle with infertility. The cost of an initial IVF treatment is $12,000 on average, but this doesn’t include medications. Fertility medications can add as much as $5000 to the overall cost. If the first cycle doesn’t result in a successful pregnancy, then subsequent cycles of IVF will add to the bill. Additional cycles cost about $7,000 each. All told, a couple can expect to spend about $20,000 on average for IVF treatments.

The cost can go even higher should you need to use an egg or sperm donor or a gestational carrier to have a baby via IVF. Donor sperm is the least expensive of these three options, averaging $200-$3000 extra. Working with an egg donor adds significant cost: you can expect to pay $25,000-30,000 for one cycle using donor eggs.

Working with a gestational carrier to have a baby via surrogacy is the most expensive option for alternative family building. The cost to have a baby via gestational surrogacy is anywhere from $50,000-$200,000.

The cost of adoption in the United States varies depending on a few factors. Adopting a child through the foster care system is the least expensive option. According to FamilyEquality.org, adoptions via the child welfare system costs less than $3000.

Domestic adoption costs, on average, between $20,000-$45,000. International adoption ranges from $35,000-$70,000. There is a fairly generous tax credit available to help offset the cost of adoption. Check with your tax preparer to find out if you qualify to receive the adoption tax credit.

Labor And Delivery

The total cost to have a baby depends on a variety of factors. Studies show that, on average, it costs close to $11,000 to deliver a baby in the United States. Your out-of-pocket costs may go up or down depending where you live, if you have insurance or not, and the type of health insurance coverage you have.

Giving Birth

The cost of labor and delivery has gone up quite a bit over the past few years. According to a study published in Health Affairs, on average, a person will pay $4,500 out of pocket to deliver a baby, even if she has health insurance. The higher cost can be attributed in part to the fact that more Americans are being offered insurance plans with high deductibles.

Total cost, not accounting for insurance, ranges from $9,000-$15,000.

The type of delivery, vaginal or Cesarean, and any complications that arise, can greatly affect the overall cost of having a baby. Your location also affects the price. A delivery in New York will be costlier than one in Wisconsin, for example.

Vaginal Delivery

Vaginal deliveries are less expensive and require shorter hospital admissions. They are also the most common manner of giving birth, with 67% of all births being vaginal deliveries. The Health Affairs study found that the average cost for a vaginal delivery was $4,314 in 2015. Any complications, anesthesia, or additional procedures would increase that cost.

Cesarean Delivery

Delivery via C-section involves a surgical procedure, meaning the cost of the delivery overall will be higher than that of a vaginal birth. The hospital stay will also be longer. Mothers who deliver vaginally will typically stay two nights in the hospital. C-section moms usually stay twice that long, averaging four nights in the hospital.

C-sections account for about 33% of all births in the United States with an average out-of-pocket cost of $5,161, according to Health Affairs.

Costs Of Raising A Child

According to the USDA’s Consumer Expenditure Survey, the average middle income American family will spend $233,610 to raise a child through age 17. That’s about $12,980 each year, and these figures don’t include any savings for college tuition.

Expenses related to raising a child are broken down into the following categories by the USDA, which has tracked data on parenting costs since 1960.

As of 2015, household parenting costs can be broken down as follows:

  • Housing = 29%
  • Food = 18%
  • Childcare and Education = 16%
  • Transportation = 15%
  • Healthcare = 9%
  • Clothing = 6%
  • Other = 7%

Housing

According to the USDA’s study, housing accounts for the biggest portion of parenting costs. Many parents decide to purchase or rent larger homes to better accommodate their larger families. Housing also includes the cost of furniture, appliances, and utilities needed to provide a safe and nurturing environment for children.

You can expect to spend a few hundred dollars on furniture for a new baby, including a crib, bassinet, and changing table. Of course, you can save money by looking for hand-me-downs from generous family members or friends. Just be sure to check that any used products aren’t subject to recalls and are in good working order.

Food

The USDA reports that the average middle income American family spends about $173 per month to feed a one-year-old child. That cost goes up as the child gets older. A nine-year-old requires about $266 worth of food per month. It costs over $300 a month to feed a teenager.

During the first year, you can save some on the cost of baby formula if you choose and are able to breastfeed. However, there are still a lot of expenses related to breastfeeding including a breast pump and supplies, milk storage bags, and other supplies. Other feeding supplies include bottles, utensils and plates, sippy cups, a highchair, baby food and/or appliances to make your own baby food, etc.

Education

There are education expenses to consider well before you start daydreaming about college plans for your little one. Factor in the cost of preschool. While preschool is not necessarily a requirement, children can greatly benefit from the structure and curriculum as they get ready to enter kindergarten. According to the National Association of Child Care Resource & Referral Agencies, the cost of preschool ranges from $372-$1100 per month. Costs vary depending on where you live, the quality of the preschool, and the number of days that your child attends.

Public education is free, but you may choose to send your children to private school instead. Parents choose private school for a number of different reasons. Some make the choice due to religious reasons, concerns about the quality of public education, or because of the private school’s reputation and prestige.

The average private school tuition is around $11,000 per year. High school is more expensive than elementary, with an average cost of nearly $15,000 for secondary students and $10,000 for elementary students.

Other Expenses

Other expenses include things like personal care items, entertainment, books and toys, and other miscellaneous expenses.

Personal care includes things like toiletries, haircuts, personal hygiene products, and more. Entertainment can include gaming systems, iPads, dance lessons, sports equipment, zoo memberships, and so on.

Transportation

You may think that transportation costs only come into play when your teenager gets her driver’s license, but that’s not the case. Before the baby is even born, you’ll need to purchase a car seat. Without one, you won’t be allowed to leave the hospital! Car seats can cost anywhere from $50-$500+ depending on the model and brand that you choose.

A stroller is another purchase you’ll want to consider. Prices run the gamut from under $100 to more than $1000.

Of course, your transportation expenses are likely to skyrocket once your child becomes a teenager. You may have expenses such as the cost of driver’s education courses, a car for them to drive, and higher insurance rates.

Healthcare

Healthcare costs make up approximately 9% of the overall cost of raising a child. This includes out-of-pocket expenses to pay for medical and dental care. Children need annual check-ups and vaccinations, but there are of course other healthcare expenses to figure into your budget. Broken bones, a trip to urgent care, orthodontics during the teenage years. Your actual costs will vary depending on the type of insurance you have. If your plan includes a high deductible, your out-of-pocket expenses will be higher. There are ways to mitigate that cost, such as using a Health Savings Account for example.

Clothing

Clothing makes up a smaller share of the overall costs—about 6%. There are a lot of ways to save money on clothing. Because children grow quickly (sometimes multiple sizes in a season!), it’s not always cost effective to buy brand new. Using hand-me-downs and buying gently used clothing from consignment sales or resale shops can really help you pinch your pennies. This is also one area where having multiple children doesn’t really double your costs. Just be sure to hang on to your oldest child’s outgrown items so the next in line can wear them!

Childcare And Activities

Childcare is a major expense for families in the United States. While the USDA’s data shows that childcare makes up 16% of the overall cost of raising a child, many parents report spending as much as a third of their take-home pay on childcare.

There are several options to consider when thinking about who will care for your children. Will one parent choose to stay home rather than work outside the home? Will you send your child to daycare, employ a nanny, or ask the grandparents to babysit? There are pros and cons that must be weighed with each decision, and it’s a choice that weighs heavily on parents. Let’s look at some of your options.

Nanny

One childcare option is to hire a nanny. A nanny is a person who regularly cares for your children in your own home. Typically, nannies help families by creating daily schedules, preparing meals, providing transportation to and from school or activities, and assisting in the children’s mental, physical, and emotional growth. Sometimes, nannies will also help with household chores.

According to Care.com, there are several different types of nannies you could choose to work with:

  • Full-time live-out nanny – an individual who arrives at your home each day to care for the children during a parent’s full-time working hours.
  • Full-time live-in nanny
  • Nanny housekeeper
  • Part-time nanny

Nannies are typically paid on a weekly basis, and the average rate for a full-time nanny is $565 per week. Of course, this will vary depending on where you live and the scope of your nanny’s work.

In-Home

Employing an in-home nanny is one of the more expensive options for childcare, but it can sometimes be more economical than sending more than one child to daycare. In addition to providing childcare, your nanny may also help you run errands, do laundry, help with the housework, and generally alleviate the stress of household responsibilities. That can be well worth the cost for many parents!

Nanny Share

Another option for working with a nanny is to consider a nanny share. A nanny share is an arrangement in which two or more families employ a nanny to watch children from each family. You’ll pay about ⅔ of the nanny’s regular rate, so you can save some on the overall cost. Many parents prefer nanny shares not only for the cost savings, but also because their children can develop important social skills by interacting and playing with other kids.

According to a survey conducted by Care.com, the average cost of a nanny share is about $19,587 per year, or $377 per week. A full-time nanny costs, on average, $29,380, or $565 per week. The cost savings is quite significant and can make childcare with a nanny a viable option for many families.

Day Care

One of the most common options for childcare is enrolling your child in a daycare center. There a several different types of daycares:

  • In-home licensed daycares
  • In-home license-exempt daycares
  • Child care centers
  • Parent’s Day Out programs
  • Preschool programs
  • Before and after school care

In-home daycares are operated in a residential location, usually the daycare owner’s home. There are usually just one or two childcare workers, and sometimes the hours of care are quite flexible. This can be a good option if you work a non-traditional schedule. State regulations vary, but typically an in-home daycare must be licensed by the state in order to care for a certain number of children. A provider may be license-exempt if they care for a small number of children. Always ask about a home daycare’s licensing status and make sure they are following all local regulations.

Childcare centers are standalone businesses that care for multiple children. These usually have set hours and are located in a commercial building. Childcare centers can be independent or part of a national or regional business. They are typically run by a local daycare director and employ several staff members to care for the children.

Childcare centers can also be run as a non-profit organization. They may be affiliated with a faith-based program, government agency, or local school district.

Parent’s Day Out programs are typically run through a non-profit such as a church. They usually have limited daytime hours.

Average Costs

Total cost for childcare varies due to a variety of factors. The child’s age, your geographical location, and the type of care you choose all play a role. Of parents who pay for childcare, more than half spend at least $10,000 per year, and ⅔ spend 10% or more of their household income on childcare.

Here is a breakdown of the average weekly costs of childcare in the United States:

  • In-home daycare: $201 per week
  • Child care center: $215 per week
  • After-school program: $243 per week
  • Nanny: $565 per week

In 2020, the most expensive states for child care were Massachusetts, New York, California, Connecticut, Maryland, and Minnesota. The least expensive were Mississippi, Alabama, Kentucky, South Dakota, Arkansas, and South Carolina.

Babysitter

Many parents wonder about the difference between a babysitter and a nanny. The main difference is that a babysitter usually works just a few hours and often not on a regular schedule. Babysitters take care of a child’s basic needs through play, feeding, bathing, and putting to bed. A nanny, on the other hand, is typically on a regular schedule with set hours. The nanny also has a larger responsibility for the growth and development of the children. Nannies are often viewed as partners in co-parenting a family’s children. Babysitters are more like parents’ helpers.

Cost Of A Babysitter

The average hourly rate for a babysitter in the United States is $16 per hour for one child. For each additional child, it’s normal to add an extra $1-2 to the hourly rate. Babysitters set their own rates which will vary based on the babysitter’s age and experience as well as any certifications they have. You should expect your 17-year-old neighbor to have a lower rate than an experienced adult who is CPR and first-aid certified.

Should A Relative Watch Your Child

For some lucky parents, it may be possible to have a grandparent or other relative available and willing to care for your children while you work. Not only can this save you money, but you may experience a greater peace of mind knowing that your child is being cared for by a loved one.

Don’t just expect Grandma to work for free, though! Most parents who ask a family member to watch their child offer some compensation. The question of compensation can also cause some conflict. You’ll want to be mindful not to take advantage of your relative’s time. Clear expectations and boundaries are needed for a positive experience.

Is Quitting Your Job An Option?

When faced with the reality of childcare costs, a lot of parents consider quitting their job to stay home with their children. The decision isn’t an easy one to make, and it’s not always cost effective.

Before you or your partner put in your notice, there are many factors to take into account. Even if you can pay your bills on a single income, you’ll be losing valuable benefits such as accrued Social Security, 401(k) contributions, and employer-sponsored healthcare. There’s also a risk in putting your career on hold to stay home with children. When your children are older and in school full-time, you may find it difficult to re-enter the workforce. Missing out on years of experience and promotions can cause your career to take a hit.

Finances aside, there is a highly emotional aspect to this decision. Will you enjoy life as a stay-at-home parent? Will your stress level be affected by the loss of income? Will staying home to experience the early years with your children outweigh any negative financial impact? Those are questions only you and your partner can answer.

As an alternative, you may consider making other adjustments to your work schedule before quitting altogether. Is it possible to change or reduce your work hours? Becoming a parent forces you to think outside the box in many ways. The question of working parent vs. stay-at-home parent is one that might cause you to get a little creative!

Benefits With Childcare

Financial considerations aside, there are many benefits to having someone other than a parent care for a child on a regular basis.

Academic Advancement

A study by the U.S. National Institutes of Health found that children in high-quality childcare performed somewhat higher academically years later when they became high schoolers. In a quality childcare setting, children are exposed to skills and concepts that promote school readiness. Many childcare providers use a structured curriculum that is age-appropriate. Studies have also shown that children in childcare have stronger language development than those who stay home with a parent.

Regular Routines

Children benefit greatly from maintaining a regular routine. Regular childcare provides structure and consistency for kids.

Effective Communication

Children in daycare have a greater opportunity for social interaction. They develop important communication skills as they learn to share, resolve arguments, and play with other kids. If a child has limited interaction with his or her peers, it may take longer for language and social skills to develop. One study showed that children in daycare are better able to adjust non-verbal cues and adapt their communication based on the age of the person they are speaking to. This is a higher order communication skill that sets kids up for success throughout life.

Smoother Transition To Kindergarten

It stands to reason that a child who has experience with a structured childcare environment will have a smoother transition to kindergarten than a child who has never been in a classroom-like setting. Daycare and preschool programs follow a schedule that is similar to the elementary school classroom. There are structured times for learning activities, open play, snack and lunch times, and outdoor play. Children who have already practiced these things in their preschool or daycare will have an easier time adjusting to formal schooling.

Child Care Costs By Country

According to data compiled by the OECD (Organisation for Economic Co-operation and Development, the United States ranks third for the most expensive childcare costs compared to other countries.

The most expensive country is actually New Zealand, with the average couple spending 37.3% of their average earnings on childcare. It, along with the United States, are the only four countries in the world where couples spend more than 30% of their income on childcare.

The United Kingdom comes in as second most expensive, with parents spending a full 35.7% of their income on childcare. The United States comes in next with American couples spending an average of 33.2%. Fourth is Australia, where parents spend 31.1% of their income on childcare.

So where is childcare the most affordable around the world? It turns out that the Czech Republic offers parents the least expensive childcare options. Couples there only pay 2.6% of their salaries toward childcare. South Korea is very similar in affordability, sitting at 3% of a couple’s income.

Overall, the OECD found that the average percent of a couple’s pay being spent on childcare is 14.5%. Quick math tells us that childcare costs in the United States are more than double the global average.

Preparations Before Having A Child

Short of moving across the globe, what can an American couple do to prepare for the expenses of raising a child? Wise financial planning and preparation can help alleviate some of the financial burden associated with raising children in the United States. Here are some tips for how to get your household financially ready to raise a child.

Have A Stable Career

First, it’s best to have a stable career before you begin growing your family. Establishing yourself in your field means that you’ll already be past the stress of obtaining your degree and getting your foot in the door with a company. It also means that you are likely to have decent benefits like health insurance and paid leave. Establishing yourself in your industry prior to having children also makes it easier to return to work after taking time off either for maternity or paternity leave or to stay at home with children for an extended period of time.

Earn Enough Disposable Income

Before you have a baby, create a detailed budget of all your expenses. Begin with the essentials like food, shelter, and transportation. If you find that you have a healthy amount of disposable income left over after paying for all of your essentials, then you can feel pretty confident moving forward with parenthood.

Keep An Emergency Fund In Place

Financial advisors recommend keeping at least three to six months of living expenses in the bank as an emergency fund. This peace-of-mind sum can be tapped into in case of emergency or job loss.

Contribute To Your Retirement Fund

It may be tempting to skip your retirement contributions to pay for more immediate needs, but a solid sign of financial health is your ability to contribute to your own future. Not only is it a sign of financial fitness, it also takes pressure off of your future children knowing that their parents will be financially stable as they age.

Prepare To Send Them To College

College tuition costs rise every year, and there’s no sign of a slowdown anytime soon. Start saving early for college. With wise investments, even a few dollars a month will grow exponentially over the years. Look into special education savings plans such as your state’s 529 plan.

Child Tax Credit

The Child Tax Credit is designed to offset some of the financial burden of raising a child. You can claim the credit when you file your personal income taxes with the IRS as long as you qualify based on certain criteria.

How It Works

As of 2020, the annual tax credit gives US taxpayers a credit of up to $2000 per child under the age of 17. If the parents earn over a certain income level, the credit is proportionally reduced. In 2021, President Biden signed the American Rescue Plan Act as a response to the COVID-19 pandemic. The legislation raises the tax credit to $3000 for each child age 6-17 and $3600 for each child ages 5 and under. At this time, the increase applies to the 2021 tax year only.

Who Qualifies

To qualify for the child tax credit, the IRS requires you and/or your child to meet seven different criteria:

  1. Age: Your child must be 16 years or younger at the end of the tax year you wish to claim the credit.
  2. Relationship: The child must be your child, stepchild, foster child. If you are the legal guardian of another family member such as a brother, sister, niece, or nephew, you may also be able to claim the credit.
  3. Support: The child can’t provide more than 50% of his or her own financial support during the tax year.
  4. Dependent status: The child needs to be your legal dependent, with no one else able to claim him or her on their tax return.
  5. Citizenship: The child must be a US citizen, national, or resident alien.
  6. Length of residency: The child must have lived with you for more than half of the tax year. There are a few exceptions to this, so be sure to check with a tax professional if you’re unsure.
  7. Family income: For 2021, the amount of the credit begins to phase out for individuals making more than $200,000 and married couples making more than $400,000.

If you meet all of the above requirements, you should be able to claim the child tax credit on your personal income taxes.

Strategize To Lower Costs

Whenever possible, it’s wise to plan strategies for lowering the cost of raising a child. Plan to meet with a financial advisor who is trained to help people plan for their financial futures. Brainstorm ways to lower costs. Despite what the advertisements say, you don’t need to buy every top-of-the-line piece of baby gear. A second hand stroller will work just fine, and as an added bonus, you can put the difference saved into your child’s college tuition fund.

While the cost of raising a child may seem astronomical, any parent will tell you that it’s well worth the journey.

At Family Inceptions, we believe that everyone deserves to be a parent. If you are looking at alternative family building options, please reach out to our team to discuss what’s possible.

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