The Cost Of Raising Kids

There is no job that’s been more rewarding in my life than being a dad.  It’s not always cupcakes and balloons, but raising my kids (now age 2 and 4) gives me more satisfaction than anything.

Being the finance nerd that I am, I can’t help myself but to go back and analyze all of the dollars that we’ve spent (and will spend) raising our two boys.  Just to forewarn you, there are so many intangibles that outweigh any amount of money that can be quantified, but this post is aimed at looking at our true cost of raising kids.

According to the latest annual “Cost of Raising a Child” report from the U.S. Department of Agriculture, it will cost the average American family $245,340 to raise a child from birth to age 18, not counting the cost of college.

So let’s take a look at what the cost of raising kids has been in the Hinson household:

Healthcare

From the moment your children are born you will be paying for their medical expenses.  For the birth alone, we ended up paying about $1,200 for each kid.  Remember, it’s not just the healthcare costs for my wife but it also includes co-pays and tests for your new addition as soon as they enter the world.

My wife and I both have excellent insurance and currently we have both of our kids on her plan.  Her company’s premiums are 100% paid for an employee, but jump to $246 per month to cover both kids.

Let’s not forget all of the doctor’s visits outside of their scheduled checkups.  We meet our $100 deductible for each child every year, pay a $30 co-pay for doctor’s visits and any emergency care. So far we’ve been to the emergency room on two different occassions, each visit costing $300 just to be admitted.  I have no doubt that with our two little monsters they’ll be on a first name basis with the E.R. doctor in no time.

By my calculation, I estimate about $64,476 in healthcare costs (barring braces or other medical conditions…).

Childcare

One of the biggest financial shocks for me becoming a dad was the cost of childcare.  My wife works part-time, 20 hrs a week.  I was able to work out a 4-10 schedule which allows me to be home on Fridays.  The savings of me being home on one day each week is 20% of our childcare cost.

Currently we have a nanny that watches the boys for 4 hours every day Monday through Thursday.  We pay her $12/hour and she does a fantastic job.

Our four year old also attends preschool which amounts to $250/month for two years of preschool (9 months out of the year).  Luckily, he’ll be in all day kindergarten next year just as our youngest will enroll in preschool.  The good thing is that with our work schedules, childcare costs should essentially end in two more years when our youngest enters Kindergarten.

My estimate for childcare costs: $78,888

Housing/Transportation

Before having kids, my wife and I lived in a modest apartment and we each drove two fully paid for sedans.  We lived foot loose and fancy free as I like to say.  But as soon as we decided to start a family, we determined that we needed to purchase a house.

The cost of owning a home (and the size that we needed for a family of four) can be broken down to about $834/month per $100,000 of home value.  Take a look at the Renting vs. Buying article on Can I Retire Yet.  It’s a great breakdown on the true cost of home ownership.

Now, we likely would have purchased a home whether we had kids or not.  But, we’d be living in a much more modest house. By my calculations, we would have saved about $667.20 per month in home ownership costs if we had purchased a home more in line with a household for two.

In addition, more little bodies in your home equals more bodies to get around town.  I would’ve been happy driving our Mazda 3 and Honda Accord into the ground.  However, we upgraded to an Acura MDX and traded in the Mazda to make room for our two favorite little guys.

My estimate for housing/transportation: $169,115.20

Food/Clothing/Miscellaneous

When my first son was born I had no clue how many “baby things” were needed.  You learn that bumbos, bouncers, bjorns, swaddles, widgets and wonkies are soooo necessary! Factoring in car seats, strollers, breast pumps, baby food and clothing…. $$$$$$

Not to mention these boys grow like weeds.  Every month I feel like they outgrow their wardrobe.  Lucky for us we have two boys so our youngest gets the hand me downs.  I’m pretty sure my 2 year old doesn’t know what a new shirt even feels like.

Our grocery bill has doubled since having two boys.  From trying to add healthier foods to their diet and the sheer volume of what they consume (and they’re not even teenagers yet!).  Now anytime we go out to eat, it’s no longer a bill for two but a bill for four meals… eating out has now become much more of a luxury.

Finally, it’s difficult to even quantify the miscellaneous.  From camping trips, kid camps and excursions, classes, birthdays and even $119/month karate lessons (I am seriously considering becoming a ninja just to teach my son karate myself… for free!), etc. The miscellaneous costs will be all over the board for the next 16 or so years.

My estimate for food/clothing/miscellaneous: $92,000

Opportunity Cost

Let’s not forget that there is a serious opportunity cost of raising kids. In fact, for my wife to move to part time we had to let go of a significant balance of restricted stock units that hadn’t vested yet.  Also, her salary has been cut in half.  At this point, we plan to continue her part time schedule for the foreseeable future.

I’ve also been approached for several job offers over the years.  Two of which would have been a large step up in pay. However, my current job is extremely fulfilling and definitely supports a work-life balance.  I rarely miss important milestones and I have the flexibility to attend karate class, preschool observation days, and spending real quality time with my two little buddies.

None of this analysis takes into account the time value of money of investments that we would have made with the costs savings and increased income of not having kids.

My estimate for opportunity cost: $740,000! And this is a very conservative estimate! This only includes my wife’s 50% pay cut for about 12 years and the stock that we had to give up…nothing else!

The Conclusion

By my rough (and conservative) estimate, raising our two boys will cost about $1,144,479.20! This far exceeds the U.S. Department of Agriculture report.

Without a doubt, parenting is costly.  But as far as I’m concerned, I would pay a $1 billion dollars to raise these two boys.  The ROI on an investment in having kids has been incredible.  And the returns will compound forever…

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Photo cred: Harald Groven

6 comments
Laura Beth @ How To Get Rich Slowly
Laura Beth @ How To Get Rich Slowly

Completely agree! The ROI on raising kids makes it a worthwhile investment. But as you point out, it's a long term investment :) I'm still investing in my grown kids, but no complaints here. Interesting read. Thanks for sharing your insight!!

DC @ Young Adult Money
DC @ Young Adult Money

I almost fell out of my chair after seeing that final cost number!  I don't have kids and these posts aren't really motivating me to have them anytime soon haha.  I'm sure one day I can relate to the "priceless" feeling of having children, but for now all I see is $$$$$$$.

Financial Tour Guide
Financial Tour Guide moderator

@DC @ Young Adult Money It is definitely expensive to raise kids.  The most interesting thing that I found was the opportunity cost.  People forget that one of the most expensive aspects of raising children is the income that you forego.