The mind-blowing cost of raising a family

What do diapers, braces, and weekly piano lessons have in common? They all serve as reminders of the surprisingly high cost of starting a family and raising kids — a cost that, in general, is only rising as the years go by.

This increase can be partially explained by shifts in our culture. For example, while today it’s common for middle-class parents to shower their children with birthday gifts, it wasn’t until the early 20th century that Western countries started conceiving of childhood as a formative period in a person’s life. Where kids growing up in the Gilded Age were treated as mini-adults and sent to work in factories, their modern-day counterparts are kept at home and surrounded by expensive toys. In a relatively short time, children went from earning money to costing money. 

Other family-related expenses — such as buying a home or paying for college — are mostly determined by economic forces, which can be difficult to wrap your head around, even for people with an academic background in that field. The underlying causes aside, let’s break down the cost of starting a family in the 21st century and offer some tips on how parents can invest in their own future, as well as that of their children.

The family in numbers

The cost of raising kids differs from family to family and is dependent on a number of factors. One is your place of residence. Housing prices vary from state to state. The same goes for living wage: the minimum income necessary to afford a “normal” or “decent” standard of living. 

According to the U.S. Census Bureau, the median household income from 2017 to 2021 was about $55,000 in Alabama. Compare that to about $84,000 in California during the same period. When looking for a place to settle, it is important to remember that income is proportional to cost of living: On average, Californians may earn more money than residents of Alabama, but they also have to pay much more for housing. 

Just as important as where you live is when you live, or, more precisely, when you decide to start having children. There’s no doubt that raising a child was considerably more affordable in the ‘80s and ‘90s than it is today. That said, even a few short years can make a large difference in your expenditures. In a study published in late 2022, the Brookings Institution found that the cost of raising a child born in 2015 for a middle-class family with two kids amounted to a total of $310,605. A previous study from 2017, released years before the pandemic, reported a cost of only $284,594. That’s around $30,000 in under 5 years.

This brings us back to the initial question: Why does the cost of starting a family continue to increase as time goes on? The first and most obvious culprit is inflation. Sticking with the same study, Brookings attributes a whopping $26,011 increase in child-rearing expenditures between 2017 and 2022 to inflation alone. But while inflation certainly contributes to rising costs in all aspects of our daily lives, in reality things are a bit more complex than that. By breaking down the total cost of raising a family into separate components — like housing and education — we can find out what’s changed. 

Raising kids: a breakdown

Unsurprisingly, housing is by far the biggest of all family-related expenses. The Bureau of Labor Statistics estimates that the median American family spends 28.7% of their annual income on their place of residence. Of course, housing costs can vary considerably depending on family size, the type of home, the location of the home, and whether you are buying or renting. Homes in small towns are cheaper than homes at the center of large cities, though the latter increase more rapidly in value. Similarly, families that rent their home often don’t need to pay for maintenance out of pocket. At the same time, they don’t build up any equity through monthly payments made to their landlord. 

Even when adjusted for inflation, homes are more expensive now than they have ever been before. This is because many countries are currently caught in the middle of an unending housing crisis. A 2022 report from the nonprofit Up for Growth noted that the U.S. is roughly 3.8 million homes short of meeting housing needs, driving up the demand — and, by extension, the price — for the small number of available homes. 

Next to housing costs are food costs, which again can vary depending on things like family size, income, location, and also diet. Families with kids who suffer from conditions like Celiac disease can expect to pay up to 159% more on groceries than other families, according to one 2018 study published in Nutrients. 

Data for food costs in America comes to us from the U.S. Department of Agriculture, which publishes yearly estimates for three types of food plans adjusted for age and sex: low-cost, moderate, and liberal. As with living wage statistics, the USDA wants to know the minimum amount of money that families have to spend to obtain a nutritious diet. In August 2022, the monthly cost of feeding children aged between 9 and 11 years old was $250.90, $324.60, and $377.60 for low-cost, moderate, and liberal plans, respectively. By contrast, the monthly cost of feeding a man between 19 and 50 years old was $292.60, $367.10, and $447.00, respectively.

In a footnote on the report, the USDA reminds readers that the numbers presented above are for individuals living in four-person households. In one-person households, grocery costs increase by 20%; in 2-person households, by 10%. In five- or six-person households, however, the total cost decreases by 5%, followed by 10% for seven-person households. In other words, the cost of feeding each individual child decreases the more children you have. More on that in a moment, though. 

Another important cost is childcare, which, according to the Department of Health and Human Services, should take up no more than 7% of a family’s total income. This, however, is rarely the case. Research from the Economic Policy Institute shows that families in Alabama spend up to 11.9% of their income on childcare, while families in California spend an astounding 24.9%. And childcare refers only to infants and young children. Later in life, parents also have to put aside money for primary and secondary school, not to mention college. The latter is particularly taxing — Brookings mentions that families who pay full tuition can expect their family-related expenses to double. 

Advice for parents

While raising kids is undoubtedly expensive, don’t let the numbers dissuade you. For all unexpected costs, raising a family can at times be cheaper than you’d think. As indicated by the USDA, the total cost of raising kids decreases with each subsequent child. This is due to what we call economies of scale: Older siblings can pass clothes, toys, and other possessions to younger ones, saving their parents from having to make additional purchases. Meanwhile, many primary and secondary schools offer discounts for families with multiple kids. 

The same, unfortunately, does not apply to higher education, which can (and regularly does) send both kids and parents into lifelong debt. To avoid this nightmare scenario, it’s important to start saving early. And if you do decide to save, don’t just put your money in a savings account; put it in a 529 plan: an investment account with special tax benefits for school-related expenses. While you’re at it, don’t forget to take advantage of the IRS’s Child Tax Credit, which allows parents to deduct up to $3,600 per offspring.

It’s no secret that people from first-world countries are having fewer kids than they used to. A handful of research organizations, including Macrotrends, believe this drop in reproduction can be linked directly to the mounting cost of raising children, which is leaving many young people hesitant to start a family. Again, though, if you want to become a parent, don’t let the numbers intimidate you. 

While kids will impact your personal finances, they do not necessarily have to break your bank account. With proper planning and knowledge, you can focus on the emotionally rewarding side of parenting, not the monetarily taxing side.