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The High Cost of Having Kids

Children are expensive! On a scale that runs from OMG! up to You Can’t be Serious, just how expensive depends on where you live and a handful of other factors. Of course on the off chance that one of my children are reading this, let me assure you that you were all worth it – every penny was well spent…. but it was a lot of pennies!

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Lifestyle and career choices as well as necessity all contribute to the bottom line cost of child rearing. Child care costs outpaced inflation in 2012 by almost double, 1.7% to almost 3%. That means if your salary increases are tied to cost of living you had an effective drop in net income if you have children.

Location, Location, Location

Children are like real estate. The biggest factor in determining cost is location. The cost of infant day care varies widely across the country and a dollar for dollar comparison is not representative. However a percentage of a couple’s income can be an accurate gauge.

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The northeast and west coast including Arizona and Nevada (and several others) pay more than 12% of their income for infant day care compared to New Jersey, the deep south and the Dakotas that pay less than 10% of their income in infant day care.

Rent, regulation, utilities and day care salaries are higher in places like New York than they are in Mobile or Little Rock. This contributes to the disparity. A family in New York City can expect to pay more than $17,000 per year for infant day care. That is close to the cost of a full year of tuition including room and board at a state university.

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All Things are Not Equal

Parents will tell you that the cost of everything has gone up including child care, so it all balances out, right? Wrong. The cost of child rearing has gone up more than the cost of other things in the last 50 years as measured as a percentage of income. In 1960 31% of household income went to housing. In 2011 30% went to housing which is flat, no change in expense versus income.

Health care costs doubled from 4% in 1960 to 8% in 2011 and food expense went down from 24% to 16%. For that same period the cost of child care and education went from only 2% up to a whopping 18% of household income. This means that children are the most expensive part of any household budget. And the numbers are increasing.

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What Does it All Mean?

It all means more than ever the decision to start a family should be a deliberate one. Kids are expensive and, to be completely honest, they don’t provide much of a return on investment in terms of cash flow. There are of course other measures than finances for return on investment. Kids are cute when they are young and challenge in their teenage years, but in the end they are worth the expense in terms of love and added value to your life.

Related Article: Ways to Save More When You’re Having a Baby

Photo Credit: HTloveHL

Frank Addessi Born and raised in the center of the known universe, Brooklyn NY, and currently hiding out in the bucolic hills of northeast Pennsylvania writing about personal finance. His expertise includes personal loans, credit cards and retirement. It's not easy living the American Dream but someone has to do it!
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