- Raising kids in America today will cost parents an average of $230,000, according to Merrill Lynch’s “The Financial Journey of Modern Parenting: Joy, Complexity, and Sacrifice” report.
- These costs begin with childcare and only increase as children age – and it doesn’t include the six-figure cost of a college education.
- Nearly 70% of surveyed parents said they feel pressure to buy their children things their peers have.
Raising kids is a six-figure undertaking.
To raise a child to age 18 in America, it’ll cost parents an average of $230,000, according to Merrill Lynch’s “The Financial Journey of Modern Parenting: Joy, Complexity, and Sacrifice” report, which surveyed more than 2,500 American parents.
This high cost has caused more parents to weigh finances into their decision to have a child; in 1970, around 33% of parents said their finances played a role in becoming a parent – today it’s 73%, according to the report.
In fact, a survey by The New York Times published earlier this year revealed that raising kids is more expensive than it’s ever been before – finances are a main reason why people aren’t having kids or are having fewer kids than they considered ideal, reported Business Insider’s Shana Lebowitz.
Even with such careful financial consideration, raising kids is so expensive that 90% of parents surveyed by Merrill Lynch were surprised by how much more money they spent after becoming a parent.
Parents spend more money on their kids as they age, often because they feel pressured
Childcare is a large drain on finances - the expense is one of the main reasons why respondents in the New York Times survey have fewer children.
Adjusting for inflation, the average weekly childcare cost increased from just $84 in 1985 to $143 in 2011, according to the US Census Bureau, Business Insider previously reported. And childcare and pre-college education now comprise 18% of the total cost of raising a kid, compared to 2% in 1960, wrote Lebowitz, citing the Washington Post.
This isn't counting any financial preparation if your child is planning to go to college.
"For college-bound children, it's wise to plan five years of college, which currently could amount to $127,000 for in-state public school or $255,000 for a private school for parents planning to pay in full for tuition and living expenses," states the Merrill Lynch report.
Ultimately, having kids can cause family spending patterns and investment patterns to shift, according to the report. "Grocery and health expenses rise, money goes to children's toys, and childcare can suddenly be a major expenditure. Spending drops in categories around the parents' entertainment, including dining out, automobile expenses and vacations."
These costs only grow as children age, especially when it comes to food, clothing, technology, entertainment, school, transportation, sports, and other activities, according to the report. While that's to be expected, these costs are even higher than they should be because parents feel pressure to give their children with what their peers have - at least, according to 69% of those surveyed.
Many of these expenses can be deemed as "necessities," but parents also spend beyond required living staples - a little more than half of parents surveyed give their children aged 7 to 17 allowances. Children under 14 receive a median amount of $40 a month and children aged 14 to 17 receive a median of $65 a month. The allowance is often earned, whether through chores, good school performance, or behaving in line with family rules.
However, it can be argued that allowance is a necessary expense, as it helps more children entering school-age years begin to learn about and gain experience with money. Many surveyed parents said an allowance serves as a starting point in their children's financial education, which gave way to financial planning basics, such as saving, budgeting, and goal setting.
Despite the high cost of raising kids, 94% of parents surveyed said parenting is worth every penny.