Have You Prepared for Your $261,270 Kid?

The decision to have a child is seldoma financial one. Still, understandingthe financial realities ofraising a child can be useful.

Expenditures on

Children by Families 2003 Annual Report

According to the US Department ofAgriculture's (USDA) ,the average cost for an upper income couple(ie, with an average annual pretaxincome of $102,400) to raise a child frombirth to age 18 is $261,270. This figureincludes adjustments for inflation andchanges in family size, but it does not factorin the impact of one spouse takingtime from work to attend to the children.

Calculations for child rearing shouldinclude child care, food, shelter, transportation,clothing, health care, and miscellaneousexpenses. College costs are notincluded in the figure, and the actualtotals vary by income level and lifestyle.

• Child care—Child care is often atthe crux of whether it makes sense forboth spouses to work. With two high-paidprofessionals in the family, child care maybe relatively inexpensive. But when thesecond spouse is not highly paid, the costof child care can reduce the net value ofthe second income to the point where itmay not be worth it. According to theUSDA, upper class parents of a childyounger than age 5 spend an average of$2500 per year on child care, with an 18-year total of $31,740. This does not includethe expense of a full-time nanny, whichcan average $500 per week.

• Food and shelter—The USDA estimatesthat it costs $1500 per year to feeda child younger than age 2. A child intheir teenage years will set parents backabout $2565 per year for food. On average,it costs $38,280 to feed a child untilage 18. Housing costs, although a functionof family size, don't necessarilyincrease with each child. The USDA estimatesthat an upper class family willspend an average of $97,590 to provide achild with shelter until age 18.

• Transportation—These expenses canadd up quickly. The USDA estimates thatthe average upper class family spends$33,690 over 18 years for one child.Parents with teenagers spend an averageof 50% more on transportation thanthose with younger children.

• Clothing—This expense comes tomind first when discussing raising children.Families spend an average of 20%more on clothing for girls than on clothingfor boys, according to the US Bureauof Labor Statistics. Generally, about$13,000 will keep a child adequatelyclothed until age 18, although parents oflate-teenage children would dispute thenotion that clothing costs end at age 18.

• Health care—Physicians can readilyassess this item with any data. This figurevaries depending on where you live andwork. According to the USDA, the averageout-of-pocket cost of keeping a childin good health until age 18 is $15,210.This assumes the child is covered by a reasonablygood insurance plan.

• Miscellaneous expenses—Thesecosts cover a wide range of items (eg,toys, entertainment, reading materials,personal care items, and pets). Accordingto the USDA, throughout an 18-year period,these items average $1775 per year,per child.