A recent Department of Agriculture study found that families earning $70,200 or more will spend a staggering $269,520 to raise a child through age 17.
This figure is a composite average, so it could cost some families much more. And this doesn’t account for college costs, which could easily add $50,000 for a four-year college education, say College Board statistics.
Since 1960, the U.S. Department of Agriculture has issued annual reports estimating the cost of raising a child from birth to age 18, with variations for two-parent and one-parent families; low, middle, and high income levels; different regions of the country; and urban vs. rural areas.
Child-raising costs in the urban West are higher than the rest of the country primarily because housing is more expensive. Thus, the average cost in the United States for a middle income family to raise a child born in 1996 to age 18 totaled an estimated $149,820.
The estimates include direct spending for housing, food, transportation, clothing, health care, child care and education, and miscellaneous expenses. They do not include costs related to pregnancy and childbirth or the indirect cost of lost earnings and career opportunities when one or both parents take time away from work to care for their children.
Tackling college costs
If a college fund was established with $5,000 when a child was 8 years old — and another $400 was added each month — the account would reach $84,277 by the time the student reached college age, assuming a hypothetical 8 percent average annual return. This hypothetical example is used for illustrative purposes only and does not represent any specific investment.
Although this is a good start, it may not fund college completely. In an October 2004 InvestmentNews survey, 93 percent of parents said they could have done more to save for their children’s education.
Even though most of them placed funding education as a top priority, many of their plans fell short.
The cost of raising a child and paying for college will not decline anytime soon. Putting a plan together now will give you a head start and help you pursue your college savings target.