Business of Home: Manage Parenting Costs

The numbers are startling: on average it costs more to raise a child than buy a home, and that doesn’t include a college education.

Latest figures released by the United States Department of Agriculture (.pdf) have the average family paying $222,360.00 for one child.  Totals for 2010 are expected in another week and they are projected to go even higher.

"That’s a big number that a lot of people aren’t anticipating," said Sarah Tims, a financial planner with RMB Capital Management.

Tims recently had her third child and said the large house, the car, the higher health insurance premiums and child care aren't things that most parents think about when they're looking at linens for the crib.

She has five suggestions for taming and preparing for the bundle of bills that come with the new bundle of joy:

  • Compute your maternity leave pay. If it’s reduced, live on that lower income while you're pregnant and save the rest for a baby nest egg.
  • Save for health care costs. Expect higher insurance premiums for a family plan, which can be $200 to $300 more per month depending on your provider.  Co-pays can be $15 be $30 per visit.
  • Get Life and Disability Insurance. Disability might cost more but chances are greater that you will need it.  The goal is to insure your income if something happens.
  • Investigate the Dependent Care Tax Credit. The IRS allows up to 35 percent of expenses, or $3,000 per child, depending on your income.  Higher earners may save more with a Flexible Spending Account if offered at work.
  • Roth IRA’s for triple duty savings. You can use the money in emergencies, for college costs without penalty, or save it for retirement. As long as your income is below $169,000/year, It can be a good option.

Costs are highest in the northeast and west, followed by the Midwest.  Raising a child in rural areas and the south tend to have the lowest costs for raising children.

The USDA has a Cost of Raising a Child Calculator on it's website at

$mart Money: Navigating the Road to Financial Freedom
Contact Us