The Cost of Children

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We have long known that raising children is expensive. Today’s economic realities mean that families must make choices about how and where they spend their money, with a new report from the US Department of Agriculture outlining just how expensive it actually is. Based on their calculations, a two-child, middle income family in the US in 2015 can expect to spend approximately $12,980 (US) annually per child, or $233,610 for food, shelter, and other expenses to raise a child through age 17, a figure that does not include post-secondary education expenses. A similar study in Canada pegged the yearly cost at $13,366 (Cdn).  Of course, the investment in children also means that their money cannot be spent on consumer goods or leisure.

Two additional findings from the USDA report are noteworthy. First, there are broad regional variations in the cost of raising a child, with costs less in rural areas due to less expensive housing, and the greatest in the urban Northeast. Second, having a larger family size means that the cost per child actually decreases – a sort of economy of scale effect – with families able to share resources, such as passing clothing from one child to the next.

So what does this mean? Reflecting Easterlin’s ‘quality’ versus ‘quantity’ argument, parents and families have placed an emphasis on the quality of their children by investing in their success, rather than having a large number of children that must share the resources of the family. Consequently, fertility rates (which are already below replacement) may feel additional downward pressure.  Although the argument about quality and quantity is a rather dry, economic viewpoint of choice, the cost of children does have family planning implications, forcing some families to limit family size to one child, delay having children, or choosing to have no children at all. While the latter case includes other issues that influence their decision, an increasing number of couples are deciding to not have children. Small family size also brings with it  other societal concerns, with low fertility levels impacting longer-term social welfare, with fewer workers in the labor force supporting a larger number of old dependents.

Further Reading:

Brown M. The real cost of raising kids. MoneySense Magazine. 15 April 2015. Available at: http://www.moneysense.ca/save/financial-planning/the-real-cost-of-raising-a-child/

Lino M, Kuczynski K, Rodriguez N, Schap T. 2017. Expenditures on Children by Families, 2015. USDA, Miscellaneous Report No. 1528-2015. Available at: https://www.cnpp.usda.gov/sites/default/files/crc2015.pdf

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