Tags: american | child | rearing | costs | middle | class | 241

Child Born in 2012 Seen by U.S. Costing $241,080 to Raise

Thursday, 15 Aug 2013 07:09 AM

 

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A middle-income family will spend $241,080 on average to raise a child born last year to the age of 18, a 2.6 percent increase from a year ago that outpaces the broader inflation rate, according to a government report.

Housing was the largest expense at 30 percent of spending, the U.S. Department of Agriculture said today in an annual report that also showed wealthier families spent triple the amount on entertainment and reading materials as poorer households. Child care was the second-biggest expense in more affluent homes, ahead of food, while health costs pinched all household budgets.

“The cost of raising a child increases as family income goes up because families have more resources,” Kevin Concannon, the USDA’s undersecretary for food, nutrition and consumer services, said on a conference call with reporters. “Conversely, the stresses and the challenges get worse as families have less access to resources.”

Child-raising costs are climbing just as elements of the federal health-care overhaul take effect, aiming to limit price gains, and as a rebound in U.S. home prices adds expenses for families. U.S. inflation in the year through June was 1.8 percent, according to the government. The USDA report excluded payments for college.

Income Differences

The study, conducted since 1960, tracks seven categories of spending, such as housing, transportation and clothing, and is used to help courts and government agencies estimate child- support costs, the USDA said.

For a typical two-parent middle-income family, spending on each child was $12,600 to $14,700 in 2012. A family earning less than $60,640 a year will probably spend $173,490 in 2012 dollars, while parents earning more than $105,000 may pay $399,780, according to the study.

Adjusted for anticipated inflation, raising a child in a middle-class family would cost $301,970, the department said. The USDA report includes an online calculator to help figure out costs.

Expenses were highest for children raised in the urban Northeast, followed by cities in the West and Midwest, the USDA said. The urban South and rural areas were the least expensive. While housing accounts for the biggest portion of expenses, across income groups, the next-highest expenses vary depending on household wealth.

Child Care

Higher- and middle-income households spend the second-most on child-care and education, followed by food, while nutrition was a bigger share of expenses for poorer households, with more lower-income families caring for their children at home, the study said. Transportation was the third-biggest expense across all income categories.

Housing has covered almost a third of costs to raise a child since the first study. The real-estate market collapse beginning in 2007 helped constrain cost increases, easing budget strains for some families, said Mark Lino, the USDA researcher who wrote the report. A rebound, while healthy for the broader economy, may actually make home affordability more difficult for some families, he said.

“Health-care and child-care costs have been stresses to families over the past few years” more than housing has, Lino said in an interview. And while depressed property values eased some strains, “falling home prices created their own sets of problems,” he said.

Video Games

Low-income households have less to spend on personal-care items, entertainment such as video games or sports equipment, and reading materials, as basic necessities take a greater proportion of incomes. Since 1995, the lower third of households increased such miscellaneous spending by less than 1 percent, a decline in real expenditures when inflation is considered, Lino said. Spending on such items in wealthier homes rose 37 percent.

“It’s a zero-sum game, and the bottom third has had to shift money to cover necessities,” he said. “The upper-income families have more flexibility.”

In the 1960 report, housing accounted for 31 percent of the cost to raise a child, then estimated at $25,230 -- the equivalent of $195,690 in 2012 dollars. Food was the second- biggest expense, at 24 percent, with transportation at 16 percent, compared with 14 percent in 2012.

Health care represented 4 percent of the cost in 1960, half the 2012 level. Education and child care accounted for 2 percent of costs, with most children being cared for at home. Two-income families have raised the portion of income spent on day care and other forms of child care, while advances in agriculture have lowered food expenses, the USDA said.

The U.S. median household income in 1960, according to reports at the time, was $5,600 -- or $44,176 in today’s dollars. U.S. actual household income in 2011, the most recent year reported, was $50,054.


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