The Cost of Raising a Child is--Yikes!

June 1998
Journal of Financial Planning;Jun98, Vol. 11 Issue 3, p15
Academic Journal
This section focuses on a cover article on the cost of raising one child published in the March 30, 1998 issue of U.S. News & World Report. It concluded that a child born today to a middle-income family and raised for 22 years will cost that family $1.45 million. For higher-income families, the figure runs $2.78 million, and for lower-income families it drops to $761,871. Now obviously these numbers are well above those estimates published every year by the U.S. Department of Agriculture (USDA). The estimate of the USDA for a middle-income child born in 197, for example, was a mere $301,183. This covers food, housing, transportation, health care, child care and so on. Why such a dramatic difference? The key lies with two major assumptions the magazine made. First, the magazine ran the numbers through the college years of the child, a significant expense for many families that the USDA, which stops at the age of 17, leaves out. Second, the magazine took into account what it called forgone wages. It reasoned that families with kids do not make as much money as a couple without children, since presumably at least one of the parents either is out of the workforce entirely or, more commonly, does not advance as far because of child care demands. This leaves an opportunity cost that the magazine computes and which makes up the huge part of the expense of raising a child.


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