Financial Planning for Parenthood: Are You Ready?

in Financial Planning by

  • USDA stats estimate the total cost for raising a child up until the age of 18 to be $245,340 – and even more if you include inflation.
  • When planning for a family, make sure to consider unexpected costs of raising kids.
  • Anticipate housing, child care, and education as the biggest costs for your future kid.

Part Of Our Series On Tackling Your Scary Personal Finances

There’s a lot to consider when you’re thinking about having a child. The sleepless nights alone are enough to, well, keep you up at night. And then there are the costs associated with raising little Johnny or Susie.

Most couples planning for children are concerned with the immediate expenses of daycare, diapers, and all the baby equipment a new little one requires. But the costs of raising a child go well beyond the baby years, and the total number can be significant – scary to say the least.

According to recent USDA statistics, the average middle class family who had a child in 2013 can count on spending over $245,340 to raise that child through the age of 18. And that number doesn’t even include the costs of pregnancy and delivery, or the cost of college.

A figure like that can scare a prospective parent more than the latest horror film. Add inflation, and you can bump the price up to $304,480. It’s crazy to imagine that when these statistics first came out in 1960, the cost of raising a child was just $25,230!

So, how can financially savvy soon-to-be parents start preparing for their bundle of joy? Let’s start by breaking down the expected expenses. According to the USDA, your biggest costs will be housing, childcare, education, and food:


#1 Expense: Housing

By far, the biggest child-related cost is housing, making up almost 1/3 of total expenses to raise a kid. Most of that comes from the additional bedroom having a child will require.

#2 Expense: Childcare & Education

Childcare and education make up the next heftiest expense, totaling 18% of the costs of a child.

#3 Expense: Food

And the cost of food rounds out the top three, coming in at 16% of total cost. As you might expect, costs vary according to location. Housing costs are the highest in the western part of the U.S., and the lowest in the southern states. Overall, however, child rearing costs the most in the Northeast.

But how does that average number apply to you, the potential parent? Try these tips for financially planning ahead:

Plan Housing For A Growing Family

Consider your housing situation now and how it might need to change with a growing family. You may have enough room for a baby, but how about a school-aged child, or a teenager or two? Speaking of school, do you live in a good school district, or will you need to move or pay for private school when the time comes? The answers to these questions will help you prepare for your biggest child-rearing cost.

Consider Childcare & Education Costs

Most parents are faced with one of two possibilities when it comes to caring for a child – the cost of daycare, versus lost income if one parent stays at home. Then there are the costs of preschool, and potentially private school down the road. With education and childcare being the second most expensive part of raising a child, it’s important to hash out a clear plan for these factors.

Factor In Food Expenses

Findings show that the cost of having a child increases as the child ages. The cost of food is one of the big reasons why, since it obviously costs more to feed an older child than a baby. That makes decisions like whether you’ll formula feed your child from the get go important – the average cost for formula in a year is over $2000/year.

Know Your Health Care Coverage

To figure out how a new family member will affect your health care costs, you need to understand how your health coverage works. What health care plan would you add a baby to, and will that increase the costs of your coverage? Additionally, make sure you know what kind of out-of-pocket costs you’ll have with deductibles, co-pays, and co-insurance when your child needs to visit a doctor or hospital.

Track Transportation Expenses

Parents usually see the biggest hit in transportation costs when they need to buy bigger vehicles to transport their growing families. But families in urban areas may feel the pinch too, with an increase in the cost of public transportation to get children to school and other destinations. So if you’re in the market for a new car, plan ahead for the next child or two.

Keep Clothing Costs In Check

Children’s clothes may cost less when they’re smaller, but they’ll outgrow them fast enough to take a chunk out of your budget. And once your child enters school, clothing requirements may involve buying uniforms too. If you’re trying to save on the constant cost of clothes, keep an eye out for seasonal sales, or try swapping with friends or between siblings to cut back spending when your kids are still growing.

Planning For Your Family

Feeling overwhelmed? You won’t be the first parent to feel the financial pain of raising a child!

The good news is that each successive child costs less due to economies of scale. And, the price of clothes, food, and even housing doesn’t increase as much with an additional child as they do with the first. So if you’re trying to keep your family on track financially, try Personal Capital’s free tools to manage your spending, and remember an Advisor is only a phone call away for a free family financial planning consultation.

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Julie Mayfield

Julie Mayfield is a freelance writer and blogger specializing in personal finance and lifestyle topics. She is the creator of two blogs: The Family CEO and Creating This Life. She has written for the U.S. News & World Report website, is a contributor to The U.S. News Guide to Paying for College, and has appeared in Woman’s Day magazine and on NBC’s TODAY show.


  1. mustachianordie

    Raising a child can be less expensive than you think. Be creative with what is considered essential. Also well before having a child, look at your own financial values. Are they optimized to enable you and your partner to achieve greater freedom? Sometimes you need to take societal norms and flip them on the head. Question what your peers are doing? Do you really want to do 9 to 5 until 75? Imagine the life you really want and then imagine, is the path you currently are on going to get you to that destination? If not, might it be time to think differently?

    I encourage you to read these thought-provoking articles:

    1) Avoid Ivy League Syndrome:

    2) The Real Cost of Raising Children

    3) Is the American Dream a Nightmare

    4) Are you giving your future self the shaft?

    5) It’s not about extreme frugality!

    Read more and consider looking what else can be done to improve your finances. Stay positive and be mustachian! Cheers!

  2. Reality


    This is a very disappointing article. You did not question the USDA statistics at all. There are millions upon millions of people who spend nowhere near this much on child rearing – why are we accepting this numbers as solid enough for projections? They aren’t.

    A couple reasons:
    – Housing. An extra bedroom? Ok, check. That’s fair. I’m not convinced that this increases by as much as the USDA numbers claim. People routinely buy more house than they need, kid(s) or not.
    – Childcare/Education. Yep, this will go up, too. But it shouldn’t be huge as public school is pretty close to free beyond the taxes you already pay. As for childcare, the loss of income/daycare decision is certainly a calculation that needs to be made
    – Food. Simple budgeting can help this. Kids eat more as they age, but batch cooking healthy meals shouldn’t increase your budget by as much as these numbers claim.
    – Healthcare. This is an unknown due to the uncertain healthcare landscape.
    – Transportation. No no no no. People do not need behemoths to tote 1-2 kids to soccer practice. The sedan they already own is good enough. Also, public transit is often free for children going to school.


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