Here’s What It Costs to Raise a Child and How You Might Cover It

Kids are costly, but the family budget doesn’t have to tank to pay for them if you prepare properly.

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Do you happen to have an extra $14,000-plus that you can squeeze into your annual budget to cover the expenses involved in raising a child? If not, you may want to start planning now—well before the baby is on the way—because that’s what the U.S. Department of Agriculture estimates for the costs of child-rearing infants born in 2015.

That’s according to “The Cost of Raising a Child,” the USDA’s annual report of what middle-income, married-couple families can expect. The costs will vary, of course, depending on the family income level, the ages and number of children, and where you live.

“There are significant economies of scale with regards to children, sometimes referred to as the cheaper-by-the-dozen effect,” said Mark Lino, an economist and the author of the report. “As families increase in size, children may share a bedroom, clothing and toys can be reused, and food can be purchased in larger, more economical packages.”

Those heavy costs include everything from the price of food, housing, transportation, health care, and miscellaneous goods and services, plus what the government calls “child-specific expenditures” for clothing, childcare, and education.

But get this: The estimated $233,610 tab covers birth through age 17 and doesn’t include the costs of a college education. That’s when the real spending party begins.

A Financial Punch List

What to do to keep your family financially solvent and still saving during these crucial child-rearing years and beyond? Here’s a quick checklist of things to keep in mind and in the bank:

Put a plan in place: Planning seems like a natural thing to do in the course of charting your financial life, but a baby—or two, or three—tends to rule the financial roost during those developing years. Analyze both your fixed and flexible monthly outlays to determine where you can make significant shifts to accommodate Junior and siblings. You may want to have both pre-baby and post-baby budgets—one to cover clothing, furniture, and equipment, and the other to cover the ongoing costs like diapers, food, childcare, and the like.

Make sure you’re insured: Even if you have good health insurance through an employer, medical costs in the maternity ward can be pricey. If you and your spouse are covered by separate health insurance plans, be sure you understand how they will suit your baby best in terms of doctors, pediatrician visits, vaccines, medications, and hospitalization. Also, you might need to start thinking about life insurance. If you’re the family breadwinner and something happens to you, what happens to your family?

Look for help: Start with employer benefits that might help ease the burden, such as maternity/paternity leave benefits, adoption reimbursement, workplace savings accounts, or health savings accounts. Look elsewhere, too, for college savings accounts and childcare subsidies that might be available. Meanwhile, keep on the lookout for other accounts, programs, or subsidies you might be able to tap once preschool and academic and athletic activities kick in.

Don’t forget your long-term goals: Retirement savings shouldn’t go away because there’s a new face in the house. You’ll still need to keep those savings in place, even though touching them may be decades away. Stay on track and look to tax-advantaged plans to help you get through it. Even if you have to lower your monthly savings goals for a short period, remember the power of compound savings and keep yourself on that savings path for your golden years. TD Ameritrade has a number of accounts and tools that can help you stay financially focused during these years.

Write that will: When you’re young with few assets, a will isn’t always the first thing on your mind. But when you begin accumulating assets and have a family to consider, the will should rise on the priority list. What if something happens to both parents? Who will raise the child? Is your child the beneficiary of your assets? 

Save for baby’s college: According to the latest figures from the College Board, the average annual cost of attendance for an out-of-state public university is about $35,000, and private schools average about $10,000 more per year. Even in-state public school costs have risen dramatically—College Board says average annual tuition, fees, and room and board costs rose above $20,000 for the 2016–17 school year. Multiply that by four or even five. Don’t get caught unawares when high school graduation seems to suddenly come up.  

No one ever said children were a prudent financial investment, but the other tangibles and intangibles tend to far outweigh the monetary outlay. Still, a bit of planning may help soften the blow.   

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