When you have kids it’s impossible to retire early, right? I found out that may not be true in all cases. Like my own. We have three kids and still managed to retire early. But how is it possible when kids are soooooo expensive?
The US Department of Agriculture publishes the “Expenditures on Children By Families Annual Report” which examines the cost to raise children in America. The headline number that gets a lot of press is the total cost to raise a child from age 0 to 17: $233,610. And that doesn’t include the cost of college!
Almost a quarter of a million dollars seems really high to me, so I’m diving into our kid-spending to see what it actually costs to raise our three kids.
First up, let’s take a look at the spending breakdown as reported by the USDA.
Cost of raising a kid for the average family:
|Age 0-17 Total (per kid)||Per Year Average (per kid)|
The total cost of $233,610 from age 0 to 17 averages out to $12,978 per year to raise a kid. In the footnotes of the USDA’s study, they note that this level of spending is for an average family earning between $59,200 to $107,400 with two kids. Wealth is correlated to how much a family spends on kid expenses with lower income folks spending about $9,700 per year per kid and higher income folks spending about $20,700 per year per kid.
Per the USDA study, families with just one kid tend to spend about 27% more per kid than the average two kid household. However, families with three children spend 24% less per kid compared to the average two kid household. More kids leads to economies of scale (and being slightly more broke so you are forced to spend less).
Doing the math on our three kids at the average spend of $12,978 per year per kid, minus the 24% spending reduction for three kid households, we get: $12,978 x 3 x 0.76 = $29,590. That’s right – average people like us spend almost $30,000 per year raising three kids!
Where does all that money go? It’s primarily the big three – housing, food, and transportation. Let’s take a detailed look at the Root of Good spending in the categories used in the USDA study.
The USDA study says the average housing cost is $3,680 per kid per year. Our figure is much lower.
Some background: we bought an 1,800 square foot, 4 bedroom, 2.5 bathroom starter home before we even had kids. Lots of our neighbors are childless and own similar homes on our street.
The smallest homes in our neighborhood are 1,200 square feet with 3 bedrooms and 1.5 bathrooms. According to real estate sales data, our extra bedroom and larger living space adds a mere $18,000 to the price of our home.
We couldn’t have saved more than $18,000 even if we bought the smallest house in the neighborhood assuming we didn’t need the space for our kids. There’s always the argument that we could have moved to a cheaper neighborhood or could have rented a cheaper apartment, but that’s something we could always do even with kids! And we certainly didn’t pay a kid-related premium for a good school district since our neighborhood elementary school was among the worst schools in the entire district when we bought the house (that’s no longer true, fortunately).
Our additional 600 square feet of living space versus the smallest house in the neighborhood requires additional periodic maintenance, higher utility bills, and leads to higher taxes and insurance bills. All together, these extra costs add to approximately $1,500 per year.
To summarize: purchasing a house with an extra 600 square feet of space costs an additional $18,000 up front, plus $1,500 per year in ongoing costs (or $500 per kid per year). The mortgage payments on the extra $18,000 purchase price would be just under $400 per kid per year.
Our housing costs total $900 per kid per year (assuming we still had a mortgage).
Although after listening to my daughter run the hot water in the shower on full blast for ten minutes to “warm it up” (in spite of it already being hot from previous showers), I might have to revisit the allocation of utility expenses and award the kids a higher than average share of that line item. But, silver lining: at least they bathe semi-regularly, right?
Food expenditures total $2,300 per kid per the USDA, or roughly $200 per kid per month.
In contrast, we spend around $450 per month on groceries for our family of five plus about $50 per month on dining out a time or three. That works out to about $100 per person per month in the food category.
We are fortunate to live in a highly competitive grocery market with three discount grocery stores on the same street corner a mile and a half from our house. Aldi, Lidl, and Superwalmart all compete for our grocery dollars so we save quite a bit on groceries every month.
We cook at home for almost all meals, which is something we enjoy. And not just simple stuff. Delicious foods from all over the world are commonplace on our dinner table. Dishes such as pad thai, tacos, sushi, and spring rolls. We don’t spend a lot on convenience foods, but instead spend more on sauces, spices, and other seasonings to make basic ingredients really awesome. All that on a $100 per kid per month food budget.
However, it would be incredibly easy to go out to eat more often and nudge our total food spending up to the USDA average of $200 per kid per month.
The USDA study says the average kid costs $1,972 to transport during the year. We definitely don’t spend that much.
To add more context, we live between downtown and suburbia where there is some transit, the area is somewhat walkable and bikeable, but we couldn’t easily get by without a car (especially with kids).
When we both retired, we dropped from two cars to one since we no longer had to commute to work. We did get a larger size car, a used minivan purchased for $8,000. We expect it to last around ten years, so the added cost for the larger car, about $3,000, works out to roughly $300 per year.
Throw in the extra maintenance costs and taxes for a larger car and we might be up to $600 per year. Add $300 for gas each year for kid-related trips, and the total comes to $900 per year. Broken down per kid, we’re spending $300 per kid per year on routine transportation.
Our oldest kid is 13 years old, and we tentatively plan to buy a second car when she is old enough to drive at age 16. It will most likely be $5,000 or so. The main added expense will be auto insurance, which is approximately $2,000 for the year for an inexperienced driver in North Carolina. At that point, kid-related transportation costs will certainly climb!
With the new car comes new possibilities for our kids to earn money through part time jobs. Who knows, the car might even become a net moneymaker for our overall household finances!
I must note that early retirement led to a drastic reduction in our routine driving. We only put 300 miles on our car each month since we have the time and energy to walk our youngest the half mile to his elementary school. We also walk or bike to grocery stores, restaurants, the library, and the park.
The USDA says kids will spend $737 per year on clothing. That’s a little bit more than our total clothing expenditure for the whole family so it’s obviously not accurate on a per-kid basis in our household.
Let’s face it, clothes are cheap thanks to competitive pressures of globalization. We spend a few hundred dollars each summer on the new back to school clothes and shoes plus smaller amounts a couple of times per year as necessary.
Total clothing costs are under $200 per kid. That covers one or two pairs of name brand shoes (purchased at a discount of course!) plus five or six complete outfits. Throw in some thrift store shopping, hand me downs, and gifts from a favorite aunt who has no daughters of her own and you have a closet full of clothes for not a lot of money out of pocket.
Per the USDA, healthcare runs $1,207 per kid. That’s certainly doable if you don’t include employer provided health insurance or the cost of the full price for a private plan.
In our case, we get heavy subsidies through the Affordable Care Act (aka “Obamacare”). In fact, with the Affordable Care Act, insurance actually costs LESS as you have MORE kids.
As an example, a couple with no kids would pay $3,200 per year for health insurance at an adjusted gross income of $40,000 per year. The same couple with three kids would see their health insurance costs drop to $1,400 per year – a savings of $1,800 per year!
In addition, the Affordable Care Act provides low copays and deductibles for health insurance policies for that hypothetical family of four through “cost sharing subsidies”. We are fortunate to qualify for those cost sharing subsidies in the form of a $125 annual deductible and $5 to $20 copays for visits to the doctor.
I budget approximately $3,000 per year for health insurance and dental expenses. But as I pointed out, the kids actually save us money on health insurance which more than offsets any increased out of pocket expenses for their copays and deductibles. So we “make money” in the healthcare category by having kids. Net healthcare cost is zero.
I’ll also add that our kids are relatively healthy and don’t need much more than an annual physical, routine vaccinations, and a flu shot. I sympathize with those who have children needing significant ongoing medical treatment as that will drive up the costs to astronomical levels, especially if you have high deducibles and out of pocket maximums.
Child Care and Education
Since we are no longer working, we spend nothing on child care. If we aren’t traveling the globe as we do most summers, we’ll sometimes put the kids in summer camps. Rates range from free to $60 per week.
We choose to live near family and as a result we have built in free child care as often as we want it.
While working, we had an arrangement with Mrs. Root of Good’s mother to keep our kids. We paid her a decent amount although it was less than the cost of a traditional childcare arrangement.
Now that all of our kids are in school most of the year, if we did have to pay childcare costs they would be substantially lower than they were in the age zero to five range. Between after school care and city-run summer camps to keep them busy, we could spend $2,500 or less annually for childcare if we were working full time.
Education spending for us includes field trips (typically $30-60 per year), school supplies and the occasional new bookbag, calculator, or new computer. Education spending totals about $200 per kid per year.
As I mentioned, childcare spending is basically zero given our ambitiously busy international travel schedule during the summer (no time for paid camps).
I lump personal care items like toothbrushes, toothpaste, floss, and deodorant into the “groceries” category where we spend about $100 per month per person. Truly miscellaneous items probably amount to $200 per kid per year.
Entertainment options include computers, tablets and phones they received for Christmas or birthdays, and a family Netflix account. We tend to give the kids around $300 per year in cash between all the holidays and their birthday, and much of that gets spent on “entertainment” for them, so I’ll categorize cash gifts as “entertainment” expenses.
Reading materials are free – we have a public library!
Totaling the personal care items plus entertainment expenses nets us $500 per year per kid in miscellaneous expenses.
Total Kid Costs
Here’s the USDA’s “Cost of Kids” table with the Root of Good kid costs included.
|Age 0-17 Total per kid (USDA)||Per Year Average per kid (USDA)||Per Year Average, each Root of Good kid|
How did we do?
Root of Good kids cost $3,300 per kid per year versus the USDA’s report of $12,978 per year. Stellar! We’re “saving” almost $10,000 per kid per year versus the average!
And it gets even cheaper when you factor in tax savings due to children. As of 2018, the federal child tax credit is $2,000 per kid. On our state taxes, we can take a $100 to $125 tax credit per kid. The combined federal and state tax credits bring our annual kid costs down to a net of $1,200 per year.
Vacations – Or, Why Our Kids Actually Cost More Than $1,200 Per Year
Throughout the tallying of kid expenses I’ve omitted our $10,000 per year family vacation budget. It’s completely discretionary but something we choose to spend highly on. In fact, it’s a full 25% of our annual $40,000 per year budget.
If we split the $10,000 per year between the five of us, that adds $2,000 in spending per kid per year for vacations. That might actually overstate the cost of kids since hotel rooms often cost the same whether it’s for two or four people (and sometimes five people cost the same as two).
Airbnbs offer similar economies of scale. A week in June in Amsterdam, for example, averages $202 per night for a couple, whereas the cost for apartments that accommodate five is only $323 per night, or just 60% more.
Transport costs vary, but the trains in Germany, for example, allow kids to ride free when traveling with fare-paying adults. During our nine week European trip, we often traveled many hours across one or two countries for USD$50 for the whole family when kids rode free.
Whether we split the $10,000 per year vacation budget equally between the two adults and three kids or give the kids some smaller share, it seems fair to say they don’t add more than $2,000 per kid per year to the vacation budget.
It’s worth mentioning that our kid-related travel budget was very small while working for two main reasons:
- We worked full time with very limited vacation time. That means very few vacations
- Traveling with young kids is challenging. At least when we traveled with our young kids. As a result we didn’t travel a ton when the kids were younger (which describes basically our entire 10 year working careers).
In terms of changes in spending patterns as the kids get older, it seems like childcare spending drops once they enter school around age five, and at the same time, vacationing gets easier and more fun and therefore more expensive.
Kids – Not Exactly Bankrupting Us
When we add the $2,000 per kid per year vacation budget into the $3,300 core spending, we end up with $5,300 per kid per year (not including $2,000+ in tax savings; I’m not clear on where that’s accounted for in the USDA report).
At $5,300 we’re still well under half of the kid-related spending reported in the USDA study. I give us a solid A+ on keeping kid costs low without sacrificing quality of life.
Eventually the kid costs will climb in their later teen years as they start driving and “needing” more things. However they may also find jobs or opportunities to make money themselves to partially offset higher expenses.
College costs are just around the corner, but beyond the scope of my comparison to the USDA child expenditure report which covers age 0 to 17 and explicitly excludes college costs. However, I don’t think college will be extremely expensive for us for several different reasons.
To summarize it all, it appears we spend about $9,600 per year in total on our three kids after factoring in tax savings. That’s just $3,200 per kid, which is significantly less than the five figure forecasts floating around in the media (and in the minds of angsty upper-middle class parents across the nation).
Intuitively, that makes sense considering we have spent a grand total of between $25,000 and $40,000 during each of our five years of early retirement. If we would have spent the USDA’s figure of $12,978 per child times three, then that would consume essentially all of our $40,000 per year annual budget every year, leaving a measly $1,000 for all non-kid related spending.
What I have found true is that the fixed costs of one or two people are already fairly high since you have to have a house and a car of some sort (at least where we live). Adding a bit more space to accommodate kids doesn’t lead to radically higher spending on housing or transportation.
In the end, kids can cost a little or a whole lot, with much of the cost differential explained by parental choices.
Am I way out of line here? Or are you spending under $12,978 raising your own kid(s)? I know there are a ton of factors at play causing kid costs to fall all over the map, but I would like to hear your experience for kid-related costs.
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Some say it’s expensive to raise children. It can be… But it really doesn’t have to! You show an excellent example of how it can be done affordably, without compromising quality of life. What kids needs the most is love and attention from their parents. Not the new iPhone or 100$ shoes. Great reminder of what life is all about Justin.
My kids would be too scared of having a new iphone because they would be worried about breaking or losing it. We’ve already lost 1 phone and temporarily lost another (but found it) so I guess they realize having a cheapo phone isn’t too bad. 🙂
Have you done a post on walking to the grocery store? I’d love to hear how you do that. I live in the same area, and I don’t find that an easy venture! How often do you go, how many bags do you bring back, do you carry them, etc…. that’s the kind of info I’m interested in.
I haven’t done a post on it. We usually take the car if we’re doing the big weekly shopping trip. But if it’s just a few items on sale or that we need to grab at our in-neighborhood Food Lion, we’ll walk or bike up there.
In terms of hauling things, we each have a bookbag that can fit 20 pounds or so. And then we can carry 10-15 pounds in each hand (think a gallon of milk in one hand and similar weight in the other). Between the two of us, that’s quite a bit of cargo.
I have walked the 1.5 miles to Walmart and Aldi but that’s a long trek. Especially if carrying a lot of groceries. Biking it isn’t bad but I don’t have a cargo rack on my bike so it’s really if I’m getting a small amount of goods that I can fit in a backpack or on my handlebars.
We have a bike cart. It’s nice and holds quite a bit!
My car was down the entire month of Dec. 2020. I had to walk to the grocery store and Walgreens whenever I needed anything. The grocery store closes to my house is about half a mile and same with Walgreens. I have a small shopping cart from Walgreens that I kept at my house this entire month in order to bring my groceries home. I would go to the grocery store usually 5 days out of the week and once a week to Walgreens. I would fill the small basket with around 4-7 bags of groceries and drinks. I would place a 32 pack of water under the basket or under the groceries. Honestly, I don’t know why I haven’t done this before now. Not only am I getting some exercise in, but we didn’t eat fast food once except for ordering pizza a couple of times. I saved a lot of money on gas from not eating out a couple times a week or going to the neighborhood Walmart where I would buy items I really didn’t have to have. I know not everyone can do this for various reasons, but if you are able to I would definitely recommend it.
I’m unexpected at the math, those are some very frugal RoG kids! I always think kids are crazy expensive from the way many mannnnyyy parents talk about it. There’s a few women who had kids young that I know and they’re struggling even with a 2 income household because of the hockey lessons or the emergency dental work etc. You travel with yours!
Hockey lessons and emergency dental expenses – largely optional spending 😉 We’ve been fortunate that the only chipped teeth were baby teeth and about to come out anyway, however we did drop a little $$ on some repairs along the way.
Sounds like your kids don’t or aren’t aloud to do anything other than what their told. I have 4 kids and just saying all these numbers are ridiculously wrong. And how can you say largely optional spending on dental? So they suffer so you can vacation? I apologize if I’m coming off rude but in S. California you wouldn’t be able to travel. Pretty much $900-1000/Month daycare
Ave. 2 bed 2 bath Apartment $1,750-2,000. Nowhere in California has a mortgage sub $1000. I met your best monthly income with daycare and housing. Haven’t gone over all the rest
It’s almost like you came here to complain about me and my kids and how I raise them 😉
Sub-$1000 mortgage in California? Easy – get out of the big expensive cities. And while you’re at it, keep on driving to a lower COL state if you can’t afford California! Needless to say, you can find $1,000 mortgages in plenty of nice places in the country but it might not be possible in the HCOL cities.
I believe you on daycare costs, and you probably won’t find daycare a ton cheaper in Raleigh either. But daycare isn’t forever.
In any event, I am sure you can imagine that costs will vary over the years with kids and costs vary based on where you live.
Great post. I’ve done a post or two on the “Big Three” expenses which are housing, transportation, and food. I inevitably get protests claiming that childcare is more expensive and should be in there. First off, not everyone has kids, so it’s not an expense that everyone incurs, like the big three. So that kicks it out of the big three right there. And even if you do have kids you’ve shown it doesn’t have to be expensive.
Childcare can definitely be VERY expensive. It doesn’t have to be as there are usually cheaper options that aren’t as shiny as a five star daycare center. Fortunately age 0-5 childcare is a temporary thing that largely goes away once they enter kindergarten.
There are various options for child care outside of the standard daycare. They all tend to be rather expensive if it’s not a friend or family member doing it, but a willingness to compromise on some of the more luxurious options can get you a decent enough price. I’ve actually heard of people negotiating on the price for some places too so be sure to consider that.
The YMCA has a more affordable option if they’re in your area and they provide food for the kids all day (more $$ saved).
If you work on a military base with a daycare on it, you can often register for there and that’s the best price around for a pretty good quality facility.
If you only want your kid in a Goddard school, you’re going to have to pony up the $$ to go there.
If you have an option for a Dependent Care FSA at work, that will at least enable you to pay up to $5000 of the daycare expenses tax-free. If you don’t have this because you’re retired already, you are the daycare.
Good point. We actually paid my mother in law above the table and she reported the income. So we were able to take the Dependent Care credit and/or funnel the $$ through the FSA at work.
I don’t mean to protest :-), but I can see the view their view that childcare should be in there. Everyone incurs utilities, but it is obviously small. In a lot of people’s cases childcare cost is above transportation and food combined. If it’s bigger than two of the “Big Three”, isn’t there a strong case for including it? (I realize that sounded like I’m trying to stir some debate, but just trying to be Devil’s Advocate. I think it’s an interesting area to explore.)
Justin has shown that kids don’t need to be expensive, but the costs can be all over the map for the average person. Justin has also shown that transportation and food doesn’t need to expensive. There are some cheap trailers for housing as well. There’s a question of quality with all these things and people value different things differently.
Amazing RoG. I probably spend less than that with my 2yr old boy ! USDA doesn’t know the power of frugal…maybe because it’s so hard to find a frugal person in the USA.
That’s true – USDA is reporting average spending. They did show the higher earners spend roughly 2x as much as the lowest earners, so there’s some forced frugality at work here too. But you’re right – people tend to spend to the max according to their abilities.
Couldn’t agree more. Kids are often times only as expensive as their parents make them! We touch on this topic quite a bit over at our blog. The fact of the matter is, with a little planning combined with the frugality that tends to come natural in the FI community, kids are down right cheap to raise!
And they provide tons of free entertainment!
Mother of 4 in Australia, so some things such as crazy Healthcare and cheap groceries aren’t the same…
I found that the kids were cheap when 13 and below. Then they began secondary school.
Mine were music students, so I paid for 2 of them to do a tour of the USA with the school. Music lessons and sport lessons were exxy, though not as much as the braces that 3 of the 4 beasts needed.
I also travelled with my family- to Bali, Thailand and Singapore. School fees increased as they got older.
Still, like you, my costs were nowhere near the costs estimated by the government.
Sending kids to the USA for a tour? We send our kids to Australia for tours! 😉 Actually, I haven’t seen school tours to Australia yet, but I’m sure they’re coming. The Mexico, Spain, NYC, and Italy 1 week trips were all $2500 to $4000 which is insane given that we can book the whole family for that amount (or stay all summer as a family for just 2-3x that cost).
Excellent and detailed breakdown of the costs of raising children. Like you pointed in your post, much of the costs of raising children is related to parental choices. Areas like childcare can be quite expensive in some HCOL areas but then geographic arbitrage can be an answer to that problem. Your middle name is frugal and you make a strong point how we can challenge the system by living frugally on your own terms, while having a great life! Excellent take.
I’ve seen a lot of people move to HCOL areas to make big bucks, then come back to “reasonable” places to have kids and slow down a bit. Seems like a smart move financially even if the salaries outside the HCOL cities are a little lower.
Childcare is the most expensive part of having children. We have one child and family provided childcare was not an option for us. He was in daycare from 6 weeks to 5.5 years and during that period we have spent on average $12k per year on childcare alone. Now that he is in kinder costs are much more manag eable. Our current biggest kid expenditure is health insurance at $3,400 per year, which is $199 a month premium through Liberty healthcare with $1000 deductible, so our total kid cost now would be around $5k a year.
Childcare is definitely a big one, and one we mostly avoided fortunately. I’m sure moving up to kindergarten freed up a ton of cash for other things!
Thanks for posting this! I’ve been hoping for a breakdown to debunk the USDA report. I wonder how many would-be parents are scared off by that ridiculous study.
A ton are scared off by the reports I’m sure. And add to that the college cost scare tactics (no way to get a degree for under a quarter of a million lol). If you’re comfortably middle class and on the way to FIRE, there’s no reason to skip kids for strictly financial reasons.
Suze Orman just said that on Paula Pant’s Afford Anything podcast. She was also opining that the cost of a college education would be $400k-$500k in a decade or so. A lot of fear mongering there.
I found her $400k-500k number to be a bit outlandish as well. I don’t see the outrageous cost increases of college to be sustainable in the long run.
I’ll just give each kid a cool half million, let them buy a $100k condo/townhouse and figure out how to live on 4% of $400k plus whatever they can earn on the side 😉
I don’t know exactly how much my three kids cost me as far as additional housing expense but for transportation; transit pass is $1,080 per kid and add gas when I actually drive them places.
Food gets more expensive as they get older, my 17 year old son eats a lot more now than when he was younger.
Health and dental can add up quickly, all three had braces! It wasn’t covered under my plan:(
And extra-curricular activities can get expensive depending on your kids . They don’t need to be in everything but it may help keep them “out of trouble” as teenagers if you enroll them in at least one. It can also help with scholarships later if they get good at it (sports, music…)
Still below the government numbers:)
Wow, transit pass is $1,080? They just made transit passes for teens completely free here in Raleigh. We picked up that card as soon as it came out! And I think the adult pass is only $36/month. Of course Raleigh doesn’t have the greatest transit…
I’m watching the food consumption closely 🙂 I think our six year old eats more than I do even though he’s 1/5th my size and skinny as a stick (he NEVER stops moving). He’ll be eating a carton of eggs and washing it down with a gallon of milk by the time he’s 17!
Yes $90/month for the student pass! Not sure we have the greatest transit either!
Watch for that six year old of yours, he may put you in the poor house later:)
I like this style of analysis. I don’t budget to the level you do, but I think our costs would end up to be close to double yours, still just a fraction of what the norm is.
We tend to eat out more as entertainment. I don’t enjoy cooking and my wife’s work schedule doesn’t give her much of an opportunity. We still eat at home most of the time, but we splurge on eating out probably close to the national average.
I don’t know how to calculate our housing costs, since ~40% of the money we get back from dog sitting. It’s the same size house as you, but if we downsized, we wouldn’t have that income either. We had bought the house before we had kids, so it’s arguable we’d just have spent the money anyway.
Our discretionary cost is the big one. Child care turned into private school when we got a special military deal. It’s still very expensive in straight dollars and cents, but it feels like we are getting value for the dollar. Putting a value on education is always one of the more difficult questions I have when it comes to personal finance.
“We had bought the house before we had kids, so it’s arguable we’d just have spent the money anyway.” I think that’s the truth for a lot of people. There are tons of single people and childless couples in our neighborhood that have houses just as large as ours. If you want a certain kind of house (like a single family detached house) you can only go so cheap/small.
One of the things I forgot to mention in my last comment is that some of the expenses are cheaper because you’ve retired and have more time. I think you noted this a few times in your article.
I don’t know how you manage the $60/week or free summer camp. I mean where do they find staff to work with kids for $12 a day? Even the cheapest option around me (the YMCA) is $180 for members (more for non-members obviously). I realize costs are a little more in Rhode Island, but it’s not typically 3x more
Camp Connri is $30-50 per child for 4 night 5 day summer camp on the CT RI border
City of Raleigh Parks and Rec – $60/wk I think for the all day summer camps. This past summer we also did the GlaxoSmithKline science in the summer camps – totally free. And the 2 week Wake County Sheriff’s Law Enforcement Adventure camp – totally free all day camp and they even feed your kids lunch and snacks for free.
Sorry for the delay – I guess I missed your comment almost 3 weeks ago in the rush to prep for our cruise. Mrs. RoG pointed out my delinquency 🙂
Thanks for this! We’re trying to start a family and it’s kind of terrifying to see what some people spend. It’s a good reminder that children don’t have to be expensive!
On a side note: that pad thai looks amazing! It’s the one remaining takeout dish that we haven’t found a recipe that works for us. Would you mind sharing how you make it?
I just responded to someone else: “I don’t really follow a recipe. Sauce is usually improvised but includes tamarind paste or Maesri Pad Thai sauce. Rice noodles. Then some kind of protein (eggs, tofu, pork, steak etc).”
Great research Justin! I always wondered where those numbers came from. I can attribute that having only 1 child I probably do spend more than if we had multiple kids. But even then my son (5) favorite things are: going to the park [FREE], going to the library [FREE], playing Minecraft with Mama [$19.99 for the game which probably equals less than $.10 per time we play]. Seriously you don’t have to spend a ton. Love it!
We got a deal on minecraft! The phone/tablet version was $6.99 and I think I used free google play credit. And I found a $1 game code on ebay for the desktop windows version! Agreed though, most of our kid entertainment is super cheap or free. Lately the six year old has been playing with hundreds and hundreds of duplo blocks that we got for free from a neighbor’s yard sale leftovers. He likes to build pokemon or other anime characters in minecraft style out of the blocks.
Another game similar to minecraft that you might enjoy (also free for the most part!) is Roblox. My kids are crazy about it, even the 12 and 13 year olds.
Is your Pad Thai recipe posted somewhere? I would love to have it. Thanks!
I don’t really follow a recipe. Sauce is usually improvised but includes tamarind paste or Maesri Pad Thai sauce. Rice noodles. Then some kind of protein (eggs, tofu, pork, steak etc).
We spend $1400 a month on daycare for one kid. We both work. It’s okay. But, seriously, daycare will probably cost more than college 🙂
Sounds like it. Our flagship state university is only $1000/month for 9 months ($9k/yr) 🙂
Most so-called studies, whether the costs of raising children or the costs of retirement, always appeared to me to be worst-case scenarios and not averages. Your example shows how easy it could be (not will be since personal choices come into play) for most people to keep down the cost of kids. And let’s not forget that the averages are influenced disproportionately by the wealthy, just like all spending. The same holds true for retirement where the vast majority of people will not need 80-100% of their prior income to make it. I suspect most studies are underwritten by the financial industry who scare tactics to get people to save more with them are legendary.
I think the methodology on the USDA study is valid as far as it goes. But it’s simply reporting averages. And as we know, it’s not too hard to be above average 🙂
Great post. Does your vacation budget factor in travel hacking? I’m assuming these are the expenses after any rewards and points are taken into account.
Yes, travel costs include travel hacking. Without that, I’d say the travel budget would roughly double.
For us, the biggest expense was childcare and preschool. Now that he’s going to a public school, our expense is pretty minimal.
Housing is another big one. We haven’t moved yet because of our kid, but that’s coming up very soon. If we don’t have a kid, we’d be happy in our 2 bd/2 bt condo. Living in a low COL location really helps you out.
But you could probably stay in the 2 bedroom condo if you didn’t have your mom with you, right?
I’d give you a a+ as well. We’ve only got 1 16 year old and with band, instrument braces and school trips I’m sure we’re double your per child but still way below that silly study.
We’ve done several Asia and Europe trips but we found a teenage boy too frustrating to travel with, bad attitudes can save ya money.
Thanks for the piece.
Leave em behind, save money, enjoy the trip more? Sounds like a plan! 🙂
How is your neighborhood and the body of water behind your house after the storm? We assume all is well.
All is well here. Though as I’m writing this, we’re in the middle of Tropical Storm Michael. All is well with this storm so far, too! Just a lot of wind and rain so far.
Another interesting post, Justin! Thanks for sharing your costs. We live in a HCOL, and we both work so our costs of having kids are significantly higher than yours. (For me work is mandatory, for my husband it’s his choice to work.) However, you’ll never hear me complain “kids are so expensive.” They are worth it and a choice we made with eyes open! Here are my back-of-the-envelope estimate of costs in some categories that are VERY different than yours.
Taxes: No tax child credit for people in our income bracket.
Childcare: Highly, HIGHLY variable. Summer camp was $550/week for one child. We were able to find a military subsidy that brought it down significantly, luckily. Some friends of ours with 3 kids figured out hiring a college kid for the summer and purchasing a pool membership ($700 buy-in, $700/season) to be more economical. We might do that at some point, instead. Military subsidized daycare was about $1700/month for all 3 kids. For non-military people in this area, full-time daycare starts at $2000/month/kid for infants and decreases to $1300/month/kid for preschool-aged. When the twins were first born and we were on the waitlist for military day care we spent almost $8000/month on children! I only got 6 weeks of maternity leave and then was back to residency. We had to hire a full-time nanny ($18/hr for 50 hrs a week = $4000/month) + daycare for our toddler ($600/month). We chose to have a night-nanny 3 nights a week for the first 12 weeks so we could get some rest ($30/hr x 27 hrs/week = $3240/month). When we finally got into the daycare, we bought 80 Chipotle burritos for the staff we were so grateful. Kids are now school-aged and after care at their public school is a steal at $550/month. Military subsidy brings that down a bit, too. We also live near family, but they have no interest in being the full-time nanny – however have come through for a sick kid here and there which has been a lifesaver. Current spending during school year on childcare (lowest EVER) = $900/month. During highest period = $7840/month.
School: Public school hits us up for money a lot. Just wrote a big start-of-year check to the PTA (because I hate fundraisers) and I know we are at the wealthier end of the school population, so I don’t mind doing more than my fair share, since it’s not a hardship for us. I also send in tons of requested school supplies (Ritz crackers, cups, dry erase markers, etc) for the same reason. Public school isn’t entirely free, at least not for us. We’re spending A LOT more than $200/year/kid because of this.
Fun: We spend a fair amount here. Boxing lessons. Swimming lessons. Soccer team. (not all at the same time) Movies on weekends, county fair, open gym at the gymnastics place, farms, indoor swim park.
Housing: Oh my. Before kids we lived in a super cheap apartment for $1600/month. One kid – moved into a 3-bedroom house for $2700/month. Pregnant with twins, and sister was going to come live with us to help out – moved into a 6-bedroom house for $3800/month. So I guess you could say house 3 kids costs us $2200/month – or $26,400/year – or $8,800/year/kid. Yup. Now I understand those USDA numbers.
Help: Oh, you thought housing and childcare was bad?? Buckle-up. Before kids we had a housekeeper for our apartment every other week $80. In the bigger house, now up to $140. Once kids were born decided I didn’t want my husband wasting his Saturday mowing the yard, so outsource that ($20/cut). Once I was back to work as a resident (doc in training), with a husband who works fulltime frequently traveling, 3 kids under the age of 2, pumping breastmilk for twins, the evening routine got CRAY-CRAY. Dinner, dishes, baths, holding, feeding, crying, breastfeeding, washing pump parts, pouring pumped milk into prepared bottles for next day at daycare, washing 10-12 BOTTLES from daycare, washing pump parts…so we hired evening help a few evenings a week. That has morphed over the years but where it sits now it’s $20/hour for 16 hours/week = $1280/month. We were contemplating cutting back and then I came up on orders to deploy for 9 months, so the help remains critical to supporting my husband’s busy career and sanity. Total on help: $1460/month.
Anyways, I’ll stop there. Yes, our kids are pricey. We could make it cheaper if we wanted to, but I don’t know the point of having money if it’s not to make your life easier. Our spending is mindful and we’re satisfied with most of it. And we’re set to reach fatFIRE at 45.
Well, your final paragraph says it all — YOUR choices for YOUR sanity — that’s what matters, right? Child care IS a big big concern and it sounds like you guys hit the trifecta of Stressful And Necessary Expenses based on time of life and family configuration . Both parents hard at work with crazy hours (some travel, too) and very young children = hello! child care expenses. Not for ever but for now! And you must be doing something right if you are set to FIRE at 45 — congrats!! Enjoyed reading another take on all this.
As the study points out, higher income households tend to spend more money on kids 🙂 I think part of it is that they can afford it, and part of it is “necessity” since you have to work a lot harder to earn those incomes, and therefore end up paying more for convenience.
You mentioned the tax benefits at the end… I think after exemptions and credits that Jr has been a source of profit for us for the first 2-3 years. And now that I pay him for his work on the blog he provides tax benefits there as well.
That’s awesome! I don’t think our kids actually save us money overall but they certainly didn’t add a lot to bottom line expenses net of taxes. At least not enough to make it impossible to retire in our 30’s.
I’ve found that the costs of raising kids don’t have to be high, but you need to be prepared for unexpected costs. For example, one of my kids was fine in the cheap city camps; another struggled immensely with the staff and a few of the kids, and I had to switch him to a place that could fund more patient and attentive counselors. One of my kids could eat anything; another had food allergies that weren’t cheap to work around. One of mine did fine in a cheap daycare; another needed more 1:1 attention. One had enough musical talent and interest to warrant investment in better lessons and instruments.
However, I’ve definitely seen that spending more time together cooking at home, going to parks, etc. doesn’t just save money; it also makes all of us happier and teaches my kids important skills and life lessons than going out to eat or paying for expensive leisure activities on a regular basis.
Kid costs are definitely YMMV and dependent on the family and the kid(s)! We’ve been fortunate so far.
We are well on our journey to a work optional lifestyle – 8 kids (2 currently in college – without loans); extra-curricular activities, and vacations (38/50 states and counting) are all factored in. While certainly our expenses have gone up with the addition of the kids, compared to life before kids (“BK”), what we do with our money has shifted. What we have found is that children are “priceless” and that with determination we are near completing our journey to time over money
While certainly our expenses have gone up with the addition of the kids, compared to life before kids (“BK”), what we do with our money has shifted.
That’s the key, and something I didn’t reflect in my budget analysis. We end up spending time and energy on kid-related stuff which means we actually spend less time and energy (and as a result, less money) in other categories that the kid-free spend on.
You are are kicking ass and taking names when it comes to hacking kid costs. This is why whenever people say “oh oh but you couldn’t FIRE if you had kids!” I just refer the to you and Jeremy.
Way to show the USDA! Being average is boring. Being efficient and badass is way better.
Yeah – that’s the magic of averages. All you have to do is be a little better and you’re “above average”. It’s not like we’re forced to buy the average priced car, house, vacation, etc. In most cases, something below the average cost works just as well.
Love this so much! Those USDA numbers seem to get thrown around a lot and a lot of people get scared of having kids or think if they have kids they have to kiss their FIRE dreams goodbye. So not true, but even if it were, in my opinion, having kids would still be worth it and then some. I am always inspired by how well you live on the amount you do. #goals
Thanks for showing that having kids doesn’t have to mean financial ruin. Enjoy your cruise!
I felt like I needed to take a closer look at the kid expenses and what do you know, it’s not as bad as many make it out to be!
My family’s experience is pretty similar Justin — the cost for our two kids is considerably lower than the USDA estimates. For example, we probably average about $125 per person on food (per month).
By far the most expensive item in our monthly budget was childcare. Now that my oldest has started kindergarten we suddenly have tons of free cash available! Woohoo!
In my opinion, kids aren’t really that expensive, but parents can make them expensive. If little Johnny or little Suzie needs to have a “perfect” life with everything perfect shiny and new with the best private school and luxury brand names, then yeah kids will cost a lot. But those are choices the parent makes, not the child.
Kindergarten = free childcare 🙂 I’ve mentioned that occasionally (in jest) at the kids’ elementary school and I get some interesting looks from the teachers.
I think your comparison would be a lot more helpful if you factored in your kids being in daycare, like they were when you/your wife worked. Of course you have limited childcare costs (and transportation now that you and your wife are at home.
But for us the biggest cost by far is the daycare of $26k/year ($16k/yr for baby and $10k/yr for preschooler). We are pretty similar all fronts you mentioned (spending less on clothes, food, and nothing on insurance, because we have great work coverage), except we don’t live near family and live in southern California, where daycare is very competitive and expensive. Someday, of course, those expenses will go away, and that’s when we’ll start saving for their college funds!
Costs are highly variable based on family needs, geographic location, and even vary a lot year to year as needs change. Childcare for example is a lot more expensive in early years vs in later years when free public school takes up most of the burden of those costs.
That said, we probably would have hired a college student nanny or two for $11-12/hr if we had faced those steep childcare costs. Make life a lot simpler and would probably be about the same as full time daycare costs at the rates you cite (which aren’t that far off for North Carolina if you’re going with private daycare at a reputable facility).
A little off topic. Can I ask you about your experience with Freedom Pop? I went with them off the advice on your blog, that it was a free cell phone coverage. Our experience with them hasn’t been good. The phone is never able to receive calls or send texts. There is always updating that almost everyday. And making calls is pain.
Has this been your experience ?
Our experience hasn’t been too bad overall for something that’s free 🙂
That said, it’s occasionally a pain in the neck. For example, they just deactivated my Global SIM card while I was gone on a cruise so when I got back I couldn’t connect to get an Uber to the airport (fortunately the cruise terminal had free wifi, and I had my backup smartphone with me which works fine on freedompop).
And I’ve had problems calling over voice with my Global SIM for a while because it’s based out of the UK (or so I’ve read) so it seems like I’m making an international call and a lot of apps won’t let me connect. But since I have to replace the SIM with something domestic, I think that problem will go away. Otherwise, it’s been pretty workable for data. Our other 3 US-based phones (that are CDMA and don’t have SIMs) all work fine on voice with decent call quality as long as the cell data connection or wifi is solid (like 3-4+ out of 5 bars).
What I’d love to see is more of an apples to apples comparison to families in similar situation – ie: living in NC city, parents who don’t work, etc.
I messed around with the pretty cool calculator on their site which reports more specific numbers based on region (unfortunately not down to state level), age of kids and income, which would get closer to an apples to apples comparison. For my situation, 17 year old child in northeast, I almost fell off my chair when the average annual spending came up as $32,674! So even though I spend much more than you per child, when looking at the ‘averages’, I might actually be spending at a smaller percentage to the average, since when I guess at what your inputs are, the average spending per child per year is under the 13k you showed in the chart, which I guess must be a national overall average. It’s all in how you state and massage the numbers…
Anyway, seriously, congrats on the awesome savings! And I enjoyed reading your details and breakdowns.
I think they have those datasets available somewhere, as the report itself is a summary of the datasets and it went into the methodology a bit. So you could pull, say, NYC metro area data theoretically to get a more apples to apples comparison.
Great article! My childless wife and I often discuss how much…or how little it costs to raise a kid. Then we remind ourselves we have no practical idea what we’re talking about, but we consider ourselves good guessers :).
I think people CAN spend a ton of money on kids, just like cars, pets, and hair. Or they can spend much, much less and still have the majority of the joy.
I appreciate breaking the numbers down, too. It helps defeat the “Yes, but…” mentality of people who are trying to convince you otherwise. EVERYTHING can generally be cheaper than we make it out to be while retaining most of the fun if we just put a little effort into it.
“I think people CAN spend a ton of money on kids, just like cars, pets, and hair. ” That’s pretty much it, and you can extend that to housing, food, and every other aspect of spending, not just kids!
Very good analysis. I also believe that having children should not prevent you from becoming FI early. We raised 2 children and traveled a lot and still managed to save a lot of money. I think our 2 biggest expenses were childcare and college – if you can minimize these costs it will make a big difference. We also saved money by buying a less expensive house ( still good schools) and not buying expensive cars. Both of our kids turned out well, and they both have a frugal non-materialistic mentality.
I think our kids have picked up frugal habits, too. So that will make their future financial lives a lot easier vs those raised in spendthrift households!
I’m in the Raleigh area too. Was wondering on the camps, where are you scoring cheap camps for the kids in the summer? I couldn’t find anything reasonable (even girl scout camps can be expensive).
City of Raleigh Parks and Rec – $60/wk I think for the all day summer camps. This past summer we also did the GlaxoSmithKline science in the summer camps – totally free. And the 2 week Wake County Sheriff’s Law Enforcement Adventure camp – totally free all day camp and they even feed your kids lunch and snacks for free.
Justin, Great post. This mirrors my own experience of raising my son for the first 10 years that I actually tracked. This is despite having an above average household income, so income is a driver for spending only if we make it to be. The results are explained in my link if you click my name.
I’ve never closely tracked the kid-related spending because it always seemed so low. So I kind of had to suss it out of my other expense tracking data, but I confirmed that it is in fact rather low. 🙂
HI Justin, I’m really surprised by how low health expenses can be with Obamacare. Not because I think Obamacare is expensive but because of how much my employer provided plan costs. Our employer provided plan – which is an HSA – costs about $1100 per month total. Of that we pay about $300 per month. Plus we put away $200 per month extra in an HSA because it’s tax savings, and also because our deductible is something like $5,000 and a $10,000 out of pocket maximum. We live in the Northeast so that could be part of the higher cost, but still the price you pay for 5 is downright cheap!
At the lower income levels where ACA Cost Sharing Subsidies come into play, the deductibles and copays are very close to zero. That’s a bigger help than lower premiums if you actually have big medical issues during the year! We have’t so far, but it’s saved us a bit over the years.
Wow, it kind of reminds me of the government/financial industry “criteria” for retirement — I do believe I will spend less than they say since we already spend less than the national average for most categories. My girl is all grown but I am SURE we didn’t spend that much! Public schools & university; lots of free and/or cheap activities (okay, and some not so free) thru the park system; lots of just down time to play and explore; lots of hand me downs and gifts from besotted grandma’s; and so forth. Also, we stayed in a smaller, cheaper home that we still live in and our mortgage is pretty dang low. And frankly, we’d have had to live there anyway. She was never a huge eater 😉 and we loved yard sales and thrift stores. So — yeah, I agree, even minus the economies of scale (she’s a singleton) we just didn’t go for broke. Our biggest expense in those days — eating out — I SO salute your delicious and frugal meals. Anyway, great food for thought!
You probably have better things to do, but would love to read your thoughts on Suze Orman’s anti-FIRE rant on “Afford Anything”.
I don’t have the time to even listen to her comments! I’m sure it’s mostly detritus. 🙂
Where is September update?
Working on it! I’ve been disconnected from the internet for 10 days while on a cruise!
September was great but October isn’t going as well so far in terms of stock performance and our net worth.
Thanks for helping to bust the myth that kids need to cost so much money that only people that make $500k/year can afford them.
And in the end…kids aren’t about having more or less money in 20 years.
Thanks! Our experience is just one datapoint, but an important one for those that avoid having kids for strictly financial reasons.
Man, I’ve been working through this since I’m new to FI and we had been not paying attention until now to our spending.
My wife and I both work and we are still a ways away from FI. We just had a new baby and we plan in 3 years to have the third and final kid.
In MN, daycare is really expensive. We found a center we love and it is still $100-150 cheaper per week than other centers. My wife is a social worker and didn’t feel comfortable quite with in-homes, though if there’s an opening (super rare), we might still explore that when they’re over 12mo.
I mapped it out. Because we don’t have family to watch them, they will be in care for their 5 years before public school. For 3 kids, it will be about $160k over 8 years which averages to $25k per year for daycare.
Seeing that in the spreadsheet sort of was a staggering.
Luckily, we have a few ideas and things going for us.
First, my wife works at a school so she gets a school schedule. That axes expenses for the summer and she’s home when they’re home.
Second, even with exhorbitant childcare, my wife’s salary still makes up for it.
Third, with our income, we should actually be partially FI in 5 years. IF we can make the budget work. Meaning, my wife will still work but I will have the option to be stay at home dad and take care of the kids (who will be older, with oldest actually in school).
Fourth, I have passive income and side work that could bring in enough income to negate any childcare. So if I can keep that up, we basically just budget like we have lower income (which is still very high).
It is a hard place to be since we find a ton of value in the center we use and our son has shown amazing development.
But I was still REALLY surprised that in a few short years, potentially I could just quit the 9-5 or switch to a more flexible schedule to take leave during the summer and spend time with family. This seems like a good compromise to maintain a double income but have 15+ weeks purely with family every year. Plus with travel rewards, fun travel!
By the way, it still is lucrative for us to work–double 401ks, wife has pension, I had pension before, HSA, Dependent Care Spending Account, and I have a HDHP that only Fortune 50s can get. My wife’s public school healthcare is abysmal, 3-4x more expensive than mine.
Due to her working, we would accelerate the FI savings 3-4 years compared to if she quit now and we didn’t have any childcare expenses. That’s pretty powerful. It’s also her decision, I won’t push anything on her. She loves working with kids and she’s an awesome mom too. A school is one of the best gigs she could get for maintaining a double income household.
Really enjoyed your ChooseFI podcast episode from a few years back! Been listening to the backlog.
Thanks for posting this and since we share all these same values we are looking forward to when the kids are all in public school!
Public school is great 🙂 Even though our childcare costs were tiny before the kids started school, it was nice to see the cost savings once they entered kindergarten.
Wow! This is such a thorough post and one of the best I have found on this issue. As a new mother of a 9-month-old, I was recently considering adding up how much he has “cost” us so far and pit that against what we would have spent instead on going out. This seemed mechanical to do, but this post has inspired me.
I remember reading in a more mainstream article that a baby would cost us $10,000+ in the first year. Including daycare (we both work), it’s coming out more like $5,000! We have yet to see what is going to happen with our taxes and the $2000 write-off you mentioned. Thanks again for this awesome and inspiring post as we consider having another…
Good to hear it’s not costing as much as the experts predict! I’m always skeptical of those numbers, but remember they are an average and we can be better than average!
Do your kids get free/reduced school lunch via NSLP? Btw, I enjoy your blog, amazed at how you can raise 3 kids and travel so much on such a low budget!
I don’t know what NSLP is but yes, income below $55k or so qualifies for reduced price lunches. Though our kids don’t take advantage of the school breakfasts and lunches all the time. One kid never eats lunch at school (I think).
So that is amazing, I send my one kid to Montessori and that along cost me $800 a month if I break it down. I like Montessori for him a lot but reading your post I feel like I am doing myself a dis-service for long term retire early.
This is not the minimum costs to raise a child.
If you possess a vehicle, gas costs are the only budget. Schools provide transportation. Additionally, housing costs are yours alone. I wouldn’t even configure child costs into the formula for housing since the parent is a human and needs to have a home anyway.
Food and clothing costs along with miscellaneous (video games) are reasonable. However, if your clothing costs are $700, you’re spoiling your children, not raising them. If your miscellaneous costs surpass $1000, likewise, you’re spoiling your children, not raising them.
Education costs. Try public education. It’s free.
True enough about the vehicle and housing costs. Though I would say we ended up in a slightly bigger house and definitely a larger car compared to what we would have chosen if we didn’t have kids. Still a very small marginal cost to get a slightly larger house (because the smallest size house in our neighborhood is 3 bedroom – we have 4).
What route would you suggest for estate planning/wills for people with kids? Find a local lawyer or something like legal zoom? What steps should one take to plan for their untimely demise?