Every parent I know is struggling with the whopping costs of raising kids right now.
Not only are we grappling with the obvious like food, clothing and child care (when did teenagers start charging $15 an hour to babysit?), we're also in competition to be Parent of the Year, whether that means affording the most expensive strollers, private dance lessons or birthday parties.
Let's start with the basics: The current cost of raising a child is nearly $235,000 from birth to age 17 (add another $22,000 to $43,000 a year for public or private college). If that seems like a lot, it is. The Wall Street Journal says that number is closer to $900,000 when you factor in college and foregone wages for staying home to raise our children; others argue that it's over a million.
Child-rearing has gotten pricier--it's not your imagination. But it's not all inflation's fault.
"The cost that is actually required to raise a child has only gone up slightly, but the amount that people are spending has gone up significantly," says Bryan Caplan, professor of economics at George Mason University and author of "Selfish Reasons to Have More Kids: Why Being a Great Parent is Less Work and More Fun Than You Think." Caplan says that parents today feel we must do more and more (translation: spend more and more) to give our kids the best possible future. After all, no one wants to be labeled the "bad parent."
As a result, the mom market has become a $1.7 trillion industry, and the funny thing is, our kids are no better off today than they were 50 years ago, says Caplan. So maybe a wake-up call about this small fortune we're spending is in order. Here are the leading ways that parenting is--sometimes unnecessarily--robbing our wallets, and what you can do about it.
Remember that $235,000 it costs to raise a kid? Housing accounts for roughly one third of that, according to the USDA. But what does that mean? Well, consider whether you've thought of moving to a bigger place to accommodate your growing clan. That wasn't always the case, says Caplan. "If you look at the types of homes that people lived in during the 1950s, we'd consider them shacks," he says. "Today people just live in nicer houses; standards have gone up."
Also new? The idea that every kid should have his own bedroom. "In the Baby Boom era, four kids per room was normal," he adds. "Now people consider that unacceptable." How do you decide how much house you can afford? A simple rule of thumb: No matter how big your family, housing should never account for more than 40% of your take-home pay.
Food is actually cheaper now, says Caplan, but the way we eat has changed. We're opting for more expensive foods and eating out more--thus the increased costs for the mouths we feed. "We used to eat a lot of canned food and heavy starches," he explains. "If you wanted to eat the same way people ate in the 1960s, it would cost a lot less."
Our new, higher standards now include items like bottled water (consumption has grown more than 50% in the last decade), junk food and the rise of premium grocers like Whole Foods. Another reason our food bills have skyrocketed is dining out. Over the last century, Americans have consistently spent more and more at restaurants, with the average consumer dishing out more than $2,500 a year for this convenience. But there are plenty of ways to cut your grocery bill: Here's our handy checklist on how to spend less on food.
The amount we spend on gas has nearly doubled in the past four years, meaning, we're tapping into our budgets with every little league game, dance lesson and school affair. In 2009 the average family spent $110 during the first three months of the year on gas--now that figure is $198. And it's not just gas that has us opening our wallets wider.
More and more parents are buying their kids a first car. In fact, AutoTrader.com recently surveyed parents and found a huge generation gap: 14% said their parents had purchased their first car for them, whereas 41% 'fessed up to buying their child's first car for them. Your best bet? Track your expenses in the LearnVest Money Center and make sure your transportation budget isn't out of whack.
The cost of health care is on everyone's mind these days, and for good reason: Spending here has increased 30%, according to a recent Intuit report. This is especially affecting younger people (think: young parents) who have seen their health care spending rise by more than 40%. In the beginning of 2009, 26- to 31-year-olds paid an average of $179 a month in the first quarter versus $252 a month so far this year. Kids can rack up the costs here too. For example, if your child needs braces, you can count on paying up to $7,000, says one report.
"It used to be that we let the kids go play outside any time, but now parents feel like that's an irresponsible attitude," says Caplan. The result? A generation that some have accused of overparenting or helicopter parenting, which comes at a price. Costly gymnastic lessons, marching band and competitive sports can not only leave kids overscheduled but they can leave parents overbudget trying to keep up.
Even the cost of little league is too much for some families now, with $249 bats, $129 gloves and $39 helmets, not to mention uniforms, travel leagues and private batting/pitching lessons for some. Nonsport activities like prom are pricey too, requiring mom and dad to shell out an average of $1,139. Want to keep your extracurriculars in check? Here are the best kids' activities for your buck.
Raising kids in the digital age has become a pricey proposition. According to a new study, 20% of third-graders have their own mobile device, while 39% of fifth-graders and 83% of middle-schoolers do. These cell phones can take a chunk out of our budget given the average individual's bill is up by 31% since 2009 to $71, and a family of four who all have smartphones can cost $200 or more a month.
Other "must-have" technology adds up too: In 2004 the average American spent $770.95 annually on cable, internet and video games. Just five years later, that number rose to nearly $1,000. Whether you shell out for gadgets and games is up to you, but pretty much everyone can benefit from this nine-step guide to lowering your cell phone bill.
"There is a general pattern in the economy that labor-intensive things like day care have gotten more expensive," says Caplan. Today, one-fifth of all American families relies on child care. One of the main reasons for that is 64% of moms now work outside the home, which comes with a hefty price tag.
According to the National Association of Child Care Resource and Referral Agencies, the cost of having an infant or toddler in full-time day care runs up to $14,000 a year. Not only that, but in 35 states plus D.C., the average annual expense for an infant in day care was higher than a year's tuition and fees at a four-year public college. Ouch. But there are ways to bring down your payments, like these six ways to save on child care.
According to a recent College Board report, the price tag to attend an in-state public college rose 3.8% last year to a record $22,261. Tuition and fees alone rose 4.8% to $8,655, while housing, food and books also added to that. And if you think financial aid and grants are picking up this higher tab, think again. Economists estimate that financial aid budgets stayed flat, meaning students and parents were left to foot the bigger bill.
Even with financial assistance, the average student's total costs rose 4.6% to $16,510. That's double the rate of inflation. The good news? Some colleges are experiencing decreased enrollment due to the higher costs, which could help keep prices in check. And there are many ways you can save for college. If you're daunted by footing the bill, start here: Saving for College 101.
LearnVest's free Money Center will help you create a budget. Our free bootcamps will help you take control of your money, cut your costs or get out of debt. And our premium financial plans -- managed by LearnVest Certified Financial Planners -- can help you chart a course for the future you want.