Calculating the True Cost of Raising Kids

Calculating The True Cost Of Raising KidsHow much does it cost to raise a kid. Really?

Many of the surveys work out the hard costs of how much we actually spend raising our kids. They calculate the diapers, food, housing, transportation costs and such that come with kids.

A recent study from the Fraser Institute calculated the cost of raising kids at about $3,000 a year. I know. My mouth dropped when I read it too.

A MoneySense article in 2011 put the number closer to $250 000 to get them from birth to 18 and legally allowed to leave the nest (because that always happens, right?)

It’s expensive, to be sure, but when you do the *real* math and take into account opportunities that are missed because of the spending you make on kids, the numbers get downright ugly.

Maclean’s Magazine has done the harder math. They put the number at $700 000 to get a kid to 18, and make it $900 000 if they do the predicted and live at home into their early 20s. Oh, and that’s for one kid. There is some economies of scale that can be spread over two children, but you’re still looking at over $1M if you have more than one kid.

Just look at the money parents pay for daycare. The $1500 after tax money my family spends every month on childcare is equivalent to the mortgage on a vacation home (or we could be smart and pay off our current one twice as fast).

It’s one thing to have to spend the money on the kids, it’s another thing to have to spend it and not be able to invest it and reduce debt. There is a real opportunity cost that those who choose to have kids miss out on but rarely see. The article notes, if you would take daycare costs and invest it conservatively for a return of 5%, you’re looking at a loss of $280 000 to your nest egg.

The pregnancies for our two kids pulled my wife out of the workforce for nearly 2 and a half years. In Canada, we have maternity benefits, but they still amounted to less than half her salary. Also, by being pregnant she missed out on her own career advancement opportunities. When she ultimately reentered the system she had to do so a step or two below her experience and skill set just to get a gig. Over the course of a career, it’s easily hundreds of thousands of dollars in lost earning opportunity.

How much does it *really* cost to have kids? The extra plane ticket on vacation, the bigger car for carpooling, the extra activities, the clothes, the extra gadgets. It’s not just diapers and food costs, it’s an entire lifetime of paying.

It’s a lot more than you realize, but it’s worth every penny. Right?

Actually it is.

A 2011 study from the University of Waterloo showed that when parents were only presented with the costs of raising kids, they said they valued the time they spent with their kids more. The more they cost, the more we love them, it seems.

Image via iStockPhoto

Article Posted 3 years Ago

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