Curious how much it actually costs to raise a child (or two) these days?
There are the big-ticket items: childcare (daycare, nannies, sitters), basics (food, housing, clothes), activities (sports, clubs, camp), college, and maybe weddings.
How you decide to raise your kids—your choices, beliefs, and the myths you buy into—will determine how much impact they have on your early-retirement plans. All those sensational headlines that aim to terrify you with sky-high numbers? They’re largely clickbait meant to push products. Seriously.
The Huffington Post number quoted was $233,610 per child, and that didn’t even include college. Wild, right? If you have two kids, that suddenly looks like $467,220. Yeah, that’s enough to make anyone queasy.
Let’s calm down and look closer. Housing, for example, makes up about 30% of that USDA estimate.
But what if you’re not trying to keep up with the Joneses and you choose a modest 1,500 sq ft starter home—like most Americans did until the 1980s—instead of expanding every few years?
That change drops the $467,220 total down to $327,054. Better. I started to feel better. In our plan, the two kids share a bedroom from ages 4 to 10. Around 11 or 12, one moves to the finished basement (heated floors, extra egress window—yes, I’m being realistic). A smaller home can work just fine.
One more policy note: the new tax bill raised the Child Tax Credit from $1,000 to $1,600 per child. Not bad. If you took that credit and invested it over the allowed 17 years at a 7% real return, you’d end up with $98,688.70. Neat.
That brings our running total to $228,366.
*Update: I later learned the credit was increased to $2,000 per child in the final bill and the income limit was raised too, so most families will get the full amount.
We lived some of this ourselves. I won’t be retiring until after the kids start public school, but Mrs. Cubert’s schedule let us keep childcare down to about 30 hours a week. The USDA says childcare costs about $37,378 per child—so $74,756 for two.
Fortunately, tax breaks help. The Dependent Care Credit can cover up to 35% of childcare costs, up to $3,000 for one child or $6,000 for two. During that intense five-year stretch before kindergarten, if you’re paying for 30+ hours a week you might save up to $2,100 a year in credits. Investing those yearly savings could knock off another $12,076 from your costs.
There’s also the Earned Income Tax Credit for lower-income families (couples under about $50K), which can add up to roughly $6,300 a year.
After applying those credits, our tally drops to $216,290.
Food and transportation together make up about 33% of the USDA’s $233,610 figure. For two kids, that’s a jaw-dropping $154,182 over 18 years. But that number depends a lot on lifestyle choices.
Grandparents used to tell stories of walking to school through deep snow; we eventually got a bus. The key question is where you live and how you arrange activities. We chose a neighborhood with decent schools within walking or biking distance. Some activities require effort, but we’re not a taxi service.
If your friends live far out and drive kids to practices and tournaments constantly, that bill balloons. We cut the transportation cost by $75,000 thanks to bikes and walking, leaving us with $141,290.
Food is a real cost too—you have to feed kids well—but there are practical ways to save while staying healthy. Our household spends about $800 a month on groceries before card rewards. After rewards from our AMEX Blue and Citi Costco cards, our true spend is about $690 a month, or $8,280 a year. If the kids account for roughly half the food cost, over 16 years that’s $66,240.
With some credit-card strategies and small lifestyle changes—no constant snacking and an 80% vegetarian approach—we’ve trimmed about $13,000 off the food total.
New tally: $128,290.
Clothing clocks in at roughly 6% of the total—about $14,016 per child over 18 years, or $28,032 for two. That’s about $800 per child per year. A lot of that is shoes as they grow.
We’ve been lucky to get help from grandparents and hand-me-downs, and we shop consignment and eBay for deals. So we’ll cut that $28,032 in half. Wish us luck when the teenager needs trendier stuff.
Now we’re at $114,274 for two kids.
One more tweak: studies show dual-income couples often see a net pay bump of about 2% after kids—dad’s pay tends to rise while mom’s often falls, which is a problem, but the overall figure is around 2%. If our hypothetical household earns $150,000, that 2% is $3,000 a year. Invested in a 529 over time, that could grow to about $67,998 for college.
Also, when kids arrive you naturally spend less on travel and eating out. Our travel budget fell from $6,000 to $3,000 and dining out from $200 to $100 a week. That saves about $8,200 a year, though I’ll only count $3,000 of that per year for our conservative estimate. Multiply that $3,000 by 18 years and subtract it from the final total.
After these adjustments, our final number lands at $60,274 for two kids over 18 years—or about $30,137 per child. A lot less scary than $233,610, right?