As American families grapple with multiple financial challenges, one cost that stands out prominently is the rising cost of raising children. This ballooning expense is reshaping life decisions for many.
Escalating Parenting Costs
Recent data from LendingTree paints a clear picture of the escalating costs parents are grappling with. On average, raising a child from birth to the age of 18 now requires an investment of $237,482.
An Increase of Nearly 20%
The rate at which these expenses have grown is also noteworthy: the average yearly cost of child-rearing was $21,681 in 2021, marking an increase of nearly 20% from the figure reported in 2016.
Only Covers the “Bare Bones”
Surprisingly, these figures only factor in what LendingTree defines as the “bare bones” of child-rearing: necessities such as food, housing, child care, clothing, transportation, health insurance, and the influence of tax benefits like the Child Tax Credit.
More Costs for Additional Activities
Not accounted for are enrichment activities like sports or after-school classes and, crucially, the increasingly steep costs of college tuition.
An Unsettling Financial Reality
Matt Schulz, LendingTree’s chief credit analyst, expressed his concerns to CBS MoneyWatch about the ramifications these escalating costs have on family planning decisions.
Postponing Family Planning
With many adults already living paycheck to paycheck, the idea of adding child-rearing expenses, which doesn’t even account for college tuition, is leading to postponement or even reconsideration of having children altogether.
Childcare Costs are the Main Cost
The lion’s share of child-rearing costs is dominated by child care, which averages a hefty $11,752 per year.
Opting Out of the Workforce
Such a significant expense has resulted in some parents opting out of the workforce, especially when their earnings might not sufficiently cover childcare costs.
Childcare Costs on Par With College Tuition
And these costs can vary widely based on geography; for instance, parents in Washington, D.C. may find themselves shelling out as much as $25,000 a year on child care, on par with college tuition in many institutions.
Hawaii Is the Most Expensive State
Hawaii takes the top spot as the most expensive state for child-rearing, demanding average yearly expenses of $30,506.
Mississippi the Most Economical
On the other end of the spectrum, Mississippi offers the most economical experience, with an average yearly cost of $15,555.
$1 out of every $5 on Children
To put things in a national perspective, parents, on average, dedicate approximately $1 out of every $5 of their income to child-related expenses.
Bracing for the Impact
For those on the cusp of starting a family, Schulz has shared some potential coping strategies.
These include commencing savings as early as feasible, leveraging rising interest rates via high-yield savings accounts, and exploring local avenues for financial aid, like government-backed programs or nonprofit organizations.
Take Advantage of State Provisions
Taking advantage of state provisions, like Vermont’s voucher system for pre-kindergarten instruction, or reallocating saved childcare funds into a college savings plan, like the 529 plan, once children join public school can also help offset future costs.
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Source: CBS News