Guest Opinion: Child costs keep rising
Each year, The U.S. Department of Agriculture estimates the costs of raising a child from birth to the age of 18.
The USDA estimated expenses include housing, food, transportation, clothing, health care, education (not including college), child care and miscellaneous expenses.
At first blush, the numbers are quite intimidating: To raise a child born today to age 18, it will cost a middle-income family more than $250,000, with a high-income family spending more than $450,000 and a low-income family spending $145,000.
Add in the projected costs of college (more than $150,000 for a public university; $400,000 for a private institution), and the amounts spent raising children can have a serious impact on the savings plans of most families.
By comparison, in 1960, it was estimated that a middle-income family would spend just over $25,000 to raise a child. Adjusted for inflation, that amount today would be about $200,000, reflecting the fact that the costs have unfortunately outstripped inflation.
Within those overall expenses there have been some interesting shifts in percentages allotted towards child care, education and health care.
In 1960, child care and education comprised 2-percent of the overall child-raising expense, while today that number is 17-percent. In 1960, few women worked outside the home while today, dual-income families are common, making child care and early education a much bigger portion of family budgets.
The cost of health care has more than doubled from 4-percent to 10-percent of overall expense, with most of that increase coming since 2000.
But that does not tell the complete story because a family forced to care for a critically sick child today will find it much more expensive than in 1960, as advances in technology have driven health care costs through the roof.
Surprisingly, the cost of feeding a child has dropped from 24% of total expenses to 16-percent, and clothing costs have nearly been halved. A gallon of milk in 1960 cost 95 cents, the equivalent of nearly $7 today.
A dozen eggs in 1960 cost the equivalent of $6.75 in today’s dollars. In addition, today there are many more low-priced, fast-food options that have brought down the cost of feeding a family.
Indeed, the 1960’s proved to be the most expensive decade for food and clothing over the past 50 years. Undoubtedly the biggest dollar increase over the past 50 years has been the cost of a college education.
A semester at a major university in 1960 cost just $150. Today, a private nonprofit university can cost upwards of $55,000 each year for a four-year degree, and that does not include costs for any professional or post-graduate degrees.
We highlight this data not to foster discouragement, but to make a vital point: Raising children anymore requires long-term financial planning on the part of parents, and sometimes grandparents, too.
The good news is that with planning, the costs can be managed. Indeed, there are many ways to help your children and grandchildren as they face the financial challenges of growing up in today’s world.
Whether through gifting strategies, 529 plans, custodial UTMA or UGMA accounts, trusts, or other vehicles for passing wealth in your lifetime, we can help you devise a strategy for helping those who are important in your life.
Steven V. Greenstein is the Executive Vice President, of the The Sanibel Captiva Trust Company