Do Kids Really Cost a Lot of Money? Here’s What We Spent in the First 5 Years

Once you reach adulthood, you begin to hear about how expensive children are. Better start saving up! But how much do kids really cost?

Our daughter recently turned five. Everyone who says that they days are long, but the years fly by is absolutely correct. After being inspired by a post on the Modern FImily’s blog, I set out to determine how much we spent in our daughter’s first 5 years.

How much does raising kids usually cost?

According to the United States Department of Agriculture’s (USDA) 2017 study, the average cost of raising a child born in 2015 is expected to be $233,610! Adjusting these findings for inflation through August 2021, using data from the U.S. Bureau of Labor Statistics (BLS), would increase this estimate to over $263,000.

These estimates don’t even include the cost of sending that kid to college, which could easily add another hundred thousand dollars or more!

The estimates above represent expected costs for a married, middle income family, with two kids. Changing the number of kids, income level, or location, all resulted in different estimates. For example, changing income levels resulted in different expected costs ranging from $212,300 to $454,770. Additionally, there are economies of scale as the number of children increases. As such, the estimated cost for an only child averaged 27% more than the cost for kids in a family with two children.

How much our child cost in her first 5 years:

When it comes to tracking our money, I’m a bit obsessive, so it wasn’t too difficult to pull together enough information to determine our child-related costs for each of the last five years.

For the most part, I have separate kid categories for clothes, activities and other purchases, which made this easy. A couple categories required a little more digging to break out, which I’ll explain further below.

I have to admit: When I started this project, it was with the attitude that kids aren’t as expensive as everyone says they are. We don’t buy many toys, nor do we enroll her in dozens of activities. However, after adding everything up and seeing that we spent over $65,000 in just the first 5 years… maybe I was wrong.

Here’s how much we spent on our kid in her first 5 years, by category.

Those childcare costs will get you!

We spent over $44,000 on childcare costs! That’s a lot, and represents over 2/3 of our kids cost. In our case, the childcare costs varied a lot from year to year, based on whether our child was actually in daycare and whether it was full-time or not.

For the first 6 months and the past 18 months, our child was not enrolled in daycare or preschool at all, keeping these costs minimal. At it’s peak, full-time childcare cost us over $15,000.

On a positive note, if you exclude childcare costs, our spending was relatively low at $4,200 per year. That’s good news for anyone who’s considering having one parent stay at home, or has family nearby who are willing to help out in exchange for kiddie hugs.

Medical and Health Insurance Costs

Our medical costs have been relatively low so far, primarily because I had (and paid a big premium for) awesome insurance coverage during our daughter’s first couple of years. It covered the costs of her specialist visits and genetic testing after birth, as well as the 25 times she got sick during her first year at daycare.

More than half of our total spending was for one Emergency Room visit a couple years ago, which unfortunately occurred after we had switched her to Mr. RFL’s high deductible insurance plan.

For health insurance costs, I allocated the incremental costs for adding her to our chosen plans each year (i.e. family plan vs. spousal coverage only).

Clothes

The USDA study estimates around $760 per year for clothes in the first 5 years. This is much higher than we spent, and than I think most families probably need to spend.

Truth: Little kids are slobs. Anything you buy them is likely to get stained or ruined. We don’t buy expensive clothes for our kids, and gladly accept hand-me-downs from neighbors and friends. I suspect that it will get harder to do this as she gets older, but you can certainly save money in this category when kids are young.

Food

Food is the primary category where I had to do some estimating.

During the first year, any food related costs (which were minimal) were included in our “Kid Supplies” category. However, once our daughter began eating solid foods, I no longer separated her costs.

For the purposes of this exercise, I allocated 15% of our grocery spending and an estimate of actual restaurant costs based on my review of that year’s charges (we rarely bought her food out). In order to gut-check this, I also calculated her food cost on an average day by age, and extrapolated the results for the year. Neither approach is perfect. However, since both methods resulted in similar costs, I feel good about using the results here.

Furniture

This money is for our initial furnishing of the nursery, as well as the twin mattress and supplies Mr. RFL needed to build her “big girl bed” a few months ago. We purchased everything new, thinking we’d have multiple kids. But things don’t always go as planned.

Either way, you can save additional money here by picking up furnishings, toys and gear from second hand marketplaces (sometimes for free).

Activities

This is one category where I know we spent less because of COVID. The pandemic delayed swim lessons and any other activities we would have signed up for by about a year.

That said, you don’t need to enroll your child in dozens of activities. We’re aiming to practice a “one activity at a time” rule, which will help to control costs, but also to prevent the overscheduling which can leave some kids stressed out.

Other kid supplies / toys

Although the average annual spending for this category appears pretty large, the bulk of this spending occurred during the first two years.

Perhaps unsurprisingly, the largest expense in this category was for diapers. However, there were also a number of one time expenses for other baby gear in the first year. We were fortunate enough to have received a few larger items as baby gifts, which kept this lower than it otherwise would be.

Buying things second-hand or joining your local mom’s group for hand-me downs is a great way to save money in this category. While I wouldn’t recommend it for car seats or bottles, it’s a great strategy for other items. We also keep these costs low by minimizing the number of toys, books, and other “stuff” that we buy our child. She receives enough via gifts and hand-me-downs, so we try to limit our purchases to craft supplies and other items that will get her moving or enhance her creativity.

Categories from the USDA report that I didn’t include in our analysis

There were a couple categories included in the USDA study, which I did not include in my own analysis. Most notably, housing and transportation.

The infographic above shows housing as the largest expense at 29% of costs, with transportation making up 15%. The assumption is that families will buy a bigger home and bigger cars to fit all their kids. I imagine this is true to some extent, but it felt far too high for our circumstances.

We would have purchased the same cars regardless of our parental status, so it seems unreasonable to allocate a portion of the car expenses to our child. Additionally, while there were certainly additional fuel costs incurred over the past five years, we’ve always kept daycare close to home or our existing commute, so I doubt they were significant.

As far as homes go, I don’t think we would have spent much less (or more) on our homes if we were childless. Our money may have just gone to different aspects of the home. We didn’t buy a bigger house specifically for our child. And while we would pay more money for a better school district, our current home was chosen for proximity to Mr. RFL’s work and other attractions (it just happens to have great schools). That said, I imagine that seeking out good schools for our early retirement home will increase our costs, so this may not hold true in the future. Finally, while she uses some of the electricity and water, I didn’t feel like it was enough to warrant splitting out here.

Your circumstances may be different, so you may want to include an allocation of these costs in your own estimates.

Average cost to raise kids broken out by age (0-5)

How much kids cost will vary from year to year. You can check out the USDA’s study for the full breakout of expected costs by age range.

Since our daughter was born around the time this study came out, I used the data to compare our actual costs to the expected costs by year. Additionally, since we only have one child, I include both the family and only child amounts below.

Overall, it seems like we are spending on track to expectations. Although we’re well under the only child estimates, I suspect part of that difference stems from our exclusion incremental housing costs.

Unfortunately, being “on track” means that I might be wrong… Kids might cost as much as everyone says they do.

In case you’re interested, here’s a breakout of our actual costs by category for each of the last five years.

Don’t forget the benefits of having kids…

Technically, there are a lot of “benefits” of having kids. However, since this is a personal finance blog, let’s just focus on the financial benefits for now.

The biggest financial benefit to having kids are tax benefits.

Most states and the federal government have historically provided deductions or credits based on the number of people in your household. For 2021, the federal tax credit per child was increased to $3,000 ($3,600 for kids under age 6) for qualifying families.

Additionally, you might be eligible to receive additional benefits through work because of your child. For example, Mr. RFL’s employer contributes money to each employee’s Health Savings Account based on the health insurance plan selected. We received an extra $500 per year for adding our child on the plan, which effectively offsets some of her medical costs.

These benefits can add up, so don’t forget to include them in your considerations!

Conclusion: Worth it (but expensive)

Obviously, money is not the only factor to consider when it comes to deciding whether or not to have kids. But kids do “cost” a significant amount of money. They are also a lot of responsibility and require a lot of time, patience, and effort.

However, for us (and many other families), these costs are all worth it.

Still, it’s helpful to understand the common costs of raising kids so that you can plan accordingly as you decide what path is right for your family.

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