Why It’s So Difficult to Raise Kids and Save for Retirement

  • By Chuck Jaffe, Marketwatch
  • October 01, 2014

cost of children

My youngest daughter was born 21 years ago. At the time, I called an economist named Mark Lino from the U.S. Department of Agriculture, who told me to expect to spend as much as $300,000 to get her to age 18; toss in college costs, and it was well past $500,000 to get her to adulthood.

As a result, after she was born my lifetime financial priorities were reorganized. They became:

  • Live in a home with at least one more bathroom by the time my girls were teenagers
  • Pay for my girls’ college educations
  • Pay for their weddings
  • Collapse, after all that, into retirement with some measure of financial security

When I wrote about those priorities for The Morning Call in Allentown, Penn., where I worked when my daughter Whitney was born, I recognized that what I lacked was a plan to achieve my goals. I’ve realized over the years that the one financial “plan” that most parents have is to handle all of their most immediate needs and goals first, and assume everything else will just work out somehow. That’s how it was for us. And that’s why while my first two goals have been met — and the third may not be an issue for a while — it’s the fourth one that has me most concerned.

So when the Department of Agriculture recently released its latest child-rearing numbers, I talked to Lino again, this time about financial planning. Adjusted for inflation, the cost of raising a child born in 2013 to age 18 is $304,480, according to USDA numbers.

The changes in the last few decades have come in a few key areas. Health-care costs accounted for about 4 percent of child-rearing costs in 1993 when my daughter was born, but they amount to 8 percent of the tally today.

The biggest change since the USDA started keeping the numbers back in 1960 comes in child-care costs, which the agency lumps in with education costs (which can range from preschool and nursery school to private school). On average in the 1960s, child-care costs were roughly 2 percent of the total paid to get a child to the age of majority; today, child-care/education costs make up nearly 20 percent of the total.

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