A Sucker’s Game?

by Stacey

Over the course of their life, kids cost parents a fortune. More than you may realize. More than you might want to know. So if you don’t want to know, start singing la-la-la and skip on down to the next post.

According to this special report on the cost of kids (ooh, a special report!) in Business Week magazine, parents with some cash to spend will shell out about $300,000 on their kids by the time they turn 18 years old. That doesn’t include college tuition. Say what? Thanks to Salon’s Broadsheet for the tip.

The Agriculture Dept.’s latest survey found that households in the top-third income bracket (with average pretax income of $118,200) will spend $289,380 by their child’s 18th birthday—or about $17,000 a year (in 2006 dollars).

The largest expense is housing, according to an article in the report. A USDA survey found that housing makes up about a third of expenditures for parents, given that people often seek out more space and good schools. Health care is also sucking up more of parents’ hard-earned cash given that premiums and co-payments have been rising, says USDA economist Mark Fino.

Indeed, the USDA survey is probably understating the cost of raising kids. Considering extras like sports equipment, summer camps, private school, Disney vacations, and a full-time nanny, raising a child through age 17 could cost $1 million or more. Some parents throw extravagant birthday parties and won’t hesitate to buy their kids the latest video games and cell phones and splurge on Spanish and painting lessons.

It gets worse. There’s a whole bunch of additional expenses that the survey left out, including, ummm, college tuition. Hello? “According to reports from the College Board, a private four-year college runs an average of $23,712 per year (up 6.3% from the 2006/07 school year), while a public four-year college costs $6,185 (up 6.6% from last year),” the article says. “The ‘good news,’ says the College Board, ‘is more than $130 billion in financial aid is available.'”

Then, after college, many parents are welcoming their children back home until they find a job. In fact, 25% of employed parents have kids aged 18 to 29 living in their home at least half the time. Parents contribute $2,200 annually (on average, in 2001 dollars) to children aged 18 to 34, according to a 2003 University of Pennsylvania study. This transition to adulthood “is a very risky period,” says Arlene Skolnick, a visiting scholar at New York University and research scholar at Counsel on Contemporary Families.

Parents live in fear that their children will not acquire the skills they need to earn at least a middle-class salary, the article says. “Children that earn a bachelor’s degree stand to earn over 60% more than those with only a high school diploma, the College Board says. Over a lifetime, the gap in earning potential between a high school diploma and a B.A. is more than $800,000, it says.”

Then kids go on to have their own kids and some decide not to work, (ahem, like me) so they can stay home with their children and spend even more money. “Studies have estimated that indirect costs, such as foregone earnings, oftentimes exceed direct costs, especially if one parent has to drop out of the workforce,” says Fino at the USDA.

On top of all that, growth in wages for U.S. workers has been minuscule or stagnant, while inflation has crept higher. Average hourly earnings rose just 0.7% last year after declining in 2005 and 2004, versus the peak annual growth rate of 4.1% for 1972, according to the Labor Dept. Meanwhile, prices for food, energy, and other goods keep rising, as measured by the 3.2% rise in the consumer price index last year.

It’s information like this that just might make some people think twice before having kids. Everyone tells you about the sleep and the tantrums and the runny noses and you don’t believe it will actually happen to you or at least that it couldn’t possibly be as bad as they say. But when it’s written down in dollars and cents, it’s hard to deny.

It’s costs such as these that make 28-year-old Bahar Zaker in Syracuse, N.Y., want to put off having kids, maybe forever. “We can’t imagine how we would manage the costs of kids,” says Zaker, who has been married for three years to a philosophy professor and is finishing her thesis on French surrealist art at the University of California. One big hurdle for her is the price of education, and she questions whether it pays off. “The costs of education are going up, and you’re not always sure the value of the education is going up with them,” she says. But she also admits that not having kids is a lifestyle choice. “We both like to travel,” she says.

Yeah, well so did we. The article ends with the hope that the government or some other “savior” as the writer puts it, will help families with all this financial burden.”Everyone who wants to may join the paid labor force, but almost no one gets a family wage or enough help from government to defray the costs of raising children,” says Phillip Longman, author of the book The Empty Cradle: How Falling Birthrates Threaten World Prosperity and What to Do About It (Perseus Books Group, 2004). He figures the critical moment will emerge during the next decade, “as millions of Baby Boomers start crashing past the boundaries of old age, and as today’s teenagers find themselves saddled with massive student loans, rising taxes, and growing frustration over the difficulty of forming or affording a family.”

Until then, as Longman puts it bluntly: “Child rearing is fast becoming a sucker’s game. Though the psychic rewards remain, the economic returns to individual parents have largely disappeared, while the cost of parenthood is soaring.”

For more:
Here’s a debate on whether or not it’s worth the cost.
Here are some tips on how to make ends meet.
Here’s an article on great places to raise kids for less.
Here’s one on how to go to college for free.
Here’s another on entrepreneurs targeting parents.