Raising children is expensive — and the cost of raising a child is climbing higher. A baby born in 2013 to an average middle-income family will cost $245,000 to raise to his or her 18th birthday, according to the U.S. Department of Agriculture.
That’s an increase of 2 percent, or $4,260, over the previous year, indicating that costs associated with childrearing are rising faster than the rate of inflation. (Inflation rose by 1.5 percent between 2012 and 2013, the most recent year for which there’s complete data, according to the Westegg Inflation Calculator.) And let me clarify: that $245,000 price tag excludes the cost of college (which could add another $50,000+ to the bill, expressed in today’s dollars).
How on earth do we reach that quarter-million price point? Nearly half is consumed by housing and transportation: your child will need a bedroom, which means you’ll need (or want) to move from a one-bedroom home into a two- or three-bedroom home. You may be able to share a room with the baby when he’s a newborn, but you’ll eventually want him to have his own room (or share a room with siblings).
Child care is the second biggest line-item on the list, coming in at about $44,000. For some families, the monthly cost of childcare is almost as high as their mortgage. It’s not uncommon for families to pay $1,500 to $2,000 per month for childcare, especially when children are very young.
While I can’t offer any advice to help you maintain a one-bedroom home after the kids are born, I can offer a few pointers to tackle the second-biggest component of those expenses. Here are a few ways to lower childcare costs:
1) Move closer to grandma and grandpa
Move closer to family if possible — even if it means accepting a slight pay cut at work — if this significantly reduces childcare costs. But be cautious: while a short-term paycut is fine, don’t accept a job that has diminished or limited growth potential. That’s robbing from your future to save a few dollars in the present.
2) “Barter” childcare services
Barter with friends and neighbors. Since childcare costs can be astronomical, ask your neighbor, for example, if they can watch your child after school from 3 pm until 5:30 pm when you arrive home. In return, you’ll watch their children every Friday and Saturday night, so that they can enjoy some adults-only time.
3) Compare prices
Don’t assume that daycare is cheaper than hiring a live-in nanny or au pair, especially if you have more than one child. Sometimes, live-in childcare can actually result in cost savings, particularly if your childcare provider lives in your home. Nannies and au pairs will often accept a lower salary because you’re providing housing and utilities.
4) Look for flex time
Ask your employer if you can work from home one day per week. Produce your best results on that day, and after three to six months, ask your employer to extend this to two days per week.
The ability to work-from-home will dramatically increase your flexibility, which means you’re more likely to be the person who can pick up the children if they get sick at school (rather than needing to call a babysitter to arrange a pickup).
Don’t assume you’ll be able to focus on work while your children are at home. Even if you work from home, arrange for your children to be watched by a babysitter, or participate in a sports league, so you can have a few hours of quiet concentration. Use this time to bolster your performance at work — so that you’ll have more negotiating power.
Do you have children? How do you keep childcare costs at a minimum?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.