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Raising Children Costs Between $286,000 and $476,000

The U.S Department of Agriculture (USDA) just came out with its latest figures on how much it costs to raise a child. Ready for sticker shock? Middle income families (with annual earnings of $56,670 to $98,120) spend between $11,650 and $13,530 a year. Upper income households (with annual incomes above $98,120), dig considerably deeper into their pockets, shelling out between $19,380 and $23,180 a year.

The price tag for new parents is even worse. A baby born in 2009 will cost a middle class family $286,050 by the time that child reaches age 18. Wealthier moms and dads can expect a bill of $475,680. (These figures are adjusted for inflation.)

Here's some more bad news. The reality is that most families will spend far more than these figures since there are child-related costs that aren't included in the government's statistics. First, it doesn't take into account the cost of college or all the money that many parents start setting aside for education when their little ones are still in diapers.

The USDA expenditures also don't include the cost of life insurance. Sure, buying term or whole life isn't a requirement for parents. But many of us choose to purchase policies that could run several hundred or even thousands of dollars a year to help support our children should anything happen to us.

And let's not forget the loss in earnings or career opportunities that many of us miss out on simply because we're busy raising a family. According to one recent study, "Getting a Job: The Motherhood Penalty", working moms who were on the hunt for a new position were offered an average $11,000 less a year than equally qualified childless women. As for stay-at-home moms, their life long earning potential suffers considerably due to the pay cut they often have to take when they return to the workforce.

Our Parents Had It Easier

My parents have often reminded me that raising children has never been cheap. Still, I've often wondered how they and their generation managed to comfortably bring up kids on one income while my friends and I struggle to do it on two. The answer, it turns out, is pretty simple. Child rearing is now 22% more costly than it was back in 1960. Adjusted for 2009 dollars, middle income parents spent $182,857 on their youngsters in 1960. Today they spend $222,360.

Interestingly, a family's biggest expenses -- housing and food -- were the same back in 1960 as they are today. Only, we now actually spend a smaller percent of our child-rearing expenditures (16% versus 24%) at the supermarket.

Clothing and transportation are also cheaper today. Families spend just 6% of their kid budgets on their children's wardrobes today versus 11% back in 1960. And transportation costs account for just 13% rather than 16% of expenditures.

So then where is all of our money going? Blame child care and health care costs. Two income families in 2009 are handing over 17% of child-rearing expenses to caregivers and education expenses. Back in Don Draper's day, mom stayed home and the family spent very little on babysitters.

The other big increase is in health care costs, which have doubled over the past 50 years. Families now spend 8% of their expenditures on it versus just 4% back in 1960.

Are you surprised by how much it costs to raise a child? What are your biggest expenses?

More on MoneyWatch:
Cost of Raising a Kid: What the Feds Got Wrong
Baby image by gabi_menashe, courtesy of CC 2.0.

Stacey Bradford is the author of The Wall Street Journal. Financial Guidebook for New Parents.

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