The Cost of Raising a Child Has Surpassed $300,000

Posted by Matin Varshochi in FamilySeptember 2, 20227 min read
Key Takeaways
  • A report by the United States Department of Agriculture (USDA) in 2020 said the cost to raise a child was $233,610. But, a recent estimate from the Brookings Institution says the number has exceeded $300,000. 
  • Housing, food, and education account for most of the costs associated with raising a child. 
  • One way to reduce the cost of raising children is by applying for and receiving Child Tax Credits from the federal government.
Are you ready to make some real money moves?

The idea of having children can be sweet when you think about all the special moments like cuddles, hugs, and kisses. But the reality of having children is that they are a huge responsibility, especially regarding your finances. 

According to Statista, 40% of Americans currently have at least one child under 18 living in their household. In addition, the number of emerging parents has increased over the years, and so has the cost of raising children.

According to another study released by the United States Department of Agriculture (USDA), the average cost of raising children in 2020 was $233,610. Since then, the most recent estimate from the Brookings Institution reports that the average cost of providing for a child has surpassed $300,000. Many economic factors like inflation have influenced the rising cost of taking care of a child.


Major Costs of Raising a Child



According to a study by the Kaiser Family Foundation, it costs around $18,865 to give birth under large insurance plans, with an out-of-pocket average of $2,854. If a mother doesn’t have an adequate health insurance plan covering birthing a child, she could pay large sums of money later. 


mother giving birth to her child

Image Credit: Iryna Inshyna /


Also, it’s important to note that most hospitals in the United States bill mothers differently based on whether she is having a vaginal birth, cesarean (also known as a c-section), or whether their hospital stay is extended due to their recovery process. 



After the baby is born, a significant cost that should be accounted for is the baby’s nutrition. Whether a mother chooses to nurse her baby or formula-feed, the costs of each have long been debated. Although buying formula can be a hefty monthly bill, mothers who breastfeed also have to take into account other expenses. 

“Most breastfeeding women require an additional 500 calories per day. That means bigger appetites and an even bigger grocery bill,” According to an article by Her Money. “Breastfeeding also calls for the continuation of prenatal vitamins, which poses an additional cost.”


Whether a mother has the ability to breastfeed or chooses to formula feed her baby, the expenses might differ, but they can still become a financial strain for parents. 



According to a USDA report, the largest expense for every American is their housing cost, which typically can account for one-third of a person’s monthly after-tax income. As a parent, sheltering your child is one of the main priorities and is a non-negotiable expense. However, with the housing market constantly fluctuating, this estimate will most likely vary, depending on the size of your house and the location of your residency. 


Finding a safe and affordable home is key, and these two features are heavily reliant on the size of your down payment and credit score. As a result, it is crucial to take proactive steps toward attaining a higher credit score so the interest rate on your mortgage is lower. When your interest rate is lower, you have to pay less to your lender each month, and you can use the excess money towards bettering your child’s life. 


Recommended Read: The Best Time to Buy a House




Another large expense that has to be paid for a child is getting access to education. When signing them up for school, there are two options, public or private. Public schools are free of charge from kindergarten until grade 12, but private schools cost an annual average of $12,350

Your educational expenses will vary depending on whether you sign them up for public or private school. Regardless of your choice, if you want your child to participate in extracurricular activities such as sports or being part of the school band, it will set you back more. 


children raising hand in class

Image Credit: wavebreakmedia /


CapWay Pro Tip: CapWay provides financial education to children and adults of all ages. If you want to increase your financial knowledge to better understand how to prepare yourself for children or any other financial life event, go to our Phunds or Learn Money pages and search for any topics you like. 


Health Insurance

One cost that is sometimes overlooked is receiving access to health care. There will come a time when a child will have to visit the doctor for a flu shot or for their annual check-up. These procedures are crucial and expensive, so attaining family health insurance is essential. 


girl at doctor's office

Image Credit: gpointstudio /


On average, health insurance costs $456 per month and $1,152 for a family. Although health insurance is a minor expense compared to the other costs of raising a child, it is crucial to have as its absence carries significant risk.


Recommended Read: Healthcare Costs Are Increasing Despite Affordable Tactics


If there comes a time when you/your child needs immediate medical attention, and there is no health insurance to cover the procedures, it could have major financial consequences.

Factors Causing Higher Cost of Childcare


Over the years, the annual cost of caring for children has increased, mainly due to inflation. As inflation levels have been relatively low in the past, the cost of caring for a child rose subtly. But, the past couple of years has shown rapid increases in cost, mainly because of the COVID-19 pandemic.


The COVID-19 pandemic caused the government to implement numerous relief packages to help Americans out with their ongoing living expenses. As a result of the various government assistance programs which gave money to millions of families, inflation began to soar to its highest point since 1990, which inevitably raised the cost of living and caring for children. 

What Higher Costs Could Mean


Bringing a child into the world is a choice that many adults choose to make. However, the rising education, housing, and food costs are causing households to make a financial decision on whether they can afford to conceive. As these costs continue to rise, the typical household income could become insufficient in the future to adequately support a child. 


Consequently, if the cost of raising children continues to rise at a similar rate, it could mean the only people who are financially comfortable to afford children would become those in the upper middle class and higher. 


Setting Your Child Up for Financial Success


Although the outlined costs above are expensive, they fail to factor in the possibility of a child pursuing higher education. On average, public and private tuitions cost $10,388 and $38,185, respectively. As the cost of tuition will rise by the time your child chooses to attend college, below are two investment accounts that can be opened to help your child be financially prepared when the time comes to pursue higher education.  

dad and daughter reading book together

Image Credit: Monkey Business Images /




The first account that can be opened to help your child have access to funds once they choose to pursue higher education is a Uniform Transfers to Minors Act (UTMA) account. The UTMA account is a tax-advantaged account that allows minors to receive various assets which will be put under their name. 


However, the minor will not have access to this account until they reach the age picked by the account creator, typically between 18-25. A custodian is in charge until the child reaches the predetermined age to control their account. The goal of the custodian is to maintain the account as they see fit until it is time for the child to take over. 




The second account that can be opened is the Uniform Gifts to Minors Act (UGMA). The UGMA account is an investment account that allows adults to transfer assets into the child’s account for different reasons. Once the assets have been put into the minor’s account, they cannot be moved or touched until the child reaches the predetermined age chosen by the account creator. 


Similar to a UTMA account, the UGMA also has an appointed custodian to take care of the assets held within it for the child.


Cost Reduction Options


As the cost of raising children has increased over the years, it can become difficult for the typical household to keep up with the rising cost. Fortunately, the federal government has decided to step up and help families out. The government has introduced the Child Tax Credit, which is a reimbursement given to parents so long as they meet the necessary requirements.

The Child Tax Credit allows parents to receive a tax credit of $3,600 for every child under the age of six (6) and $3,000 for every child between six (6) and seventeen (17). If you wish to read more about the Child Tax Credit to see whether you qualify, click on the link below. 


Recommended Read: Parents to Receive Monthly Child Tax Credit Payments Starting July 15th


The Money Wrap-Up

Deciding to bring a child into this world requires many preparations to be done correctly. Taking care of children until they reach the age of 17 and beyond requires immense responsibility. As a result, to ensure neither you nor your child experiences financial hardship, take the time to research the cost of food, education, and housing. 


The $300,000 figure was an estimate; it will change depending on your area and preference. By attaining a better understanding of the costs associated with raising a child, the chances of a financially comfortable life will be higher, which is beneficial for everyone.


Disclaimer: The information in this article should not be considered financial advice. Always consult a tax professional or financial advisor prior to making any key financial decisions. CapWay is not liable for any losses which may be incurred. 


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