09 May Cost of kids
Photo by Ben Wicks on Unsplash
If you have a family, or are thinking of starting one, chances are you already know it’s expensive to raise children in this day and age. I certainly do based on my experience of raising two kids, but I don’t know exactly how much it’s going to cost over an 18 year period – which is not necessarily when they will cease to be on the payroll but it is at least when they are adults.
A report published in August 2018 by the Child Poverty Action Group estimates the additional cost to a family of having children. They calculate the cost of an individual child as the difference in costs that an additional child makes to the whole family’s expenses rather than basing it on a list of items.
In other words, the report looks at the costs of a family (couple) without kids and then the total cost if they have a child and each additional child. It looks at the costs for each year of childhood, and then adds these up to give a total from birth to age 18.
The expenses they looked at were based on the Minimum Income Standard (MIS) which is defined as “the income that people need in order to reach a minimum socially acceptable standard of living in the UK today”. Items in the MIS range from food, clothing and heating bills to modest items required for social participation, such as birthday presents and a week’s self-catering holiday in the UK once a year. The report then includes childcare costs but does not include more expensive holidays or some of the other activities that we all help our kids participate in which inevitably cost additional sums.
Just the MIS figures with childcare included are quite frightening, particularly if you have young children!
For a family using childcare without any state assistance, the estimated overall cost of one child from birth to age 18 is £162,000 (for a family with two parents), or an average of £9,000 per year. The report does find that the costs of the first and subsequent children are not identical due to the need for changes in lifestyle and the economies of scale relating to having more than one child. However, when families reach the third child, the marginal costs rise due the need for additional expenses such as a larger car.
The report does allow for additional housing costs but uses a model of minimum costs based on social rents for families with children. This potentially understates the cost to families who own their own homes as there is often the need to spend additional sums to either extend your current home or buy a bigger home in order to accommodate your expanding family. I know the costs of this myself, but they have to be weighed against the benefits to the whole family that come from a better home.
Even if you don’t take into account additional housing costs, the report allows us to estimate that the cost of two children from birth to age 18 might cost c.£324,000. Again, this is based on the MIS, which is not going to be the standard of living for every family, but it does provide a good starting point.
Our kids are in fact priceless and we never judge them against a monetary cost. Nor does the decision to start a family rarely come down to simply cost, so this is purely an academic exercise. However, it does give us an idea of just how expensive a family can be and reminds us that these costs do not include saving for our retirement, private education or the costs of university education. It also highlights our reliance on our ‘human capital’ or ability to earn and the need for adequate protection against death and disability.