OREGON STATE UNIVERSITY

Costs of raising a child continue to rise

05/23/2000

CORVALLIS - The cost of raising a child continues to rise and is highest for families living in cities in the western United States, according to the U.S. Department of Agriculture.

In its annual report "Expenditures on Children by Families," the USDA estimates a middle income ($36,900-$62,000 a year before taxes), two-parent family in the urban West will spend $173,880 to raise a child born in 1999 to age 18.

The total is 2.6 percent higher than for the previous year, but is offset by a corresponding rise in income. Child raising costs in the urban West are higher than the rest of the country primarily because housing is more expensive, according to Alice Mills Morrow, Oregon State University Extension family resource specialist. Housing is the largest expense across all income groups and accounts for 36 to 3

8 percent of child-rearing expenses. Food is the second largest average expense, accounting for 15 to 19 percent. The cost of food for a child rises steadily as the child grows older, almost doubling by the teenage years, according to the report. A middle-income family in the urban West spends an estimated $1,120 per year on food for a child from birth to age two. The food budget will reach an estimated $2,150 per year for the same child when she or he is between ages 15-17.

Families with an income below $36,900 will spend a higher percentage of their income for food expenses, 19.5 percent, compared to families with an income above $62,000, whose food costs will account for 15 percent.

Unlike food expenses, the cost of child care is highest during the first five years of life. Child care and education are the only expenses that go down as a child grows older, declining every year until rising between ages 15-17.

Because single-parent households account for an increasing percentage of families with children, the USDA prepared separate estimates for these households.

The estimates show that a single parent family with an income less than $36,800 before taxes will spend $111,570 to raise a child born in 1999 to age 18. The western two-parent counterpart will spend $130,890. Although the actual expenditure is less for single-parent families, it represents a larger percentage of income.

"Single-parent families have lower average incomes and spend a larger percentage of their income on children," Morrow said.

Because the USDA estimates are based on averages, they are not useful in predicting what a particular family will spend. However, they do illustrate useful trends. For instance, the overall cost of raising a child increases as a child gets older, a signal for parents to continually find ways to add to their income.

"That's probably not good news for parents of pre-school children who think financial pressures will be less when day care is no longer required," Morrow said. "Unfortunately, the savings in child care as youngsters grow older is more than offset by increases in other expense categories."

The USDA estimates only apply to costs from birth through age 18. They do not include the cost of saving for college. While saving for college is encouraged, Morrow says people need to take care of immediate concerns first and get their current situation under control.

Nor do the cost estimates take into account the income lost when a parent drops from full-time to part-time employment in order to spend more time with the child, or declines a career promotion to avoid uprooting the child. And supporting children may not end after they reach 18 years of age. A 1996 survey by Phoenix Home Life Mutual Insurance Company found that 47 percent of parents provide some support for children over 21 years of age.

The USDA estimates are put to a variety of uses. Divorce attorneys and mediators employ them to provide a reality check for parents who think child support guidelines are unrealistic.

The estimates are also useful in estate planning to evaluate financial needs in case of a parent's death. And teachers use the estimates to help students understand the financial changes that accompany parenthood. In addition, the estimates are useful in developing state child support guidelines and foster care payments.

To receive a copy of the 1999 estimates of raising a child, send a stamped, self-addressed envelope to Cost of Raising a Child, OSU Extension, 161 Milam Hall, Corvallis, OR 97331-5106. The USDA report is also available on the World Wide Web.