How Kids Affect Financial Independence

How much money will you need to raise a kid? If you want to retire early or become financially independent you may have asked yourself this question. I did too and here is what I found.

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What I found out is that the average annual cost of raising a kid in the US ranges depending on the household income. For middle income families the range was $12,350 to $13,900, and for low income families the range was $9,330 to $9,980. Looking for the more extreme savers I found people who claimed to have raised their kids for as low as $3,000 to $6,000 a year. How much it will cost to raise a kid depends on a lot of factors but luckily the USDA helped break those factors down for us.

So below we will look at how much kids cost and we will break it down so you can find places to save money. There is data visualizations and even a calculator to help you get a better idea of what a kid might cost you. Then we will look at how much you need to save in order to achieve financial independence or early retirement if you have a kid or are going to have one.

How much do kids cost?

It turns out that the United States Department of Agriculture (USDA) was also curious about how much people spend on kids, so they have published some very useful numbers that they collected from 2011 to 2015. Their report looks into the different factors that go into the cost of raising a kid such as household income, age, location, and the number of children you have .

It is now 2019 at the time of writing this article, and $1.00 in 2015 is worth $1.081 in 2019 due to inflation, so keep that in mind while reading through this. You don’t have to try and convert these numbers since I will adjust for inflation for you. I will display it next to the number and it should look something like this, $100 ($108.1 in 2019).

The USDA report looked at how much families spent and broke up families into three categories based on income. Here is how much each spent.

Cost of Raising a Child

Under $60k
$9,330 to $9,980
$60k to $107k
$12,350 to $13,900
Over $107k
$19,380 to $23,380

The report also showed how spending was related to age and it looks like kids tend to cost more the older they get. The average middle income family spent about $12.6k the first year and by the last year were spending roughly $13.9k. In general, a family that spent $12,344 in the first year would likely spend an additional $75 every year.

The report also accounted for things like the age of the child, where you live, and where the money goes. Here is how where you live factors into the cost of raising a child.

How Where You Live Affects Cost
Rural Areas
- 17.4%
Urban Northeast
Urban West
Urban South
- 0.7%
Urban Midwest
- 2.7%

The USDA report also included a breakdown of these numbers which is very useful if you are trying to create a more accurate estimate given your circumstances. For example, maybe you have a spare bedroom and have no plans on moving. In this situation you don’t have to factor in housing which takes off 29%.

When I first saw this breakdown it was a huge relief as I was already accounting for housing when deciding how much I need to retire. Here is a breakdown of the cost of raising a child. Displayed is the percentages spent on each expense as well as what that looks like as a monthly expense for a middle income family in 2019 dollars.

Spending Breakdown

Expense % of total spent $ / month (2019)
29% $323 to $363
18% $200 to $225
Child Care and Education
16% $178 to $200
15% $167 to $188
Health Care
9% $100 to $113
Other and Miscellaneous
7% $78 to $88
6% $67 to $75

Children also get cheaper when you have more of them. The amount of children you have is a large factor in how much it costs. Here is a breakdown of the savings.

Multi Child Discount

Child Married Couples Single parent
1st child 1.27 1.26
2nd child 1 0.96
3rd child 0.76 0.78

I found this a little hard to understand so here is an example. Say you are a part of a married couple with 2 children and you are spending $1k a month on each child, if you only had one child, that child would cost you $1k * 1.27 = $1.27k, and if you had 3 children each child would end up costing you $1k * 0.76 = $760 on average.

The last two things to consider when looking at the cost of raising a child are inflation and college. The numbers in the report do not account for college, if you want to pay for your child's college you will also have to plan for that. Lastly, if you think you have an idea of how much your child will cost, remember that you need to adjust for inflation as time goes on. Below we will look at inflation when we try to figure out how much you will need to save in order to be financially independent or possibly retire early.

Estimating Your Cost
Married or Single?
Show results inflation adjusted for which year?
How many children have you had?
What income range do you and your spouse combined fall into?
What region of the US do you live in?
Included Costs
Estimated Cost: $16,467 - $17,615
These estimates were done assuming an average inflation rate of 3% since 2015 which is 22.99%.

Keep in mind that these are estimates that you can use to get a rough idea, if you are looking for exact estimates you should consult with a professional.

Will trying to achieve financial independence hurt your kid?

Doing some research I learned that it is best to think about what things impact your kids happiness and development and how trying to achieve financial independence will affect those things. Kids need:

- a safe and stable environment

- shelter, clothes, food

- medical care

- a good relationship with their family

So if you’re financial independence goals don’t provide these needs then they may be hurting your kid.

How to access the USDA crc2015 report.

This one is tricky because the link to get the report does not return the report, it looks like they took the url down. However you can use the Wayback Machine to get the pdf. You can try to see if this link works. If it does not then you can go to the Wayback Machine here . And enter in this url

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