The Cost of Raising a Child
How Much Can You Expect to Spend?
Sponsored by: AICPA Life Insurance Program
Very few new parents are completely prepared for all the responsibilities of raising a child – least of all the cost associated with adding a member to their family.
In fact, the first child to a middle-income family adds about $12,000 per year to the family’s expenses, and any subsequent children add around $10,000 each year. Over time, this accounts for almost 20% of a family’s pre-tax income. But it’s worse before it gets easier – the percentage doubles for families that have two kids under the age of 5.1
To keep up with the rising costs of caring for their children, more mothers are returning to the workforce after their children are born. As of 2004, 71% of women with school-aged children were working outside the home.2 But on the flip side, annual full-time child care costs in the U.S. average around $7,300, draining the extra funds she contributes to the bottom line.
The high price tag that comes along with having children is one of the reasons why many couples choose to purchase term life insurance coverage when they start a family. As difficult as it is with two parents contributing to the care and financial well-being of a child, it would be even harder, should one parent die, leaving the other to support the family on one income.
Many parents choose to purchase a term life policy of up to 10-times their annual income, to provide their spouse with the money needed to pay for housing, clothing, educational and child care needs, if they were to die. It’s protection many families think they’ll never need, but are glad they have, should the worst happen.
1.U.S. Department of Agriculture, Center for Nutrition Policy and Promotion, Expenditures on Children by Families, 2005.
2.U.S. Department of Labor, Bureau of Labor Statistics, “Women in the Labor Force: A Databook,” May, 2005.
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