Your Baby Cost You $700,000 in Lost Opportunity
If you didn’t know already, babies are money-eating monsters. As discussed in the previous article, the cost of raising a single child from birth through high school is a quarter million dollars.
But that’s just the direct costs.
Let’s look not only at those direct costs, but also the opportunity cost of child rearing.
A United States government survey listed the annual costs of raising a child as such:
| Age | Cost |
| 1 | $13,430.00 |
| 2 | $13,430.00 |
| 3 | $13,720.00 |
| 4 | $13,720.00 |
| 5 | $13,720.00 |
| 6 | $13,570.00 |
| 7 | $13,570.00 |
| 8 | $13,570.00 |
| 9 | $13,410.00 |
| 10 | $13,410.00 |
| 11 | $13,410.00 |
| 12 | $13,170.00 |
| 13 | $13,170.00 |
| 14 | $13,170.00 |
| 15 | $14,670.00 |
| 16 | $14,670.00 |
| 17 | $14,670.00 |
| 18 | $14,670.00 |
The total cost is $247,150. If instead you had invested that money into a Roth IRA mutual fund with an average return of 10%, at the end of 18 years you would have $683,000. The real cost of raising a child is nearly seven tenths of a million dollars.
For two kids, the total cost is $494,000, and the lost opportunity cost is 1.3 million dollars. Three children cost $741,000 with a lost opportunity of 2 million dollars at the end of 18 years.
While children can bring joy into your life, you need to seriously consider the financial implications of having one before you do.
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(If you are interested in the details of these calculations, you can click here to see the spreadsheet.)
Filed in money-eating monsters, total cost of ownership 3 Comments so far
steph on 20 Oct 2009 at 7:16 am #
There are no logical reasons to have children. There are emotional ones, and life-fulfilling reasons, but you can’t set them to any sort of logic (other than biological need). You either want to or you don’t want to. And if you want to beyond all reasons or logic, then you do it, or try to. And it’s usually worth it, I think. It changed me in ways that I didn’t expect, and made me a better version of myself. And I wouldn’t take 1 million dollars for my daughter or the experience that it has given me so far… but I won’t do it again. I am content with one!
Lewis on 02 Nov 2009 at 3:49 pm #
10% every year? Sweet! Hope there’s no downturn…
Grey on 02 Nov 2009 at 5:10 pm #
@Lewis:
Better hope there’s no upturns either by that logic. 10% *on average* over 18 years is a pretty standard return for many index funds. Se the Dow Jones Industrial Average.