Raising a child: How much will it cost?

If you're thinking about starting a family, or have already begun the process, congratulations! Becoming a parent and raising children can be one of life's most fulfilling endeavors. And while you have a lot to look forward to, the joyful expectation of a new family member may be accompanied by nervous anticipation of new expenses and questions: How much does a baby cost? What will you spend as your child gets older? What can you do to minimize financial stress? This article can help by telling you about the following:

• Expenses to expect when having a baby

• What you might spend raising a child through college-age

• Ways to deal with the financial challenges

How much does it cost to have a baby?

The cost of a baby's birth — including prenatal care, delivery, and postpartum follow-up — is highly dependent on where you live, the facility where the baby is delivered, and the type of birth, with deliveries by Cesarean section costing significantly more. And importantly, the amount you pay out-of-pocket can vary widely depending on what type of insurance you have. Here are some key facts:

• According to the Peterson-Kaiser Family Foundation Health System Tracker, the average bill for having a child — including prenatal care, non-Cesarean delivery, and postpartum care — was $18,865 in 2023.¹ The average bill, including delivery by Cesarean section, was $26,280.¹

• In 2023, the average out-of-pocket cost for patients with health insurance was $2,854. The out-of-pocket cost for delivery alone was $2,655 for non-Cesarean and $3,214 for Cesarean.¹ According to the Health Care Cost Institute, patients delivering in Michigan had the lowest out-of-pocket costs, and patients living in Nebraska had the highest.¹

• Assuming uncomplicated birth and postpartum recovery, these totals included prenatal care, delivery, mother's hospital bill, baby's hospital bill, medication, and newborn care by a pediatrician. However, if the mother or baby experiences complications, the total and out-of-pocket costs will likely increase. For example, if the baby spends time in the NICU (neonatal intensive care unit), out-of-pocket costs could exceed $10,000.²

• The total bills for patients choosing an alternative to hospital delivery — such as birthing at home with a midwife or doula — will be significantly lower, approximately $1,500-$5,000. However, these costs are not covered by most health insurance plans, so patients are responsible for the entire cost.³

Bottom line? While childbirth can be a stressful event, as long as the mother is covered by health insurance, the cost may be considerable but not necessarily unmanageable for an average middle-income family.

Costs to expect in the first year

According to some studies, expenses during a newborn's first year of life can range from $20,000 to $50,000, depending on where you live, your household income, and, importantly, how much you have to spend on child care⁴.

Of course, your total expenses will depend on your personal circumstances and choices — especially those regarding nutrition and child care. For example, if the mother chooses to breastfeed rather than use formula, the nutrition expense will be significantly lower. And if one of the parents can care for the infant — rather than hiring a nanny or sending the child to a daycare center – your child care expenses will be significantly lower. That said, here are some ballpark figures on expenses between birth and age two:

• Baby equipment
  Your first major expense after the cost of childbirth itself will be for essential baby gear, including a crib, stroller, playpen, car seat, baby bath, highchair, bottles, breastfeeding kit, and more. Plus, if you want to get a jump on baby-proofing the house, you'll need additional equipment, including safety gates. Since every family's living situation is different, there is no way to predict exact costs, but they have been estimated to range from $425 to $3,000³, with a midpoint of about $1,712.

• Baby care
  Assuming that neither of the parents will be available to take care of the baby – and no relatives or family friends step up — child care costs will be the biggest expense during the baby's first year of life. How big? Well, as of 2023, the average monthly cost of a daycare center in the United States was approximately $1,230⁵, while the average monthly cost for a nanny was roughly $3,190.⁵ It’s important to note that these are nationwide averages, and that costs vary depending on your location. Child care costs in more expensive areas such as New York City and Los Angeles will probably be significantly higher.

• Nutrition
  As noted earlier, the cost of a baby’s nutrition during year one depends, in large part, on whether the mother chooses to breastfeed or use formula. If the baby relies exclusively on powdered formula, costs can range from $400 to $800² per month until solid food is introduced. Should the baby need hypoallergenic formula or another specialty product, the figure may be substantially higher. Once food is introduced — usually at six months — formula costs will decrease. Monthly baby food costs are estimated at $98 to $230², with a midpoint of about $164 per month.

• Diapers, baby clothes, and more
  In addition to your outlays for baby gear, child care, and formula, there are some other expenses you should anticipate. Disposable diapers will cost between $70-$80 per month, depending on the brand and where they are purchased. Baby clothes can run between $20-$50 per month² or more, depending on how fast the baby grows and where you shop. Baby toys can cost between $30-$50 per month.² Finally, at some point during the first year, you will probably need to "baby proof" your home, which can cost between $500-$2500, with most parents spending approximately $1,500.⁶

Clearly, the first year of a baby’s life can be quite costly. But if you employ some common strategies to save money — such as shopping at big box stores and asking relatives or friends for equipment and clothes that they no longer need – your expenses may be more manageable.

How much you could spend until age 18

Like virtually everything else, the cost of raising a child has increased in recent years. In fact, it increased by 19.3% between 2016 and 2021⁷ — the last year for which complete data is available — and has undoubtedly grown since then due to above-average inflation. Here are some key figures as of 2021:

• Nationwide, parents will spend an average of $237,482 raising a child from birth to age 18. Of course, this figure will vary depending on your location, with costs in Hawaii being the highest ($314,529) and South Carolina the lowest ($169,327).⁷

• Parents spent a yearly average of $21,681 on raising a child. This figure represents annual costs minus tax exemptions or credits. Annual expenses were highest in Hawaii, the District of Columbia and Washington state, and lowest in Mississippi, Alabama and Arkansas.⁷

• Parents spent an average of 19% of their annual income on raising a child. This percentage was highest in Hawaii (23.9%) and lowest in Georgia (15.5%).⁷

• Families with a child spent an additional $1,104 annually on rent, versus comparable families with no children.⁷

• Families with a child spent an additional $3,524 annually on food, versus comparable families with no children.⁷

• Families with a child spent an additional $2,888 annually on health insurance coverage versus comparable families without children.⁷

• Families with a young child spent an average of $11,752 per year on child care.⁷

Of course, the exact cost for an item will be higher or lower, depending on your location, your circumstances, and your choices. For instance, parents who can handle some or all of the child care duties themselves will save a substantial amount of money over the course of a year. Conversely, parents who opt for private preschool will see their annual outlay jump. And don't forget — there will be additional expenses down the road — such as increased insurance premiums when the child is learning to drive.

If college is part of the plan for your child, start preparing now

As of 2023, the average cost for an in-state student living on campus at a public institution is $26,027 per year or $104,108 for four years. Out-of-state students will pay an average of $27,091 per year or $108,364 for four years. Students at private colleges will pay an average of $55,840 per year or $223,360 over four years⁸. And, if history is a guide, these costs will be significantly higher — even with financial aid – by the time a baby born this year graduates high school.

The bottom line? The expenses incurred over a child's life significantly impact family finances. But people like you manage to do it, and careful planning and financial preparation can help lessen many of the financial concerns.

Think about whether life insurance should be part of your plan

If you’re young and just starting a family, life insurance may be the last thing on your mind. But it can help you be better prepared to handle the financial and emotional challenges of parenthood. Here’s why:

• Life insurance is crucial for individuals with children — especially young children or children who are decades away from being self-sufficient — who rely on their income. Life insurance ensures that in the event of the policyholder's death, their survivors are financially protected and can maintain their standard of living. The life insurance death benefit — usually a tax-free, lump sum payment — can help cover a range of expenses, from food and other daily living costs to mortgage payments, preschool costs, and college tuition.

• A permanent life insurance policy — whole life insurance or universal life insurance — can be used as a tax-advantaged savings vehicle to help you achieve specific financial goals, including college tuition and family health emergencies.

• If your family depends on two incomes, consider life insurance for both parents. Should one parent pass away, the life insurance death benefit will help replace their income.

• If one parent works and the other handles child care, coverage for both parents can also be essential, because the death benefit can help pay for child care so the surviving parent can continue to work.

Guardian can help

If you'd like more information on life insurance for yourself or your partner, take the next step: talk with an experienced professional who will take the time to learn about your unique situation and explain the different options that may fit your needs and your budget. If you don't know a financial professional, ask your friends for a recommendation — or click below to find a Guardian financial professional in your area. Remember, the younger and healthier you are, the less your policy will cost. So why not do it today?