Do You Know the Cost of Raising a Child?

Every year, the U.S. Department of Agriculture (USDA) releases a report on the cost of raising a child from birth to age 18. The numbers are based on child-rearing expenses in different areas of the country, taking family income and size into consideration. In its 2014 report, the USDA estimates that, on average, a baby born in 2013 will cost $245,340 to raise to age 18. This figure doesn’t include pregnancy or college costs.

Where You Live Matters

Location makes a big difference. In the urban South, you can expect to pay an average of $230,610 to raise your child to 18. Living in the urban Northeast—the most expensive region in which to raise children—costs $282,480 on average. Children raised in a rural region might cost $193,590, saving parents nearly $100,000 compared to living in a pricey city.

The USDA offers a calculator to help you figure out the cost of raising a child in your own circumstances. I currently live in the Northeast, and the calculator estimates my 13-year-old son’s expenses at $15,575 annually. We are preparing to move to Idaho, where the cost of living is much lower. Per the USDA’s calculations, this move will lower my child-rearing costs to $14,288 per year.

Parents can implement a number of strategies to spend less on their children, including using coupons for grocery shopping, purchasing clothing and other items secondhand, and adopting an overall frugal lifestyle. For the savvy parent, raising a child doesn’t need to be as expensive as the government expects.

Lower Taxes Free Up Money for Your Kids

Considering a move to a different municipality or state could also mitigate your financial burden through lower taxes. Some states have high income tax rates, which may cut into your ability to handle the cost of raising a child. California, Hawaii, Oregon, and New York are among the states with the highest income tax rates. Moving to a state that doesn’t collect income tax, such as Texas, Wyoming, Nevada, or Washington, will help you save money, providing you with the ability to put more of your income to good use. New Hampshire and Tennessee levy taxes from income earned on interest and dividends, but they won’t tax your wages, so it’s important to keep in mind your sources of income if you decide to move.

When relocating to take advantage of low income tax rates, keep in mind that some states make up for a lack of income tax through other forms of taxation, including on sales and property. Alaska and New Hampshire, for example, don’t charge sales tax or income tax, which can provide significant savings over time. New Hampshire does have one of the highest property tax rates, but at just 1.86 percent, it is a lot lower than many states’ taxes on sales and income.

As you evaluate the cost of raising a child and factor this into your overall financial plan, don’t forget to think about where to live. Moving to a state with low taxes can free up your resources and prevent the expenses associated with raising children from overwhelming your budget.

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