Aug. 18 (Bloomberg) -- The cost for a middle-income family to raise a child born last year to age 18 is $245,340, a 1.8 percent increase from the previous year and the smallest jump since the financial crisis, according to the government.
Housing was the largest expense at 30 percent, unchanged from 2012, the U.S. Department of Agriculture said today in an annual report that showed wealthier families spend more than twice as much on their children as poorer households. Child care was the second-biggest cost in more affluent homes, while lower-income households spent a greater proportion on food.
Costs have climbed as the need for day care has increased and a recovery in U.S. home prices adds expense. The advance was the smallest since 2009, with inflation in check as health-care costs rise more slowly, jobs are created and the Federal Reserve winds down record economic stimulus.
“Improving economic times would definitely help families be able to afford to spend more on kids,” Elizabeth Peters, director of the Center on Labor, Human Services and Population at the Urban Institute in Washington, said in an interview. “And they allow them to think about starting to have a family in a situation when they wouldn’t have before.”
The U.S. economy has expanded at an average annual rate of 2.2 percent since the 18-month recession ended in June 2009. Payrolls rose by more than 200,000 for a sixth straight month in July, the longest stretch for growth since 1997, according to the Labor Department. The improving economy may in turn encourage parents to spend more on their kids, Peters said.
U.S. inflation in the 12 months through June was 2.1 percent, the government said last month. The USDA report excluded payments for college, as well as government aid and financial contributions from sources other than parents.
The study, conducted since 1960, tracks seven categories of spending, such as housing, transportation and clothing, and is used to help courts and government agencies estimate child-support costs, the USDA said.
For typical two-child, two-parent families with income from $61,530 to $106,540 before tax, annual spending on each child was $12,800 to $14,970 last year, according to the report.
A family earning less than $61,530 a year before taxes will probably spend $176,550 in 2013 dollars, while parents earning more than $106,540 may pay $407,820 to age 18, according to the study.
Adjusted for anticipated annual inflation of 2.4 percent, raising a child in a middle-class family would cost $304,480 through 2030, the USDA said. The report includes an online calculator to help determine costs.
“Even if the growth isn’t as high as it has been in previous years, families are still spending a lot on raising children,” said Katie Hamm, the director of early childhood policy at the Center for American Progress, a Washington-based group aligned with Democrats. “It’s really difficult for the families.”
Health care, which ranked fifth among expenses, rose 2.3 percent, less than the average 4.3 percent increase in the past decade, said Mark Lino, the USDA economist who led the study.
“The pace of the climb in health care is decreasing, and that’s helped moderate the rise in costs,” he said. Child care and education’s rise of 3.7 percent, while double the overall gain, was less than in previous years. Transportation costs were unchanged, helping to pull down the average, he said.
The urban Northeast had the highest costs, followed by West and Midwest, the USDA said. Households in the urban South and rural areas spent less to raise a child. Housing is the biggest expense for all income groups.
Child-care and education are the second-biggest expense in higher- and middle-income households, followed by food. Nutrition ranked second for lower-income families, with more of those caring for children at home, according to the study.
A gap between richer and poorer families emerges “in the education costs and the discretionary costs,” Lino said. Wealthier parents “send their children to more-expensive day care and private schools. They tend to buy more computers, video games, sports equipment, private music lessons and such,” he said.
Lower-income families “keep them home and let them play in the backyard, like my parents did.”
Transit costs took up a greater share of budgets for children ages 15-17, as teenagers get drivers’ licenses. Child-care costs were greatest until age 6, when attending school reduces the need for day care.
Housing has covered almost a third of costs to raise a child since the first study. The USDA calculates the need for additional household space, and excludes costs such as moving to a more expensive neighborhood in search of better schools.
In 1960, housing costs to raise a child were estimated at $25,230 -- equal to $198,560 in 2013 dollars. Food was the second-biggest expense, at 24 percent, with transportation at 16 percent.
Health care covered 4 percent of costs in 1960, half the 2013 level. Education and child care were 18 percent of 2013 costs, up from 2 percent in 1960, when most children were cared for at home.
To contact the editors responsible for this story: Steve Geimann at email@example.com Romaine Bostick