Study: It Costs $2.3 Million to Raise a Family

It costs about $2,319,162 to raise a family of four these days. That's for expenses for two parents and two kids for 20 years, to raise children to age 18.

EverQuote analyzed the annual expenditures and expected costs for housing, food, transportation, insurance, savings, child care, vacations and other common family expenses. Using the latest data from the Bureau of Labor Statistics (BLS), the Department of Agriculture (USDA) and other sources, we compiled an economic picture of where money is going for parents who are raising families.

After all, having children isn't limited to the kids' costs. Parents have expenses too that should be accounted for in the cost of raising a family. Looking at costs for the whole family gives a more realistic sense of what to expect.

The costliest category for a family is housing, followed by food, taxes and insurance. We used the latest expenditure and cost data and calculated totals for 20 years, not accounting for inflation. Here's where the money is going:

Cost breakdown

Highlights:

• Housing far outpaces other categories in expenditures, amounting to almost half a million dollars over 20 years (using today's dollars).
• Food comes in as the second most expensive category. Boys are more expensive to feed than girls, and that can add up over the years. For example, food at home for a teen boy age 14 to 18 is $304.90 a month, compared to $243.10 for a girl. That's a difference of about $3,700 over five years. Our analysis used a family with one boy and one girl.
• Personal taxes are the third most expensive category of expenditures.
• Insurance ranks fourth in cost. We combined average expenditures for homeowners insurance, auto insurance on two cars, a worker's contribution for group health insurance for a family, an average health insurance deductible, and $1 million in term life insurance for both parents. The biggest component of this category is health insurance, at $110,940 for 20 years.

Add more if you want to retire

We didn't include retirement savings in our cost analysis. To calculate an estimate for that, add $760,000 over 20 years, which would bring the grand total of the cost of raising a family to over $3 million. That's based each parent making a 401(k) contribution each year. We used $19,000 a year, which is the 401(k) maximum contribution in 2019. Since we can't predict future annual 401(k) limit increases, we used $19,000 for 20 years for both parents.

A lack of retirement savings would not be uncommon. About half of households age 55 and older have no retirement savings such as a 401(k) or IRA, according to the Government Accountability Office (GAO). Among the 48% of households with some retirement savings, the median amount saved is only $104,000 for households age 55 to 64, says the GAO.

Cutting costs: 3 examples

Of course raising a family can be done for less than $2.3 million. If we assume a family household income of $90,000 over 20 years, it totals $1.8 million. (The median income for a household with a married couple is $90,386, according to the U.S. Census Bureau.)

There are families that spend less than the expenditures reported by the BLS -- and those that spend more. We analyzed potential savings by adjusting spending in a variety of ways.

Save $144,237 by cutting food costs

Our initial analysis used costs for food at home from the USDA for a "moderate-cost plan" and expenditures for eating out from the BLS. Changing to costs for a "thrifty plan" as defined by the USDA, and cutting eating-out expenditures in half, saves $144,237 over 20 years.

The USDA's food-plan levels are based on the cost of purchasing and preparing food at home to make a nutritious diet, at four spending levels: thrifty, low-cost, moderate-cost and liberal. The "thrifty" level is based on prices paid for many foods by those with a low income. The moderate-cost level is based on expenditures in the second-from-the-top quartile of food spending.

Save $118,675 by cutting out financial safety nets

Sometimes the first things to get cut from a budget are expenses that aren't immediate needs. Savings and life insurance are both important financial safety nets for a family but may be top targets for cuts. Eliminating college savings, a family emergency fund and life insurance for both parents saves $118,675.

Save $606,087 by slashing across the board

Slashing expenditures across many categories saves almost $600,000. To achieve this, we used all the cuts mentioned above for food, savings and life insurance. Then we also cut out vacations, holiday spending, coffees for the parents and alcohol. For the kids we cut musical instruments, braces, laptops and driving school. We cut expenditures in half for clothes, shoes and entertainment. And we changed all pre-school and child care from center-based to less expensive home-based care. That brought the total cost of raising a family to about $1,713,075.

Other ways to save

Maintain good credit: Having good credit can pay off in a number of ways, including better mortgage rates, lower car insurance rates and better rates for borrowing money such as car loans.

Comparison shop for car insurance: The best way to save on car insurance is to compare quotes. That has the biggest potential savings because rates for the same coverage can vary by hundreds of dollars among companies.

Take advantage of employer matches to your 401(k): Saving for retirement is crucial, so make sure you get all the "free money" possible from your employer by maxing out the matching funds available to you.

Let technology help: Find a budgeting app you like such as Mint or PocketGuard.

Methodology

We found the latest data available for a variety of common costs in raising a family. We then calculated that cost for 20 years, not including inflation.

Data sources

• Amazon: Violin and drum set.
• American Association of Orthodontists: Cost of braces from the American Dental Association.
• Bankrate: Home maintenance.
• Bureau of Labor Statistics: Consumer Expenditure Survey 2017, mean annual expenditures for housing (owned dwellings), mortgage interest, property taxes, eating out, alcoholic beverages, entertainment, medicine, medical supplies, utilities, household operations, housekeeping supplies, household furnishing and equipment, apparel and footwear, personal care products and services, personal taxes (federal, state and other), vehicle purchases, gasoline and oil, and vehicle maintenance.
• Child Care Aware: Cost of child care and pre-school.
• The College Board: College cost based on a public four-year college.
• Deloitte: School supplies.
• EverQuote: Car insurance premiums reported by users for a Ford Escape and Honda Accord EX.
• EverQuote: Term life insurance rates.
• Experian: Holiday gift spending.
• IRS: 2019 contribution limit for 401(k)s.
• Kaiser Family Foundation: Workers' contribution toward family health insurance and average deductible.
• LearnVest: Vacation spending.
• National Association of Insurance Commissioners: Home insurance cost.
• PC Magazine: Asus Chromebook Flips.
• Square: Coffee, national average.
• Thumbtack: Driving school for 10 hours for each child.
• U.S. Census Bureau: Median household income for a married couple in 2017, used to calculate three months of emergency savings.
• USDA: Cost of food at home, U.S. average, November 2018.

Feb. 11, 2019