MILLION-DOLLAR BABIES

Costs to raise children keep rising … and rising

The U.S. Department of Agriculture every year measures the costs of raising a child to his or her 18th birthday. The department considers family income, health/child care, education (not including college) and miscellaneous expenses. Raising a child today will cost a middle-income family more than $250,000, with a high-income family spending more than $450,000 and a lower-income family about $145,000.

In 1960, by comparison, a middle-income family would spend $25,000 for those same expenses. Adjusted for inflation, that amount today would be about $200,000, reflecting that it costs about 25 percent more to raise kids than it did in 1960.

There have been interesting shifts in percentages allotted toward child care, education and health care. In 1960, for example, child care and education comprised 2 percent of the overall expense, while today that number is 17 percent. In 1960, few women worked outside the home, while today dual-income families are common, so child care and early education have become much bigger expenses.

The cost of health care has more than doubled from 4 percent to 10 percent of overall expense. But that does not tell the complete story―a family forced to care for a critically ill child today will find it much more expensive than in 1960 due to the advances in technology that have driven health-care costs through the roof.

Surprisingly, the costs of feeding a child have dropped from 24 percent to 16 percent and clothing expenses have been nearly halved, dropping from 11 percent to 6 percent of overall costs. A gallon of milk in 1960 was 95 cents, today’s equivalent of nearly $7! In addition, today there are many more low-priced fast-food options to reduce the cost to feed a family. The 1960s would prove to be the most expensive decade for food and clothing in the past 50 years.

And while first-class stamps in 1960 were a nickel, a loaf of bread was 20 cents and a gallon of gas was a quarter, undoubtedly the biggest dollar increase over the past 50 years has been a college education. While not measured in the USDA expense index, in 1960 it cost about $150 for a semester at a major university. Today, a private nonprofit university can cost upward of $35,000 each year for a four-year degree, and that’s not including costs for professional or post-graduate degrees.

There are many ways to help your children and grandchildren facing the challenges of growing up in today’s world. Whether by outright gift, a custodial UTMA or UGMA account, a trust or other vehicle for passing wealth in your lifetime, devise a strategy for helping those who are most important in your life.

LEGAL, INVESTMENT AND TAX NOTICE: This information is not intended to be and should not be treated as legal advice, investment advice or tax advice. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel.

Steven V. Greenstein is Executive Vice President, Wealth Services, for The Sanibel Captiva Trust Company.

DEVISE A STRATEGY FOR HELPING THOSE WHO ARE MOST IMPORTANT IN YOUR LIFE.