Mil­lion-Dol­lar Ba­bies

Costs to raise chil­dren keep ris­ing … and ris­ing

RSWLiving - - Work - BY STEVEN V. GREEN­STEIN Steven V. Green­stein is Ex­ec­u­tive Vice Pres­i­dent, Wealth Ser­vices, for The Sanibel Cap­tiva Trust Com­pany.

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.

De­vise a strat­egy for help­ing those who are most im­por­tant in your life.

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