I Realized My Kids Cost Me $1.2 Million – Here’s the True Opportunity Cost of Raising Children

One of the things parents learn hard and fast is that children are expensive, no matter how much you try to save and do right, it’s costly to raise them. According to LendingTree, it currently costs, on average, as much as $389,000 to raise a child from birth to 18 years of age. 

This is something one Redditor is finding out the hard way, as they have looked at the opportunity cost of raising a child with a post in r/MiddleClassFinance. While everyone is going to spend a different amount raising their children, this is an interesting “What If” question. 

The Approximate Cost of Raising Children

According to the Redditor’s 22-year breakdown of raising a child, they believe they are on track to miss approximately $1.2 million in compounded earnings. This is just after 22 years of saving, as they also did the math for the child staying in the home until they are 30, which they approximate to be around $2.6 million in total compounded money if they had no children. 

To break this down, they are looking at an estimated $20,000 annual spend in the first five years, or $120,000 in total. They believe this accounts for daycare costs, food, healthcare, clothes, diapers, early toys, and other associated expenses. 

For the next 13 years, the Redditor estimates that it would cost them around $10,000 per year. However, where things get interesting is the $50,000 annual spending they are accounting for during college. As a result, the current expenditure they are totaling up to raise a child, based on current market estimates, is approximately $450,000. 

While this number is definitely above what LendingTree estimates, it’s inevitable that some parents will spend more, and others will pay less. 

The Opportunity Cost is Big

Given that this Redditor estimates that this $450,000 spent until a child is 22 is giving up $1.2 million, it does stand to reason that the opportunity cost is notably large. For adults who don’t want children, there is no question that they should be enjoying a more flexible financial future. 

What’s a little challenging with this Redditor’s situation is that while nobody says raising children isn’t expensive, all of this math is predicated on every penny being used as an investment that would have otherwise been spent on child expenses. 

This just doesn’t seem realistic, and neither does the very generous rate of return that this Redditor appears to be accounting for. The reality of the situation is that parents without children are more likely to travel, eat out more, potentially purchase more expensive cars and a more expensive home, while also living in a higher-cost-of-living neighborhood, etc. 

In other words, the math here isn’t so black and white as to say that every single person who doesn’t raise children is missing out on millions.

Perhaps most importantly, all of these estimates are based on having enough income so that there is enough money to either raise a child according to LendingTree standards or to put away for investments. There are so many different variables here that this situation seems very unique to the Redditor, and not for everyone else reading this Reddit post. 

What Parents Should Really Do

Ultimately, raising children is only as expensive as you allow it to be, and there are ways to reduce your costs. None of this is to say that childcare costs won’t accumulate over time, but not everyone is going to spend the same amount, and raising multiple children is proof that the cost per child isn’t linear either.

Hand-me-down clothes and toys can certainly offset some of the costs that would have been initially included in raising a first child. In addition, the Redditor is responsible for almost $200,000 in college costs, but this doesn’t account for a 529 fund that is likely to be established when a child is born. With the right savings, a good chunk of the Redditor’s estimated college costs can be offset by 18 years of 529 activity. 

When it comes to childcare costs, there are ways to look at different tax credits and deductions you can utilize to help offset some savings come tax time. There might even be flexible work arrangements like remote work that can help save on childcare costs. 

Of course, everyone knows that none of these potential financial solutions for parents are foolproof and that no matter how you slice it, the opportunity cost of raising a child or multiple children is something to consider.