2024 Update: The Real Cost of Raising a Child

The stork may still be in the baby delivery business, but he’s bringing a big bill along for the ride these days.

That’s the reality for U.S. families raising children in 2024, as the cost keeps climbing.

According to Bankrate’s 2024 Cost of Infant Care Study, caring for just one infant costs families 10% of their household budget and 14.7% for full-time center-based baby care.

The study also notes that average annual prices range from $7,862 to $25,480 for infant full-time center-based care across the country, depending on the state the family resides in. Those costs between 8.7% and 20.5% of median family income per child yearly, again dependent on the state.

“Child care is an enormous expense for families no matter where they live in the country,” says Alex Gailey, an analyst at Bankrate. “That makes budgeting and family financial planning all the more important.”

A major factor affecting the cost of raising children is the rising healthcare costs.

“Just the trip to the hospital to deliver your child could cost you (and your insurance) $10,000-$30,000 or more depending on the care needed,” says Brandon Ashton, director of retirement security at Cornerstone Financial Services in East Lansing, Mich. “Living expenses have been on the rise too. A larger space for a bigger family will be a major expense, not to mention rising energy and grocery costs and baby formula has risen between 8-9% alone from January 2023 to January 2024.”

Seven Steps to Curbing the High Cost of Child Care

So how can mom and dad give themselves a break and start saving money on surging childcare costs? Family planning and money managers advise taking these key action steps.

Break it down. For budget-strapped parents, Taking a bite-by-bite approach to childcare financial planning is best.

“When it comes to mitigating the high costs of raising a child, it’s important to structure a budget in terms of one-time (stroller, car seat), recurring (diapers, formula), and occasional (toys, hygiene supplies) expenses,” says Stacey Black, lead financial educator at BECU, one of the largest credit unions in the United States.

That way, parents “have full visibility on the different costs that will impact them throughout the different stages of their baby’s first months and years so they can plan and save accordingly,” Black notes.

Get creative. New parents can also seek ways to trim down costs on certain items as needed.

“For example, prioritizing a stroller that adjusts as the baby grows to avoid a new purchase and opting for secondhand baby clothes from friends or family during particularly quick growth spurts – that all helps,” Black adds.

Get backup. A strong support system is always a good idea to mitigate the high costs of having a child.

“Living close to or having grandma and grandpa do some daycare will cut down on costs in a big way,” Ashton says. “For instance, If you’re  expecting, then have an organized registry.”

Knowing who can chip in financially soften the budget blow when it’s time for a baby to arrive. “Throw an extra diaper or formula party to stock up on two of the biggest expenses that go with having a baby,” Ashton adds. “Your wallet will thank you, and those parties can be fun.”

Forget what the neighbors have. It may not be the parent’s fault, but trying to keep up with the Joneses is a budget-busting proposition.

“By buying too much unnecessary stuff and going into debt for expensive vacations, you’re making a significant financial mistake,” says Margaret M. Quinlan, director of health and medical humanities at the University of North Carolina at Charlotte. “Parents should save 20% of their income and not live outside their means.”

Examine your health coverage options: If you don’t have insurance, “having or adopting a baby qualifies you for a special enrollment period for an ACA health insurance plan,” Black says.

It’s also good to boost your emergency fund in a savings account to help cover unexpected expenses such as medical bills or a hospital stay. “Set up regular, automatic transfers to your savings so you don’t have to think about it,” Black advises.

Give your future budget a “test run.” If your baby hasn’t arrived, practice living on your future budget for several months.

“This ensures you have enough money to live on and can still achieve important financial goals like adding to emergency or retirement savings,” Black adds.

Additionally, use that time to prepare for unexpected expenses: “Be mindful of spending habits,” Black says. “Resist the urge to make emotional purchases, such as buying that adorable new baby outfit or a high-end stroller on impulse.”

Ask your employer and community for help. You may have to start with your company’s human resources department. Still, it’s more than okay to ask employers for child-care help or focus your career search on companies offering family-friendly benefits.

“Today, most working American parents are struggling to find accessible, high-quality child care, both in terms of affordability and location,” says Chris Bennett, CEO at Wonderschool in San Jose, Cal. “To help employees overcome these barriers, corporations need to provide working parents with the resources they need for child care, from creating child care focused benefits, to accounting for costs, to ensuring that there is an availability of options local to families.”

Your local community may offer childcare help, as well.

“Increasing local options and creating and supporting home-based programs are helpful,”  Bennett notes.  “Local, home-based child care and early education programs also offer unique benefits. “With lower overhead costs, these programs are often less expensive to enroll in, and additionally offer the flexibility and convenience of being local to the community.”

The Biggest Mistakes Parents Make with Childcare Financing

Money management experts say avoiding family budgeting errors is just as crucial as taking forward-thinking steps.

“The biggest mistake anyone can make is not having a plan or budget,” Ashton says. “Having a plan and knowing how much you can spend once a baby arrives will be key to preventing financial stress in the long term. Child emergency expenses can be the most unpredictable costs life throws at you, so having money stashed away for extracurricular activities is always a good idea.”

Failing to assess their current financial situation and knowing where they stand today regarding monthly cash flow, savings, and debt is a bigger error, even as many parents adopt that strategy.

“Too often, parents don’t understand the push and pull of childcare and working and don’t do their homework ahead of time,” says Setu Shah, founder at Financial Doula, an Atlanta, Ga.-based advisory platform for first-time, expecting parents.  “When it’s too late, they’re shocked by the price and wait times associated with childcare.”

Some parents don’t realize until after having the baby that having one parent stay home and care for the child can backfire. “They don’t discuss outsourcing care, which could result in significant income loss,” Shah says.

Parents may also not consider long-term finances, such as taxes, insurance, and investments, which are critically important when having a child.

“That’s because the stakes are higher, and parents are now caring for another human being,” Shah adds. “Protect your family with life insurance as soon as possible and try to contribute to investment accounts early so you can grow your money.”