The Marginal Cost of Kids

Everyone knows that kids are expensive. Every year, the US Department of Agriculture publishes some high number, like $222,360, and says this is the cost to raise a child to age 18. This doesn’t even include college. No wonder, in the recession, the US birth rate has fallen quite a bit in just 2 years.

But what’s interesting is that the USDA also publishes some figures showing that the marginal cost of additional children falls precipitously. (See page 7 in that report – this is from 2006 but I’m working on getting some updated numbers). According to the 2006 numbers, if you are an average family, having one teenager costs you $14,460 a year. If you have two teens, ages 13 and 16, your costs are $23,000 a year, meaning the second kid added $8,540. But if you have three kids, ages 11, 13, and 16, your annual costs are $25,880. Meaning that last kid only added $2,880. I haven’t found averages for a fourth kid, but from conversations with some mega-families, my impression is that the marginal cost continues to decline.

Why is this? Two reasons. One is that there are economies of scale. A large box of laundry detergent or cereal is less expensive, per ounce, than a smaller one. You spread out the cost of any item of clothing over the multiple kids who will wear it, and likewise amortize cribs, car seats and toys. If you’re paying for childcare, there can also be economies here, too. Hiring a nanny or au pair is obviously expensive, but it’s not a drastically different cost if she’s caring for 1 kid or 3, so the cost per kid falls (with day care, you might get a multiple kid discount, but the cost would fall less — which is why larger 2-income families seldom go this route).

The second reason the cost falls, though, is that as families get larger, parents wind up with different ideas about what is “necessary” for kids. With two kids, you might pay for private piano lessons for each. For 5 kids, this is more complicated. Four sets of ballet lessons, or tennis lessons, will likewise add up, as will private school tuition, and trips anywhere that you can’t drive. Even a $250 plane ticket to Grandma’s becomes a $1500 ordeal for a family with four kids. As for taking a vacation overseas? Even the cost of passports starts to add up.

So I guess the question is whether one thinks any of this matters. With activities, most children won’t become professional musicians, and there may be cheaper ways (like singing in a church choir) to expose them all to music. As for athletics, we’d probably be better off as a society if more people did the “free” individual sports like running or biking that they can do easily as adults, rather than things like lacrosse or baseball, which you probably won’t. But we do live in a competitive world, and it’s human nature to want to give your offspring any advantage you can – which includes things like educational trips and lessons. I’m curious what you all think.

In other 168 Hours news:

  • I do a Q&A with Self.com on how (or more, how not) to multitask.
  • Working Moms Against Guilt has been mentioning 168 Hours several times over the last month, with a recent post about outsourcing to make life easier.
  • Ok, this isn’t really 168 Hours news. But if you subscribe to the New Yorker, Tina Fey has a hilarious article that delves into, among other things, why she hates being asked how she “juggles it all.”

ShareThis

5 thoughts on “The Marginal Cost of Kids

  1. I agree that we don’t find certain activities necessary with subsequent children. My first son went to Gymboree, my second is just as happy at the YMCA and free storytime at the library. The first child started activities earlier and we are waiting for the 2nd one to decide what he really wants to do.
    I like the suggestion about individual vs. team sports, that almost no one will be a professional at. We plan bike more and to start hiking this summer: making the most of our NYS Empire Passport, by visiting as many state parks as we can.
    I also feel that a child gets more ‘hands-on” time at an individual sport, even if we are part of a team (track, karate) or paying for the lessons. The boost in self-confidence I’ve seen in my child is amazing, and well worth the money, as it has transferred to all areas of his life.

    1. @Denise – re the individual sports thing, this is what bugs me about gym class too. I recall spending time playing kickball and then learning the rules of basketball when no one is going to do these things growing up. They would have been so much better off teaching an aerobics class every day… but that was probably not seen as manly, and there’s a big macho element in gym class. The vast majority of people are not going to do team sports as adults, and if they are, they will do them like once a week, maybe twice — not enough to meet the guidelines for exercise. Kids need to pick up an individual sport they can do their whole lives.

  2. When I was a gym teacher in the early 90’s that was my philosophy–exercise that will last a lifetime. I had a very aggressive group of kids and they turned everything with a ball into a dangerous game of dodgeball. I had to find out what they could do to burn energy, reduce stress and do in their homes, as most were apartment dwellers. Aerobics fit the bill. As long as I used current music, which I allowed them to share with me–to clear for objectionable lyrics–the boys enjoyed it just as much as the girls. Yoga was considered ‘a little out there’ back then, but that worked too.

  3. Hi,

    I think that all parents consider the cost of having kids. It is possible that the marginal cost for each additional child a family has may be less and less but for women there are hidden costs that have to be considered.

    Ann Crittenden in her book the Price of Motherhood http://www.amazon.com/Price-Motherhood-Important-World-Valued/dp/0805066195 examines many aspects of the Motherhood Penalty in the USA. Also this article in the New York Times on the The Different Costs of Motherhood http://economix.blogs.nytimes.com/2010/12/18/the-different-costs-of-motherhood/ provides yet another piece to the puzzle.

    Currently, the Social Security system penalizes anyone who spends time working as an unpaid caregiver, and anyone earning significantly less than there spouse – that is, the great majority of married mothers.

    So as a mother the bottom line for me is that there is a significant price that families especially mothers pay to raise their children and even if the cost of having a third child is way less than having only one it is a very small point to consider when the hidden costs are so huge and being largely ignored.

    It should be noted that the generations of young women entering the workforce now are accustomed to equality. They spend 2-3 decades educating themselves and competing with men for the chance to do jobs they love, they insist on equal pay and benefits. Then suddenly they become mothers and they realize that they are suddenly in the underclass because of the heavy financial penalty placed on anyone who chooses to spend any serious amount of time care giving.

    I suspect that the reason that more women are choosing not having larger families is because they are what was referred to as the “Economic Woman” a species that came into existence as a product of the 1970’s feminist movement. The Economic Woman sees her time as being worth money – $150 and hour or more as a professional, $50 or more in some business, $15 an hour as a teacher, $5-$8 as a day care worker and zero as a mother. Its is a hard pill to swallow year after year.

    I am a currently stay at home mom of two. Prior to being a mom I worked for a decade in international development at the UN and was regarded as a savvy, worldly, professional, with a paycheck and experiences to be envied. Nowadays, even the teachers at my daughter’s private elementary school, who work for me (because the annual tuition I pay pays their salary), and who have significantly less education and in some cases work experience than I do, have a hard time taking me seriously when I demand that they account for the service that I buy from them. The bottom-line is that society does not value care-giving and prefers to ignore the fact that it is the heart of the economy.

    So the question to be explored might be how much greater a penalty is incurred by a third child. I guarantee you that the cost of food, clothes, education, and extra activities will be peanuts compared to the loss in wages, opportunities and benefits over a life time.

    1. Tessa- I’m sorry to hear your daughter’s teachers aren’t treating you respectfully. I read Ann Crittenden’s book back when I was pregnant with Jasper and it was one of the things that made me really worried — that my career was shot, basically, because I was becoming a mother. Well, fast forward close to 4 years, and my career is miles ahead of where it was 4 years ago. So I think the situation is complicated. When men or women take time out of the workforce, they incur a penalty. Obviously, they lose the wages they would have earned during that time, but they also lose years of raises, and that’s if they manage to get back in (which isn’t that easy either). On the other hand, one of the main points of 168 Hours is that you don’t have to take time out of the workforce in order to spend lots of time with your kids. If you work 40 hours and sleep 8 hours a night (56 per week) that leaves 72 hours for other things. You won’t spend all that with your kids, of course, but you can spend a lot of it.

Leave a Reply

Your email address will not be published.