Hey parents, the third kid’s a bargain (USA TODAY)

(Note: This column ran in today’s USA Today)

By Laura Vanderkam

In a tepid economy, people look to save money however they can. One strategy? Not having kids. After hitting a high of 4.3 million in 2007, U.S. births tumbled, according to the Centers for Disease Control and Prevention, to about 4 million in 2010.

It makes sense. Each year, the U.S. Department of Agriculture produces a study calculating how much it costs to raise a child to age 18. In 2010, the price tag was $226,920 — curiously close to the U.S. median house price ($221,800). Given how vexing housing has been, families are understandably wary of adding similarly-priced babies to the mix.

But a closer look at these numbers shows that the real sticker shock happens when you have the first kid — something the vast majority of couples do. After that, the marginal costs decline considerably, to the point where the third kid — the one most families don’t have — is downright cheap. That’s good news for would-be bigger families because, despite vague talk of overpopulation as this planet crossed 7 billion inhabitants in October, Americans tend to undershoot, not overshoot, their preferred family size.

Numbers tell the story

To produce that $226,920 number, researchers survey about 12,000 husband-and-wife households each year. They’ve discovered that families with three kids spend 22% less per child than two-kid families. Single-kid families spend 25% more on their offspring than two-kid families spend on each of theirs.

While 22%-25% doesn’t sound like a huge difference, this is what it means on the margins: An 11-year-old who’s an only child would cost a middle-income family $15,830 per year (a big chunk of that is to house him). According to the USDA tables, though, a family with an 11-year-old and a 16-year-old would spend $26,490 per year. Having a second child added only $10,660 to the tab. After that it gets better. A middle-income family with kids ages 11, 13 and 16 spends $31,070. The third kid costs just $4,580.

So what’s going on? Two things, according to Mark Lino, who writes the USDA report. First, “if you have X amount of income, with more children the income has to be spread over more children,” leaving less for each.

In theory this could shortchange children — except there’s no evidence that folks from three-kid families turn out 22% worse than those in the two-kid norm.

That brings us to the second explanation: “You also start to get economies of scale — the cheaper by the dozen effect,” Lino says. Once you buy the home, for instance, “you can have children share a bedroom — that’s a big cost savings.” Kids use hand-me-down clothes, cribs and toys. Sitters don’t charge three times the rate for three kids vs. one.

Meagan Francis, a Michigan mother of five and author of The Happiest Mom, agrees. “Our family is twice the size of a lot of families we hang out with, but our food bill isn’t twice the size.” They buy in bulk and don’t eat out much, partly because it’s a hassle and partly because staying in “feels like a party.” Indeed, with four built-in playmates, the kids don’t need pricey activities to stave off boredom.

To be sure, some costs don’t decline. Take college (which the USDA doesn’t include in its figures). Sending 3-plus kids to college would be exorbitant. On the other hand, in an era when private tuition, room and board tops $50,000 a year, “most of the people I know with one or two kids don’t think they’re going to be able to put their kids through college,” says Francis. More kids doesn’t change that.

Of course, even if the third kid is cheap — a recession special — each child still requires volts of parental energy. But surveys find that some chunk of Americans would like to tackle more of these projects than they do. Gallup has found that people think 2.5 children is the right amount to have in a family, yet the American birth rate is about two children per woman. Some 33% of adults think that the ideal family would have three or more kids; 29% of women hit this. Perhaps fears of overpopulation figure in, but since almost 80% of Americans plunge into parenthood — with the big outlay for the first kid that entails, and showing, by adding a person to existing billions, that they don’t think the world’s too crowded — it’s strange that people stop just as the economies of scale improve.

Whether to ‘go for it’

So if you want a third, when people talk about the steep cost of kids, know there’s more to the story.

That’s what Brian Schupper decided. He and his wife, who live in Milwaukee, have many friends with two kids who “wished they’d had another,” Schupper says. As they debated the third-kid question, they worried about “the impact on our ability to provide experiences for our other two kids.” But they decided to go for it, and welcomed a third son last year. Thanks to hand-me-downs, help from family, and flexible work arrangements already in place due to the other kids, the costs have been limited. The upside? “A house with more life in it,” he says.

In other words, they’re getting more for their money. With kids — or anything else — that sounds smart.

Laura Vanderkam, author of the forthcoming All the Money in the World (March 1), is a member of USA TODAY’s Board of Contributors.

10 thoughts on “Hey parents, the third kid’s a bargain (USA TODAY)

  1. I am always telling my friends and colleagues that 3 is the new 2! (Maybe that’s because I have 3 kids, though…so perhaps a bit self-serving.) I honestly have found the above to be absolutely true for us. The 3rd child does add expense – of course – but marginally so much less than the others. The big issue for us is that we choose to send our kids to private school, so as soon as my 2-year old starts doing that, the costs will jump. But, that’s a decision we’ve made and not something absolutely necessary to have, and so we are willing to shoulder the added cost.

    However, what I think is also important to point out to parents considering another child is that your emotional energy/investment is, in a sense, also marginally lower with each one. Before people get all up in arms, I don’t mean that you love subsequent children less – that’s absolutely not the case. However, here’s an example: when I had my first, I obsessed about every little thing that he did and was calling my pediatrician at midnight because he spit up after nursing (I was his favourite parent!). That just didn’t happen with #2 and 3. Also, when I had to travel occasionally for work or pleasure and leave my only child at home with grand-parents, my husband, etc., I felt such guilt. When my husband and I recently took a 5-day couples retreat and left all 3 kids behind, not only did I feel less guilt, but they had much for fun together than they ever would have had alone. My husband and I still toy with the idea of #4, even though many people think I’m insane. I figure he/she will just be able to raise himself!

    (Whoops – sorry for the super long comment…)

    1. @Rinna- I think you’re getting at something interesting with the emotional energy comment. I’m doing a guest post for Free Range Kids on something like this when the book comes out. I think the biggest lifestyle/energy change came from having one. By three, my life is built around the reality that I have children. I’m no longer comparing myself with my then 27-year-old friends going to happy hours. Now most of the people I know have kids, partly because I’ve met many of them through my kids. Putting another child into this kid-full life has felt like it’s not a huge change. Curiously, I’ve heard the line a few times that the switch from 2 to 3 is harder because you go from man-on-man to zone defense, but it’s almost all men who’ve told me that. Looking at time studies, women spend more time with their children as the sole adult on duty, so by the time you’ve got 2, you’ve already mastered zone defense (whereas the husband who’s usually with the kids with his wife also around still thinks it’s man-on-man).

      1. People also tried to scare me about the move from 2 to 3 with all that “zone defense” discussion, and it wasn’t that bad. Whenever a family dynamic changes, it takes some readjustment. So, for example, it took me a while to figure out how to get 3 kids to bed instead of 2, and I had to deal with the usual new-baby sleep deprivation. I couldn’t honestly say it was “easy,” but nothing in comparison to moving from zero to 1! Just this past Sunday morning, I took girl (#2) and little boy (#3) to gymnastics together, where I do a mom and tot gym with #3 and #2 does her own class at the same time. My husband needed to get some work done, so I also offered to bring big boy (#1) with me as a helper to the mom and tot class so that hubby could work in a quiet house. (You can imagine how much of a helper he was.) Then, I took all three shopping for some key groceries and toys for a bday party. I had snacks and drinks ready for the shopping and promised each a small, little “gimme” toy in the store. Honestly, it was pretty much a breeze. And not because I’m some superwoman mom – I’m really, really not. I’ve just adjusted my life and expectations and experience to having kids. I like the way you said: “my life is built around the reality that I have children.” And experience is the best teacher there is. If it takes 10,000 hours to perfect a skill (as Malcolm Gladwell tells me), and my oldest is 7.5, I figure I’ve amassed 65,700 hours of parenting under my belt. A third child really didn’t make that much of a difference!

        So, does the above comment mean that you are a Free Range Mom? I’m pretty sure I’m not, but I’ll look forward to reading your guest post 😉

  2. Perhaps this is true for those with a stay at home parent or a nanny who comes to the home to watch the kids, but I truly don’t believe that this is true for dual-income households where the kids are in a daycare center. You are charged by the kid, and adding a 3rd kid most certainly DOES cost a lot more. I paid over $16,000 last year for childcare for 2 kids (one of whom was in school half the day for half of that year and full day for the other half). Adding a 3rd would have cost me well over $12,000 in addition, since the infant room is the most expensive room in a daycare center. Yes, I know, that cost goes away at some point when the kids are able to come home from school and care for themselves, but that is a lot of money. Is it worth it if both parents love their career, even though they may be taking home less from the 2nd paycheck than they are spending on daycare during those years? For me, absolutely yes (even though I only have 2 kids…..if I had a 3rd, I would not quit working even if my childcare costs exceeded my income for a few years because it is very difficult to take time off in my field.) Is is worth it if one parent is working a “job” simply to help pay the bills? I’m not sure, but I’d guess not. We’re still on the fence about it, but I guess what I’m trying to say is that I can really understand why so many dual-income families choose not to have that 3rd kid.

    1. That’s a really good point about the daycare – I have always had a nanny, so I guess I didn’t think of that. But, isn’t it to some extent (though not absolutely) similar to the private school issue I noted in my comment? If you absolutely felt that your family wanted another child, couldn’t you then use a nanny to defray some of that additional cost? I’m by no means convincing you of having a third, just saying that the basic message of the article could still hold true.

    2. @Emily- I understand it too. I just think that the economics comes out interesting ways. For starters, many people with 3 wouldn’t have 3 in daycare simultaneously. One would be in school if you’ve spread them over 5-6 years. Mine are quite close together (Twin Mom’s are even closer!) but with 3 singletons, we’ve only got 11 months where none of them are old enough for public school. Also, the economics you describe are why many people do go to a nanny situation with 3 kids. It can cost less than 3 kids in daycare, and you get the convenience of someone coming to you, and most likely working when a kid is sick (and they’d be sick less when not in daycare).

  3. I have 3 kids and I’m glad, but I don’t think this analysis is very thorough. It’s great if flexible work arrangements happen for you, but articles like this ALSO need to discuss people who are fail to meet their life goals due to 3 kids. In our state, for example, limiting the number of children under 2 that a home childcare provider can have to 2 children makes it almost impossible to find non-center-based care for twins. (Who has a slot for 2 infants at once, especially 2 infants with an older brother not yet 2?) My employer was inflexible for sickness for 1 kid, and 3 kids will be sick more than 1, even if not 3 times as many days.

    This is always the problem with anecdote vs data. You have to look at those who fail (me) AND those who succeed (them).

  4. I have 5 boys…the 3rd was the easiest transition! It is true that each child does cost a little less..we spend more time at home because my kids do have built in playmates. We also consciously limit the outside activities, not only to keep us sane, but to help the budget! Big families are the best…I highly recommend it! Nothing better in the world to spend your money on!

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