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How Much Does It Cost To Raise A Child?

Being a parent has its joys – but it’s not cheap. Add up 18 years of child-related expenses and you’ll find that you’d better start investing now. Amy Hamilton Chadwick does the numbers on having a kid in New Zealand in 2021.

5 October 2021

Do you have a couple of kids? Brace yourself.

You’ll be saying goodbye to more than half a million dollars to see them through to adulthood.

An update of one of JUNO’s most popular stories shows we spend on average NZ$265,680 per child from birth to age 18.

That’s up NZ$15,000 from the $250,560 it cost four years ago.

It’s often said that it takes a village to raise a child. From a financial perspective, though, you’d better hope the village has a solid investment portfolio.

Raising children is a costly exercise, and the more you earn, the more you’re likely to spend. 

In 2017, Juno published a story about the cost of raising a child in New Zealand. This year, we’re revisiting that story to see what’s changed.

The direct costs

The day-to-day expenses incurred by each child, either directly or as part of the family’s total bills, can be grouped into food, clothing, accommodation costs, education, and healthcare. Over the past four years, almost all these costs have risen.

The biggest gain has been in housing costs, with rents and house prices up significantly.

Interest rates are down, however, which may counteract these rises for families with mortgages.

Daycare fees have risen dramatically; the OECD estimates that a couple on the average wage will spend 27 per cent of their income to send one child to fulltime daycare.

School education costs have also gone up, but not by anywhere near as much – it can really be a relief when your child starts school.

Food’s up, clothes are down

The price of food has increased slightly; healthcare costs are up very slightly, but zero doctor’s fees for under-14s really help keep them down.

Expenditure on kids’ clothing has actually dropped, although spending on shoes has gone up. And the cost of holidays is down since overseas trips have been off the cards for the past year.

Then there are the optional extras: sports, music lessons, toys, and technology, for instance. And add in family holidays, private schooling, and extra tuition.

And do you need a bigger house with more bedrooms? The more money your family makes, the more you’ll tend to spend on your kids.

Those discretionary decisions are why there’s a big gap between what various Kiwi households spend.

Estimates range from about NZ$175 – NZ$500 per child per week, depending on your income. That’s a range of NZ$9,100 – NZ$26,000 a year, or NZ$163,800 – NZ$468,000 across 18 years.

For private education, add another NZ$12,000 – NZ$25,000 per year during school years.

And, as many parents discover, adult children can be the most expensive of all; the Bank of Mum and Dad is one of New Zealand’s biggest lenders when it comes to buying houses.

The numbers

Obviously, you didn’t have kids to turn a profit. You love the expensive little blighters.

But what costs does a Kiwi kid incur for direct costs alone?

We can make an educated guess based on local and Australian data, plus Inland Revenue’s August 2020 Household Expenditure Guide and Otago University’s Food Costs report 2019.

This covers 18 years of costs, averaged out to one month, so your child will probably vary depending on their stage of life and your choices for them:

COSTS

Food NZ$340, up 7%

Housing and utilities NZ$237, up 1%

Education (public school) NZ$60, up 50%

Activities NZ$63, up 5%

Holidays NZ$85, down 10%

Clothing NZ$70, down 13%

Transport NZ$82, up 10%

Entertainment NZ$71, up 2%

Healthcare NZ$62, no change

Pocket money NZ$35, no change

Communication/technology NZ$65, up 1%

Extra and unexpected costs NZ$60, up 20%

That’s a total of NZ$1,230 per month, or NZ$14,760 a year, or NZ$265,680 from birth to age 18. 

The ‘Stay-at-Home Parent Penalty’ 

The biggest hidden cost of parenthood is taking time out of the workforce, often for women.

Although it can seem like a money-saver – lower childcare, transport, and clothing costs – in the long term it’s enormously expensive.

Five years out of the workforce, missing out on all the pay rises, career advancements, additional KiwiSaver contributions and returns that entails, can result in the loss of hundreds of thousands of dollars in income.

When you go back into the workforce, you’re usually earning less money than when you left, or working fewer days, and you’ve missed out on opportunities for promotion.

Particularly unfairly, women who don’t have kids are penalised by the expectation that they might, which contributes to the gender pay gap, according to research by www.GlobalWomen.org.nz.

If you’re feeling guilty about enjoying work but netting almost no money from it while your kids are in daycare, you should know that you’re probably making a good long-term investment in your lifetime income.

However, it’s impossible to put a value on spending time with your kids when they’re young, so you need to weigh that up against your own feelings and financial drivers.

The good news

Knowing all the costs, why would anyone have children?

Perhaps surprisingly, there are still some upsides. Parents actually earn more than non-parents in New Zealand, according to the latest research available from Statistics New Zealand.

In other good news, a 2013 Melbourne Institute paper found that children “have a very small impact upon wealth accumulation, seemingly at odds with the large ‘costs’ implied from expenditure-based estimates”.

Children can motivate their parents to save, decrease a parent’s likelihood of quitting their job, and compel parents to plan for the future.

All those actions help to offset the costs of having kids. However, not all the research agrees with this outcome; predictably, wealthier families have better outcomes than lower-income families.

So, if you’re considering having a first child, or adding to your already growing brood, get out your calculator and remember it’s wise to keep the costs in mind – even if the rewards are priceless.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.

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