Child Tax Credits Explained

Posted On: 2006-07-03Length: 12:53

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Raising a child? It often comes with a hefty price tag. If you're bringing up baby, we'll tell you more about the bottom line in this Fidelity Personal Finance podcast.

Your children are priceless, or so you think, until you take a step back and look at what it costs to raise them. According to the U.S. Department of Agriculture, or USDA, if you make $70,200 or more a year, you could spend as much as $269,520 to raise a child to the age of 18. And that doesn't even include college. Even if your family's income is lower, the numbers are still daunting. For families making $41,700 to $70,200 a year, the USDA estimates total child-rearing expenses at $184,320. For families making less than $41,700 a year it's $134,370. That's up to age 18, by the way. No one likes to put a price tag on their child. But finances do factor into your growing family's needs. A former attorney and author named Brette Sember, reassures us that child-rearing expenses build gradually, so you do have time to plan ahead. She's author of Your Practical Pregnancy Planner, everything you need to know about the financial and legal aspects of preparing for our new baby. The point is, the more you can anticipate these costs, the more successfully you may be able to meet them.

How much will kids cost? How much you'll spend raising your kids may depend on many factors, including the number of children in your family, your income level, and the type of health care coverage you have. The USDA breaks child-rearing expenses into major categories, including housing, food, transportation, clothing, health care, child care, education, and miscellaneous expenses, that is, entertainment and personal care. Housing, which ranges from 33 to 37 percent your total bill, is by far the biggest expense incurred in raising children. Next comes food, which accounts for 15 to 20 percent of total expenses. Transportation costs range from 13 to 14 percent. Miscellaneous expenses are 10 to 12 percent, child care, education at 9 to 13 percent, health care at 8 percent, and finally clothing, at 6 percent of total child rearing costs. These statistics come from Expenditures on Children by Families, 2004, from the United States Department of Agriculture, Center for Nutrition, Policy and Promotion. What these figures don't include are lost earnings and/or career opportunities for a spouse that stays home with the kids, and more importantly, college tuition. According to the College Board, the bill for college, tuition plus room and board, for the 2004-2005 tuition year, averaged $10,659 at a four-year public college, and $23,800...