How Parents Can Save Money When Raising Children (2024)

In 2017, the U.S. Department of Agriculture (USDA) released its analysis of what it costs to raise a child in the United States. And according to their figures it can cost as much as $233,610 before inflation for a two-parent, middle-income family to raise a child through the age of 17.

Interestingly, a family's costs decrease with each additional child—what's referred to as the “cheaper by the dozen effect.” In fact the USDA states that for families with one child, expenses averaged 27% more per child than expenses in a two-child family.

The USDA bases these estimateson the Bureau of Labor Statistics' Consumer Expenditure Survey, whichdraws a picture of an average American consumer. The top three costs the USDA names, in descending order, are housing (29% of the total cost), food (18%), and childcare/ K-12 education (16%).

Spending nearly a quarter of a million dollars to raise one child is quite a hefty number. But parents often respond that it's well worth the cost to have children. However, raising a child doesn't necessarily have to break the bank.

You can raise your kids in a way that feels best for your family and still save money. Reducing the cost of child-rearing takes a combination of long-term planning and discipline. Here are a few tips to help you get started.

Housing

When it comes to housing, you often have to think about education, as well, because where you buy a home will determine where your kids will attend school. Consequently, parents will often pay a premium to buy or rent a home in districts with high-quality schools. If you plan to homeschool or send your child to a private school, your family might not need to worry about where you live.

When you’re shopping for a house, it’s worth comparing the numbers to figure out what the costs for private school would be compared to the added cost of buying a home in a higher-priced (and presumably higher-quality) school district. If you have more than one child, public school will likely come out cheaper, but single-child families could save money with private schooling.

Of course, it doesn’t make sense to pay this premium before your first child hits school age. Even though the urge to move to a bigger house and settle in for the long haul can be strong when your first child is born, the longer you wait, the more you will reduce your cost of raising a child.

That said, moving to a lower cost of living area has a lot more ramifications than just dollars and cents. When there are other benefits—such as being closer to family or the opportunity for a different lifestyle—parentsmight make the decision to move. If parents work from home, not being tethered to a workplace makes the option even more viable.

Child Care

Child care can be a huge expense for parents, especially new parents. Thankfully, it tends to decrease as children growand might even go away completely when they reach school age.

In those early years, though, reducing child care expenses means reducing your overall kid-related costs. Every family is different and has different needs, but here are some possible ways to reduce your household's childcare costs.

Choose to Be a Stay-At-Home Parent

If one parent’s job is fairly low paying, it might make sense for them to quit and stay at home with the kids. This option can eliminate child care costs, especially after the birth of a second child.

You might need to take other cost-cutting measures, though, such as moving or cutting your overall spending, to make this option a reality. It's also important to keep in mind that you won’t save money in the long rununless you go back to the workforce once childcare is no longer needed.

Become a Work-At-Home Parent

Working from home won't necessarily eliminate all child care costs, but it can usually reduce them. Working part-time from home can be a good way for parents to keep their resumes up to date, which can make re-entry into the workforce smoother.

Utilize Grandparents or Other Relatives

If you are fortunate to have grandparents or other relatives nearby, it might make sense to see if they're interested in providing child care. While this approach is not necessarily free child care, it is usually cheaper than daycare.

Plus, it can be hard to find part-time child care that is economical. Having a grandparent or other relative help out could be a possible solution if you want to reduce your work hours to part-time.

Food

Unlike child care, the cost of feeding your child will only increase as they grow. The USDA estimates that it costs a family more than $200 a month to feed one teenager! And even though food expenses are the second-highest cost for families, it's still possible to save on food expenses.

Pre-cooked foods, take-out, and restaurants all cost significantly more than it does to cook your own fresh food. For instance, one study found that frequently cooking meals at home not only helps ensure families are eating a healthy and nutritious diet, but it also saves money.

In fact, researchers found that home cooking resulted in reduced per capita food expenditures of nearly $60 per month. Cooking at home also helped reduce away-from-home costs by as much as $70 per month.

However, the goal of cooking at home can be easier said than done for busy families, because one thing that parents today often lack more than money is time. Plus, it can be daunting to come home from work and start cooking, but this is where self-discipline comes in. Here are a few tips to keep you cooking.

• Devote a block of time to cooking. Set aside some time to cook ahead—this can be once a month, once a week, or somewhere in between. Doing so will ensure you have the option to pull an easy dinner out of the freezer on a busy weeknight or put a slice of banana bread in your child's school lunch instead of a pre-packaged snack.
• Double your recipe. When you're cooking a meal, make more than you need and put half of it in the freezer for another night's dinner. This is a great way to make sure that you always have dinner options on hand for those nights when things seem a little hectic.
• Plan your meals in advance. Coming home from work and having no clue what to cook is the easiest route to takeout. You can avoid this scenario by putting together a weekly menu and planning a few freezer meals for the nights you know you will be too busy or too tired to cook.
• Get your kids involved. Dinner becomes much easier when more hands are preparing it. Plus, cooking dinner together as a family allows for casual conversations and bonding. And, you are teaching your kids important life skills.

College

Because the USDA’s cost estimates stop at age 18, college, which is often the biggest expense for many families, is not included in their data. But according to the National Center for Education Statistics (NCES), college costs are consistently rising. If this trend continues, families with young children could be hit with huge costs when their kids get older.

In fact, the NCES indicates that when comparing the 2007-08 academic year to the the 2017-18 academic year and adjusting for inflation, undergraduate tuition, fees, and room and board costs increased 31% for public institutions in a decade. Likewise, there was a 23% increase for non-profit private institutions during the same timeframe. Interestingly, there was a 9% decrease during the same time period for private for-profit institutions.

Overall, the cost for undergraduate tuition, fees, and room and board was $17,797 for public universities and $46,014 for non-profit private institutions during the 2017-18 school year. Meanwhile, for-profit private institutions cost $26,261 for undergraduate tuition, fees, and room and board during that same timeframe.

To reduce the enormous cost of sending a child to college, it's important to start saving early. That way, you can spread out the hit on your income and take advantage of compound interest when saving.

Ideally, you should start saving when your child is born, but that's not always a realistic goal for families. The good news is, it's never too late to start saving. Still, many families struggle to know how much to save.

Consider the one-third rule, which states that parents should aim to save one-third of the expected cost of sending their child to college. The rest is assumed to come from current income, scholarships, and financial aid. Saving gets you prepared for college and eases the financial burden when kids enroll. To reduce the actual amount that you spend, here are a few tips.

• Compare. Carefully analyze the cost of public universities versus private schools. Public schools are usually much cheaper, but a good student can get private school scholarships—which can make it competitive or possibly even cheaper than public schools. Be wary of excessive loans from private schools, though, which can cost more in the long run.
• Consider community college. Two years of community college followed by a transfer to a four-year public university is a great way to save money on college tuition. Using this option allows first-year and second-year students to get some of their prerequisites out of the way while saving a significant amount of money.
• Have your teen save. Encourage your teenager to get a job and start putting aside money for college or their post-high school plans. Although not all teenagers are able to save enough to cover their tuition, what they do save can help offset other costs like books and meals. And, they are learning to take financial responsibility for their future.
• Learn about financial aid. Get to know the financial aid process. Talk to the guidance counselors at your child's school, and do your own research about scholarships and financial aid. You especially need to get familiar with the Free Application for Federal Student Aid (FAFSA), which determines how much aid you qualify for. Even if your family doesn't qualify for aid, many scholarships require that the FAFSA be filled out annually.

A Word From Verywell

Having children often forces parents to be thriftier. Remember, it's not just big-ticket items that you need to plan for in your family's budget—little things also add up as your family grows.

Your family's financial plan should include ways to manage the cost of holidays, vacations, clothing, and extracurricular activities. With a little thought, self-discipline, and determination, you will soon be on the road to reducing the expenses of raising a child.