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Cost of children? The numbers ain’t kidding

TODAY Financial editor Jean Chatzky shares advice to help couples afford their little bundles of debt.
/ Source: TODAY contributor

My mother used to say if anyone in her generation had stopped to ask how much it cost to raise a child before they had them, none of the people in my generation would have been born. And that was 40 years ago.

But today, according to the U.S. Department of Agriculture, the cost of kids is far higher:

Families who make:            Will spend:

More than $74,900             $289,380$44,500 to $74,900            $197,700Less than $44,500             $143,790

Where does all that money go? According to, the breakdown at the middle-tier level looks something like this:

  • Groceries — $1525 year
  • Clothing — $606 year
  • Bigger home — $2900 year
  • Bigger car — $1250 year
  • Health care — $300 year
  • Education — $600 year
  • Child care — $4300 year (through age 11)
  • Recreation — $300 year
  • Additional insurance — $300 year
  • Gift giving — $330 year
  • Miscellaneous — $330 year

And no, that doesn't include in-vitro fertilization, which can run $10,000 per cycle and often isn't reimbursed by insurance, or adoption, which can be much more. Nor does it include college, which is currently running about $50,000 for four years at a public university and $125,000 for four years at a private college. 

So what's a parent to do? 

First, realize that these numbers are averages. They are developed by the government primarily to be used in divorce cases as a basis for child care formulas. You, as a parent, can make a lot of choices that bring your personal number down tremendously. For example:

Reevaluate your housing needs — don’t trade upYou can choose not to move into a bigger house. The formulas assume that for each additional child you add to the family, you're going to need another 100 to 150 feet of living space, but not if your new baby shares a room with the child you already have.

You can also make sure you're living in an area in which schools are good (so that you don't have to worry about the cost of a private education) and taxes are reasonable. These are the sort of criteria that “Money magazine bases its “Best Places To Live” list on each year. If you go to the “Money” Web site, you can input your criteria and come up with a list of places that might work for you.

Develop a budget based on disposable income Spend less than you make. When you look at the other categories — gifts, food, clothing — one thing is really apparent: You can make choices about how much you spend on these items. You can buy your children $100 sneakers or you can buy them $30 sneakers. You can eat out three or four times a week and load up on pricey convenience foods at the grocery store, or you can decide to eat out less often and forego the $3 Lunchables in favor of a 50-cent sandwich you make yourself. The key here is figuring out — before you go out and spend anything — how much you can afford to spend. In other words, develop a budget for what makes sense for you.

You need to know how much disposable income — how much money you have coming in after taxes — you have each month or each pay period. Of that:

Thirty-five percent goes to housing. That's not just the cost of your house, it's the cost of taxes, insurance and maintenance.

Fifteen percent to transportation. Again, that's not just the cost of your car, it's the cost of gas, insurance and tolls.

Fifteen percent to debt repayment. This is money that goes to repay your student loans, credit cards and any other debt besides your mortgage and car loan.

Ten percent to long-term saving. This can include any 401(k) or other retirement plan contribution that came out of your paycheck pre-tax.

Twenty-five percent to everything else. This is food, entertainment, clothing and gifts.

Don't buy into the JonesesParenting has become — like so many other things today — a competitive sport. Your child wants a Wii because a friend has a Wii. The more you give into pleas and impulses to buy things that aren't really necessary (and aren't truly within your means), the more you sabotage your ability to pay for truly important things (like college and your own retirement) later on.

It's best to have some longer-term goals in mind at all times. That way, when you're faced with the idea of upgrading your car “just because,” you have a reason to walk away. You want to be able to take the family to the beach for two weeks longer.

With reporting by Arielle McGowen.

Jean Chatzky is an editor-at-large at “Money” magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, .