Understanding the cost of raising children is important for many reasons, not the least of which is that it affects the calculation of child support. Under most child support models, estimates of the cost of children influence payment rates.
You might hear from people that "children cost a lot". You might also get that impression if you see economic statistics on the cost of children. But the statement is a simplification (and the stats are usually misleading).
In reality, children can cost a lot but only if you choose to spend extra money. Spending on children is highly discretionary. Couples who keep their marriage together tend to spend a lot, though this can change after divorce when they may suffer financial insecurity.
- A parent is generally doing OK if a child is well fed, adequately clothed, has a comfortable place to sleep, and gets love and attention. That doesn't cost very much.
- The cost of children becomes high if you want to give them a big house, plenty of spending money, private education, private medical, paid tutoring, expensive gifts, and holidays to distant places. It's up to a parent to make such choices.
- Parents are also able to save money by having a child-focused lifestyle – e.g., fewer restaurant meals, less alcohol consumption, simple hobbies, fewer overseas trips.
Couples with children are not obviously worse off financially than couples without children. Raising children is a lifestyle, not an extraneous financial impost. Refer to this discussion on the effective costs of children.
The discretionary nature of spending on children counts against the combined-income method for calculating child support. Trying to force an idealized pattern of spending has hidden costs, generally won't work, and offers only limited benefits to children.
It is one thing to ask a parent to contribute their fair share towards the necessary costs of children. But it is another to ask them to try to simulate the spending of an intact family in a household where they don't reside. The parents may be struggling just to communicate effectively, let alone operate as a single financial unit.
Unfortunately, the income shares model of child support is popular in the US and has most recently been introduced into Illinois. As well as being unfair to higher earning payers, the formula encourages mothers to dominate care giving (which increases support). Consequently, more children suffer from having an absent parent and the many problems associated with that.
Critique of costing practices
Did you know that, when organizations such as Australia's NATSEM work out the cost of children, they effectively add back in childless lifestyle expenses? Parents are considered to bear costs from missing out on things such as drinking, partying and holidays with friends.
If we simply compare the total spending of this couple before and after they had their baby, we will reach entirely the wrong conclusions about how much the child is actually costing them each week.