MAY 2007 :: ECONOMICS

The Million-Dollar Kid
Breakdown of Child-Rearing Costs Offers a Window Into the World of the Wealthy

By Eileen Daspin and Ellen Gamerman
Staff Reporters of The Wall Street Journal

The government says families in the top-third income bracket will spend $279,450 to raise a child born in 2005 through age 17—or about $16,000 a year. The government clearly hasn’t been to some kids’ birthday parties lately.

A Child-Spending Spectrum A chart showing the costs that go into raising a child, from the expensive to the ultra-expensive

In San Diego, Jacqueline Jones recently rang in her fifth year with a $1,000 mermaid-theme party. The party, held at a community pool, included a piñata, pizza, cake, juice boxes, customized goodie bags for 20 and a former beauty queen who arrived dressed head to toe as Ariel, the Disney princess. Jacqueline’s mom, Laura, says it’s worth it. “A lot of my friends said I’m crazy, but I mean, it’s for a memory she’ll have forever.”

With the debate about the country’s wealth gap heating up again, pampered kids provide some of the most dramatic examples, from toddlers in $800 strollers to 10-year-olds with cellphones. But for many families, drawing the line between attentive parenting and extravagance is a tough call; even parents who are relatively strapped will go to great lengths for their children. And though millions can’t afford the government’s child-cost estimate, there is no question that many others are spending far more without viewing it as extreme.

Sports, MP3 and Education

T o assess how relatively routine expenses, as well as more excessive ones, can contribute to the total cost of raising a child, The Wall Street Journal deconstructed the government’s approach and recalculated it using a different range of costs.

Escalating kid spending is more rampant among wealthier households, so we used the government’s top-third income bracket as a starting point. We also added some costs that aren’t included in that government calculation, such as college-savings plans, which a growing number of households are setting up for their kids.

We placed all these expenses on a spectrum, from those that parents and experts say are the most common, up to more unusual—and costly—frills. At the lowest end, our estimates came in at about $800,000 (in 2007 dollars) through the age of 17. Add in extras like private school, a nanny and a flat-screen TV set in a kid’s bedroom, and that figure climbs to $1.6 million.

Some of the costs can add up quickly. For parents whose kids are passionate athletes, for instance, baseball equipment, including helmets, cleats and uniforms, costs in the realm of $3,000 from the age of 10 to 17—and taking it one step further by enrolling in an elite youth team can pile on a further $12,500 for annual travel expenses. Fully half of American teenagers now own MP3 players; a year of daily iTunes downloads for them comes to $361 and change.

The biggest and most common driver is education. One in 10 children now goes to private or parochial school. Even at a relatively modest tuition at a parochial school of $6,000 a year, that would add $60,000 or more to the government’s total figure of $36,000 for education and child care. Likewise, academic extras are becoming routine; the average income of a family seeking tutoring for a child is between $50,000 and $75,000, according to Eduventures, a market-research firm.

Analysts who study consumer goods say that demographic trends, which have added to the development of a kid-centric society, underlie some of the ballooning costs. In this view, DIOKs—double-income, one-kid families—are having that child at a later age, when they can better afford to spend and spoil.

The Upgrade Cycle

Parents with more than one kid face the fiscal phenomenon of upgrading: Where baby No. 1 starts with a standard-issue stroller, the second one gets an upgrade to a $300 MacLaren and the third one gets an $879 model by Bugaboo.

Behind some upgrades is parents’ increasingly broad view of what constitutes an educational expense. School itself is just the beginning. It might mean paying $16,500 in annual property taxes in an area with top public schools, or springing for private-school tuition that can be twice that. Then there are costs that are directly in support of education, like SAT prep and tutoring. But fixated on those eventual college applications, more parents now see everything from trips to volunteering in developing countries to laptops and art-appreciation classes as falling under the category of education—and therefore, justifiable.

A stay-at-home mom in Needham, Mass., Cory Lewkowicz, says her family is comfortable, but not with unlimited resources. Ms. Lewkowicz feels adventure travel is one of the most esteem-building gifts she can give her two children. To afford a trip to Panama this summer, Ms. Lewkowicz, her kids and her husband are tightening their belts. She has given up her triple venti lattes, which she calculates were costing between $3,000 and $3,500 a year, dropped the membership at the local pool, and cut back on Christmas gifts. (The family vacation to Belize in 2006 cost $16,000.)

“It’s expensive, but you absolutely get what you pay for,” says Ms. Lewkowicz, describing the impact a trip to Costa Rica had on her son, age 11. “He took chances I never expected.”

Despite parents’ willingness to spend with abandon to provide character-building experiences, educators and therapists say the practice can backfire. Principals in wealthy communities say children are directed into so many classes, they don’t know how to work things out on their own. They also own so much stuff, school lost-and-found departments are overflowing. “In the end, they’ll be fine,” says Gail Lynn Main, the principal of Lafayette Elementary, a public school in an affluent Washington, D.C., neighborhood. “But they’re not as independent. They don’t do chores at home. If you bring a broom over, they just look at you.”