A federal government study shows that it costs around $367,148.77 to raise a child in Canada from birth to age 18, working out to $20,397.15 a year for medium-income households.Anchiy/iStockPhoto / Getty Images
If you think it costs a small fortune to raise a kid, you wouldn’t be far off. In fact, it takes an eye-popping $367,148.77 to raise a child in Canada from birth to age 18, according to a federal government study.
The report from Statistics Canada looked at expenses including housing, food and transportation. That number, based on 2017 data that I adjusted for inflation, doesn’t include college or university costs. And it strikes terror into the heart of every parent, especially those pursuing the Financially Independent and Retired Early (FIRE) lifestyle.
Here’s the biggest issue with this and other studies of its kind: Kids cost more when parents’ salaries increase. So yes, raising kids is expensive, but is it as expensive as the 2023 Statscan study suggests?
Why it can make sense to rent when you have a kid
When broken down by income, the cost of raising kids rose sharply, depending on how much parents earned. The headline $367,148.77 number is for households with medium incomes, which Statscan defined as between $83,013 to $135,790. The cost jumped significantly when salaries increased.
What we see from this survey is that higher income leads to more spending, which means that parents control some of the costs involved with raising children.
The $367,148.77 cost for medium-income households works out to $20,397.15 a year. The three highest categories of kid-related spending are housing, food and transportation. So if you can optimize your spending in these three categories, you can greatly reduce your child-rearing costs. Let’s take a look at how this could be done.
Rent only what you need, when you need it
Most families are homeowners, not renters – 67 per cent compared with 33 per cent. That’s because of a widespread Canadian notion that you can’t raise a child in an apartment. As a kid who was raised by my parents in a tiny room I shared with my grandmother, I can assure you that your kid will survive not growing up in a three-bedroom house.
When you have a newborn, the Canadian Paediatric Society recommends co-rooming for the first six months to reduce the risk of SIDS. By staying put in our one bedroom rental for the first year not only are we following safe sleep guidelines, we’re saving $12,000 that we’ll invest in our son’s registered education savings plan (RESP).
Once he’s older and needs more room, we’ll move to a two-bedroom apartment. But by not buying a house, our costs are predictable, and our portfolio generates enough yield – through interest and dividends – to pay for the rent increase.
By renting only what you need, when you need it, you can lower your housing costs below the study’s estimated inflation-adjusted overall $85,140 or $5,927.01 a year cost of housing. Keep in mind that 29 per cent of the total cost of raising a kid is from housing.
One downside of renting is the moving costs, but these are dwarfed by the tens of thousands of dollars in land transfer tax you’d have to pay if you bought, in addition to all sorts of closing costs such as lawyer fees, home inspection and so on.
Food
Next up is food, at an inflation-adjusted $61,249.94 to age 18, or $3,402.77 a year on average. Feeding your kid isn’t cheap but the cost is gradual.
When your child is young, they’ll still eat far less than what you eat. It ramps up later as they become teenagers. So far, we’ve found that feeding our son costs less than half of the estimated Statscan amount.
In terms of cutting grocery costs, we like to use the Flashfood, Too Good To Go and Flipp apps. Flashfood lets you find groceries near their best-by date at discounts of 50 per cent or more. The key is to look for meat, milk and bread, and freeze them.
Too Good To Go lets you find discounted surplus restaurant food and Flipp lets you do grocery-store price matching to get deals.
Transportation
The Statscan study estimates transportation costs to be an inflation-adjusted $74,607.64 from birth to 18, or $4,144.97 a year, on average.
If you already own a car, the added cost is simply the gas and any additional maintenance it takes to drive them to doctor’s appointments, activities, etc. In our experience, that is less than one-fifth of the Statscan number.
If you live in a place with public transportation, children under 12 ride for free. The only justification for a large cost is if you had to buy a car once you had a child. Even then, you can cut that cost by getting a used vehicle or using car-sharing services.
When I became a parent, I learned that kids aren’t cheap, but they don’t have to be crazy expensive either. We’re driven into emotional spending by the baby industrial complex, which preys on our insecurities as parents. People try to keep up with the Joneses by buying things their kids don’t need, just because other parents bought them.
The truth is you can raise them for a little or as much as you want. Kids don’t need much to be happy. They just need you.
Kristy Shen and Bryce Leung retired in their 30s and are authors of the bestselling bookQuit Like a Millionaire.
