A Modest Proposal on Expensive Child-Rearing
By Staff News & Analysis - September 29, 2011

The rising cost of raising a child … Forget designer strollers and organic baby formula, just providing a child with the basics has become more than most parents can afford. The cost of raising a child from birth to age 18 for a middle-income, two-parent family averaged $226,920 last year (not including college), according to the U.S. Department of Agriculture. That's up nearly 40% – or more than $60,000 – from 10 years ago. Just one year of spending on a child can cost up to $13,830 in 2010, compared to $9,860 a decade ago. – CNN

Dominant Social Theme: There is nothing to do but grit your teeth and soldier on. Children will need the opportunity to go to the best colleges in order to get a foothold in life. It is all very expensive but certainly worth it.

Free-Market Analysis: This article presents us with a chance to evaluate what Western families want to provide to their children. We have touched on this before but can now readdress these issues, thanks to the CNN article.

The question we will ultimately ask has little to do with the dominant social theme that this article is presenting. Those involved with its creation want us to accept its underlying assumptions. We will argue the REAL solution to the "parent trap" has to do with rethinking child-rearing and putting it in another context.

The article begins by warning us that child-rearing is becoming ever more expensive. "'From buying groceries to paying for gas, every major expense associated with raising a child has climbed significantly over the past decade,' said Mark Lino, a senior economist at the USDA."

Food prices are up dramatically and according to the article, "between 2000 and 2010, consumers paid an average of 85% more per gallon at the pump." Medical costs are up a great deal as well, as employers have scaled back benefits. Total health care costs for families with children has risen nearly 60 percent we learn. While costs are up, median household income is down by some 7%, according to a recent report from the Census Bureau. And then there is a child care.

"In 2010, the cost of putting two children in child care exceeded the median annual rent payments in every single state, according to a recent report by the National Association of Child Care Resource & Referral Agencies, or NACCRRA … For many parents, choosing to work and pay for child care is often a difficult trade off when they might otherwise stay home." Here's some more from the report, which suddenly begins to emphasize investments:

"[Parents] are overwhelmed," said Lule Demississie, managing director of retirement and investment products at TD Ameritrade. The first step is to tackle the rising cost of raising a child is to start saving, she said. Stash some cash in a regular brokerage account, which will likely offer a higher return than traditional savings but can also be easily accessed to cover impending expenses, recommended Demississie.

For longer-term needs, Demississie suggested finding tax deferred ways to save for the major bills, like employer-sponsored flexible spending accounts for health care and child care and Coverdells for education expenses or 529 plans for college, which allow you to save pre-tax dollars.

Ginger Ewing, a financial adviser with Ameriprise Financial, says new parents often ask her about saving for college but she urges them to think about more pressing needs like day care first. "If you have to choose," she said, "start there." Ewing says it's those immediate needs that are often the most underestimated. She recommends holding at least $5,000 to $7,000 in a savings account or CD to cover the big expenditures that start even in the first year.

For those unable to set aside that kind of cash, Rita Cheng, another financial adviser, strongly advises couples to start slowly and do what they can. "If all you can do is save $50 a month, that's fine. It's not the amount, it's the action that matters and sticking to it," she said.

At the beginning of the article, we indicated we wanted to provide a larger frame of reference regarding child rearing. In fact, the article is full of assumptions about what children need, what parents ought to do and how sociopolitical and economic considerations interact with child-rearing.

Instead of trying to live a suburban, middle class existence as it has been defined in the West over the past half-century or more, people need to begin to question some basic assumptions. They have to understand that the current high-tax, high-inflation structure in which they are trapped is not preordained.

Even if people are not paying a lot of income tax, for instance, they are probably still seeing maybe 25 percent of their income going to taxes at state, local and federal levels. Inflation is a tax, too, and government figures woefully understate the amount of inflation that people face.

People feel the need to conform when it comes to their living arrangements and how they interact professionally and personally with their societies. But is it really necessary to aspire to the middle-class lifestyle of the 20th Century, or have times changed?

The bottom line: Ask fundamental questions about your relationship to your society. The important question that needs resolving is whether or not parents want their kids growing up in the current society.

Do you approve of a society that is perpetually at war with developing countries and keeps its own citizens in a perpetual state of penury via taxes and fiat money printing? Do you want your children to grow up being bullied in government schools and then being equally bullied in corporate jobs that are as unfulfilling as they are basically unproductive? Do you endorse your current society and existence or do you hope for something better for your children?

Most people these days live in fear of one sort or another, over whether they will lose their jobs, be able to pay their taxes or even provide for their families day-to-day. Is this fear-based lifestyle what you wish to bequeath to your children?

The CNN article makes certain assumptions. But perhaps the key to a better and happier life is CHANGING those assumptions. As we pointed out, the article treats the current reality as immutable. There are not changes that can be made to the larger system. The solution, therefore, we are told, is to invest better and more wisely.

Even if only a pittance is available for savings, a savings plan ought to be pursued aggressively. That government can wipe out savings – and is in fact doing so – by turning on the printing presses is never acknowledged, much less dealt with.

So here is a modest proposal. There are probably ways that one can disengage at least somewhat from the current sociopolitical and economic system in which one finds oneself. Equally important, however, is a decision to seek to give children the gift of knowledge about the society in which they are growing up.

Children need to know that the schools they go to, the health care systems they participate in, the larger institutions that they experience are a kind of matrix intended to bring about a certain result. Give your child the freedom of a frame of reference that places current social interactions in context. Give it to yourself as well.

After Thoughts

Even if you cannot give your children all the "advantages" – including, for instance, an Ivy League education – give them the gift of knowledge. Work with them relentlessly to understand the kinds of manipulations they will face and what decisions will be demanded of them. This fundamental knowledge may prove more precious and useful than a far larger income or gift of capital. Knowledge is the most precious gift of all.