Reports offer vastly different takes of costs of raising children
Published Thursday, August 22, 2013 11:59AM EDT
Last Updated Thursday, August 22, 2013 10:52PM EDT
Just how much does it cost to raise a child in today’s world? Two reports released Thursday offer greatly different estimates -- with one finding many parents are delaying retirement to help pay for their children’s higher education; and another suggesting that childrearing doesn’t have to be costly at all.
The first report, commissioned by CIBC, comes from an online poll of Canadian parents with kids under 25. It found that 36 per cent of these parents said they would be delaying their retirement due to their children's post-secondary education costs. That includes 19 per cent who said they’d have to delay retirement for at least five years.
As well, one-third of respondents said they had taken on additional debt to help put their children through school.
Christina Kramer, an executive vice-president at CIBC, says the expenses of children's post-secondary education often hit parents when they are in their 40s and 50s – a time when they are also typically looking to build up their retirement savings.
Kramer added that in order to manage the costs of education, it pays to have a plan and start saving early through an RESP.
But a second report from the Fraser Institute think-tank says the annual costs of childrearing are much lower than many believe, pegging the cost of raising a child at just $3,000-$4,000 a year.
That’s much lower that most estimates from government and private organizations, the report notes, which tend to estimate the annual cost in the range of $10,000 to $15,000.
The Fraser Institute report’s author, economist Christopher Sarlo, says the problem with most of those estimates is that they “have a distinct middle-class bias” and do not reflect the reality of lower-income families.
“There are millions of Canadian parents, including countless immigrants, who, over the past several decades have successfully raised happy, healthy, and well-educated children on a fraction of this cost (inflation adjusted),” Sarlo, a senior fellow at the Institute, writes.
Sarlo worries that the high costs often calculated in other estimates are “alarming” and “frightening,” and “send a clear message to lower-income families that they really cannot afford children and, perhaps, shouldn’t have any.”
The Fraser Institute report says it calculated its estimate based on the cost of a child's “essential needs”: food, clothing, personal care, household supplies, recreation and school supplies.
Notably absent from the estimate is the cost of daycare or after-school care – which many dual-income families might argue is a necessity.
Sarlo says the decision to exclude daycare costs was “not because it is not a legitimate expense,” but because he says the majority of parents don’t need it.
He writes that many parents stay home during their children’s preschool years, have free daycare or family members to care for their children, and that there is little need for such care once a child reaches the age of 10 or 11.
“This item is best treated as a special expense for those families for whom it is relevant,” he writes.
The report has generated plenty of controversy among new parents and groups that work with low-income families.
Donna Williamson, the executive director at Family SOS, calls the estimate “shocking.”
“It shocks me that somebody came up with this,” Williamson, who helps low-income families create manageable budgets, told CTV News.
“Their children are eating Kraft Dinner and bologna and hot dogs so to say that you raise your children on $3,000 to $4,000 a year, I’m wondering how?” she asked.
According to new mother Janice Hudson, families are juggling other costs in addition to those related to childrearing.
“The reality is, you still have hard costs for housing and for food and rent and other issues,” said Hudson, who writes extensively on family issues.
And even those who are completely new to parenting are questioning the Fraser Institute’s report.
“You have to buy bottles and endless sippy cups and formula in some people’s cases, which is very expensive,” said new mom Julie Caruso. “I only have experience with the first year, but just that alone, I can only imagine it’s over $4,000.”
The Fraser Institute report also excludes the costs of sports, music lessons, summer camps or vacations, arguing that none of these expenses are necessary to raise a child “at a socially acceptable standard of living.”
Sarlo concludes that “it has never been easier, financially, to raise a child in Canada” because there are more dual-income families, incomes are higher, a child’s necessities represent a smaller portion of typical family income, and couples are having fewer children.
His report adds that once tax benefits are calculated into the estimates, such as the Canada Child Tax Benefit, the costs of child-rearing for low-income families can be zero.
With a report from CTV’s Todd Battis