Raising children cheaper in bulk

By MARK FRYER

Stand by for a plunge in the birth rate in nine months.

The only parents welcoming new arrivals then will be the ones who didn't read the news from Australia this week that it now costs A$448,000 ($511,000) to raise two children from birth to the end of their 20th year.

This startling sum comes from a study by the University of Canberra's National Centre for Social Economic Modelling, published by AMP.

Half a million bucks? For two kids? That's enough for a decent house in Auckland - this week anyway.

At this point it's tempting to reach for the old saying about lies, damned lies and statistics.

But let's give the academics the benefit of the doubt for a moment - and let's assume that Australian child-raising patterns, and costs, aren't too different to our own.

What the Canberra study tried to do was tot up the amount that parents in various income groups spend on their children, then come up with the total cost of raising a family of two, from birth through three years of university study.

Which is where the terrifying tally of $A448,000 comes from. It gets worse. That's A$448,000 in today's dollars, without accounting for inflation. And the figure claims to measure only the direct cost of having kids - the food, the housing, the "I need a new outfit for the school ball", etc, etc. Never mind the indirect costs, such as the income that one partner passes up when she - as it usually is - takes time off work to look after the family.

Some other findings:

* Food is the big one; out of every dollar spent on child-raising, 19c gets eaten. Transport is the next most-expensive item.

* The bigger they are, the more they cost; middle-income families spent A$95 a week on children aged from zero to 4 years, says the report, rising to A$199 a week by the time they're 10 to 14 and an eye-watering A$310 a week on those in the 18-plus age bracket. The amounts differ, depending on the parents' income, but age and cost go hand in hand whatever the income group.

* The poorer you are, the bigger the sacrifice. While high-income families spend most on their children, in dollar terms, low-income families devote a much higher percentage of their household income to child-raising.

* They're cheaper in bulk. The first child costs most, with each extra one adding a smaller amount to the family bills. Maybe that's because younger children can use cast-offs. More probably, says the report, it may just be that once you have a few kids, there isn't any more left to spend.

The report's authors say they worked out the cost of children by using a sample of couples, some with children, some without. In theory, since they were comparing couples with the same living standard, any difference in spending should be the result of the presence or otherwise of children.

The researchers got their A$448,000 figure by working out how much a typical couple would earn over their statistically average lives, and how much of that would be spent on the children.

The toughest years for Mr and Mrs Average are when both children are in their late teens, by which time they get through about a third of family income.

Surely child-raising can't be that costly on this side of the Tasman?

Fortunately for the New Zealand birth-rate, it doesn't appear that anyone in this country has answered that question quite as neatly as the Australians.

But the local numbers do provide a few clues, as long as you don't mind making enough assumptions to make a statistician turn white with horror.

Take food, for example. Statistics NZ tells us the average couple with one child spend $140 a week on food. For couples with two children, the weekly food bill jumps to $182.

If - and it's a big if - the extra $42 is all devoted to satisfying the second child's appetite, then it's at least in the same ballpark as the A$46 a week that the average Australian family spend to feed a 10-14 year old (it's more for older children, less for younger ones).

What about clothing? Again, going from one child to two adds about $13 a week to a New Zealand family's clothing bill. And again, that's not so different from the Australian study's figures (anything from A$6 to A$23 a week, depending on age).

Total household spending? An average New Zealand two-parent, two-child household spends $140 a week more than two parents and one child. If that means that two children cost $280 a week, then it's somewhat less than the Australian figures.

But $280 a week is about 20 per cent of total household income for the average two-parent, two-child New Zealand family. And that's not far from the 23 per cent of income that the average Australian household spends raising two children.

What was that about a great country to bring up kids?

* To contact personal finance editor Mark Fryer, write to: Weekend Herald, PO Box 32, Auckland.

mark_fryer@nzherald.co.nz

Ph: (09) 373-6400 ext 8833

Fax: (09) 373-6423.