New parents often set their sights on a bigger home to make room for a growing family.
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It’s tough to put a price tag on having a little bundle of joy, but a new analysis from Redfin puts it in perspective. According to the real estate brokerage, Birmingham, Alabama is the most affordable place in the country to raise a baby, costing an average of $16,383 in the first year.
Southern metro areas dominate the rankings of the most affordable places for a baby’s first year, with Little Rock, Arkansas ranking second at $16,565 and Charleston, South Carolina coming in third at $16,566. Louisville, Kentucky ranks fourth at $16,749, followed by New Orleans at $17,148.
From the moment prospective parents know they are going to have a child, it’s important to devise a budget that takes into account such expenses as daycare or preschool, babysitters, food, diapers, clothing and housing.
The U.S. Department of Agriculture has been tracking the cost of raising a child since 1960, examining expenses by age of child, household income, budgetary component and region of the country. With USDA’s Cost of Raising a Child calculator, parents can estimate how much it will cost to raise a child annually.
For a middle-income family, housing accounts for the largest share of expenses, 29%, of total child-rearing costs, according to Redfin. Food is second at 18%, followed by child care/education at 16%. Expenses can vary depending on the age of the child.
Baby items and healthcare costs vary widely, particularly because of the various types of health insurance. For the purpose of its analysis, Redfin used data from BabyCenter, an online parenting resource, and BMO Harris Bank to estimate flat costs: $7,850 for baby items, including diapers, clothing and other supplies, and $1,297 for out-of-pocket healthcare expenses.
The analysis calculated the cost of moving up from a two-bedroom single-family home to a comparable three-bedroom single-family home, or from a one-bedroom condo to a comparable two-bedroom condo in 79 metro areas in the country.
Redfin added the difference in annual mortgage payments to average yearly child-care costs for the state in which the metro is located, plus healthcare and baby item expenses to come up with the total cost.
Washington, D.C., where parents spend an average of $35,017 during a baby’s first year, is the most expensive metro in the country to raise a child, followed by Boston ($31,307) and Worcester, Massachusetts ($30,610).
Two of the 10 most affordable places to raise a baby, Austin, Texas and Atlanta, are also on the list of the most popular destinations for Redfin.com users who are looking to move to a different metro area. And three of the 10 most expensive places to raise a baby, Washington, D.C., San Francisco and Los Angeles, are also on the list of places Redfin.com users are planning to leave.
Ben Price, a Redfin agent in Birmingham, moved to Alabama’s largest city from Chicago partly because it’s a more affordable place to raise children.
“With three active kids in the Chicago suburbs, my wife and I found that we were always behind, both in time and finances. The cost of living with three children was too much to handle,” Price said. “At first, my wife was reluctant to consider moving to a more affordable area, but then I showed her homes for sale in Birmingham. When she saw how much more house we could afford there without sacrificing in terms of school ratings, she was in. Now we own a five-bedroom, five-bathroom home in Birmingham, more than we could afford in expensive parts of the country.”
In Birmingham, just $1,378, or 8.4 percent, of the total cost of a baby’s first year represents the annual difference in mortgage payments between a typical two-bedroom home and a three-bedroom home, while $5,858 is the cost of child care. And in D.C., the upgrade from two to three bedrooms accounts for just $2,204, or 9.3 percent, of the total cost of a baby’s first year, with child care coming in at an average of $23,666 per year. Even in expensive metros like San Jose, California, the $3,745 cost of upgrading from a two- to three-bedroom home is significantly lower than the $16,542 annual cost of child care.
“The most costly part of adding to your family is the time put into taking care of a new baby, whether it’s you or your child-care provider,” said Redfin chief economist Daryl Fairweather. “If you decide to stay at home to take care of your baby, you may have to forgo income and pause your career progression. If you hire a nanny, you will need to pay them a competitive wage. And if you happen to find an affordable daycare provider, you may have to sit on a wait list until a spot opens up for your child. That extra room for a nursery is a relatively small monthly expense compared to child care, no matter where you live.”
Because child care makes up such a significant portion of the cost of a baby’s first year, the places with the most expensive child care are the ones where it costs the most to raise a baby. For instance, Washington, D.C., where a baby’s first year is most expensive, is the most costly metro in the country for child care, and Birmingham is the least expensive for both.
However, that pattern doesn’t hold true in every area. Child care in Dayton, Ohio costs about $1,000 less per year on average than it does in Grand Rapids, Michigan. But upgrading from a two-bedroom to a three-bedroom home will cost about $1,200 more per year in Dayton, which makes it a more expensive place to have a baby compared with Grand Rapids.
“In the D.C. area, finding a home for a family in the city is becoming increasingly unaffordable, particularly in the neighborhoods with highly rated schools,” said local Redfin agent David Ehrenberg. “But one thing to keep in mind is that while paying for infant child care is costly, the city of D.C. may be less expensive than its surrounding suburbs once the child is a bit older. D.C. public schools offer free pre-K for 3- and 4-year-olds, while local Maryland and Virginia counties do not.”