Why Are Kids So Expensive These Days?

We’re often invited to speak to student groups about financial planning and I like to end with a few pieces of advice that apply to almost everyone, including a list of the biggest financial mistakes someone can make. Number one on that list is having children, which always solicits a few chuckles when we speak to graduate-level classes that contain a handful of young parents. As a dad and someone who advises parents and grandparents, I am very qualified to say that raising children is getting more expensive each year. Let’s consider two factors that drive up the costs of kids- education and recreation, and how parents and guardians might think about them.


When we have the opportunity to speak to expectant parents who ask how much it costs to raise a child, it’s hard not to reply, “Whatever you want!” All kids need to be clothed and fed, but I feel confident my daughter would survive without a garage that houses a bike, a scooter, and her choice of electric or foot-powered automobiles. Infant to college graduate, most of the expense parents dole out is optional. However, the average amount parents spend has increased faster than inflation thanks to a bleeding of the line between necessity and luxury.


Culprit #1 Education

Compared to past generations, more high school graduates choose to go to college than ever before. Nationally, college enrollment is in the low 60’s percentage-wise but is 89%(1) for students from households with income over $150,000. Suffice it to say that the majority of our reading audience sees college as a given.


That statistical “given” sure has gone up in cost faster than milk and eggs. A recent Wall Street Journal article highlighted one cause in its title, “Colleges Spend Like There’s No Tomorrow.”(2) It was a great read that discussed the arms race in facilities and amenities schools have undergone to attract students who are ready to enroll using federal loans, with little incentive for financial restraint. My alma mater up the road, the University of Kentucky, was discussed as an example of a state school. Tuition there over the last 20 years has gone up 279% (3,4) while CPI inflation has increased 66%(5) over the same period.


When a parent asks about college savings, I share two tough facts. One, it’s almost impossible to save too much for the most expensive educational tracks. If your student attends a prestigious out-of-state school as an undergraduate and another for a professional school, it’s very easy for the resulting young lawyer or physician to have $750,000 in debt. Second, it’s also conceivable that purchasing power-wise, a dollar in becomes a dollar out; if you earn 7% in a college savings account but tuition inflates by 7%, you’re not really making any headway.


Culprit #2 Recreation

Maria Montessori had the maxim that “play is the work of the child.” If that’s the case, the unemployment rate for American children is moving in a troubling direction. The Aspen Institute’s Project Play6 estimated that youth sports participation went down 8% from 2008 to before the pandemic, with only 37% of kids aged 6-12 playing a team sport.


Recreation only shares half of the trend with education. Whereas college is experiencing historically high participation costs, youth sports have historically high costs with historically low participation. It follows that this must mean that a smaller subset of parents are spending a higher amount. This squares with our experience advising parents and with the data. The Aspen Institute tracks costs and estimated $883 spending for one child’s primary sport, but $2,068 for households with income above $150,000. This isn’t inflation tied to the increase in the input cost of soccer balls and cleat leather. It’s simply that most of these young athletes travel more to play, and at earlier ages than many used to.


Anecdotally, we’ve seen a youth team ring up a travel budget of $10,000+ in a year. At that level, the team is accessing elite competition and attention from college recruiters, plus enjoying plenty of family travel around a hobby they love. Nonetheless, we’ve also heard from parents who lament about five-hour drives where they wind up playing a local team. Unfortunately, that type of experience is leading to a slow leak in participation.


Value Investing as a Parent 


In both of these realms, education and recreation, there are parties with a vested interest in growing their share of a family’s spending. Colleges grow their amenities to grow their enrollment to grow their tuition base to grow their enterprise. Youth sports has a growing economy of providers from tournament organizers, trainers & coaches, to apps that live stream games.


When we speak to parents about prioritizing education and recreation, we try to help them zoom out with a couple of facts. College admission standards are roughly static for each school (Harvard 4%, UK 94% acceptance). And the number of high school athletes who earn D1 scholarships is roughly static, too, at about 2%. We hope these truths can help parents avoid the stress that comes from striving to provide maximum opportunity for their children and instead think about these costs like the rest of their budget. Just like your home, your car, your pets, and what you eat, spend what you can afford where you see value.


On the educational front, the big achievement comes via cost control. While colleges have a wide range in cost, the expenses that hurt the most are extra semesters that happen as scholarships and college savings accounts get depleted. Unfortunately, many universities are much more competent when it comes to recruiting than advising their students to stay on track toward graduation. Two great areas to focus on to maximize value as a parent are discussing potential career tracks and progress toward your student’s major requirements during school.


For recreation, value investing can be driven by a study out of the Families in Sport Lab at Utah State University. Their research found that increasing investment correlates to perceived parent pressure and decreased enjoyment and commitment to their sport. My plain English summary of that work is that it’s great to invest in team sports for your child and your family, as long as everyone is still having fun!


  1. Enrollment https://www.brookings.edu/articles/college-enrollment-gaps-how-academic-preparation-influences-opportunity/
  2. WSJ Colleges Spend Like There’s No Tomorrow. ‘These Places Are Just Devouring Money.’


  1. UK tuition 2003 https://www.uky.edu/trustees-archive/minutes/2003/mar/fcr1amend.pdf
  2. UK tuition 2023 https://www.uky.edu/studentaccount/tuition
  3. Inflation Calculator https://www.calculator.net/inflation-calculator.html
  4. Aspen Institute State of Play 2022 https://projectplay.org/state-of-play-2022/
  5. The Impact of Family Financial Investment on Perceived Parent Pressure and Child Enjoyment and Commitment in Organized Youth Sport https://onlinelibrary.wiley.com/doi/10.1111/fare.12193
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