The Monetary Cost of Raising Children

Under the impetus of federal law, each state is required to develop Guidelines by which to determine presumptive child support awards following divorce. The key federal requirement is that during the specified quadrennial reviews of each state’s Guidelines, “a state must consider economic data on the cost of raising children.” Our purpose here is to compare presumptive child support awards provided in typical state Guidelines with the actual monetary costs of raising children.

To this end, we estimate these monetary costs from government data on consumer outlays in households with children as compared with substantially similar childless households. We review and reject current methods for determining child costs: both from income equivalence methods and those offered in annual government surveys; and provide quite different results despite using the same data employed by others.

Our econometric results indicate much lower monetary costs than reported for either of the two alternatives. Since presumptive child support awards in most states rely on current methods, these findings suggest that existing award structures should be re-evaluated.

Current award structures create a financial asset resulting from the gap between presumptive awards and monetary costs for custodial parents. This factor engenders resentment by support payers since it is his or her payments that fund this asset. And this resentment harms relationships between the parents. Increased willingness of non-custodial parents to make their assessed payments is an outcome promoted when payment amounts reflect the actual monetary costs of raising children.