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Our Kid Doesn’t Cost That Much (So Far…)

by retirebyforty on April 9, 2014 · 46 comments

in baby, expenditure, family

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How much raising a kid cost according to the USDA

We all know kids aren’t cheap. If you’re not financially secure, a baby can wreck havoc on your budget. That’s one of the reasons why we waited to have a kid until we were in our late 30s. I’m sure you have seen the ridiculous amounts the USDA estimated a kid will cost. You can use the estimator at CNN Money (based on USDA’s 2012 estimates.) It shows we’ll spend $255,237 raising our kid until he’s 18 years old. That’s not even including college, so it’s a bit scary.

Actually, I wrote about this topic two years ago, but now that RB40 Jr. is 3 years old, we have some real data to compare to the estimate. (Does it really cost $295,560 to raise a child?)

Let’s see what our monthly cost looks like.

Age Housing Food Clothing/misc Healthcare Child care/education
1 0 $50 $40 $0 $1,250
2 0 $50 $40 $0 $0
3 (current) 0 $50 $20 $0 $300

Housing: $0

The USDA assumes families will move to a larger home to accommodate a kid. That’s why they added over $6,000/year in this category. We are still living in our 2 bed, 2 bath condo so we haven’t incurred the additional cost yet. Now I’m thinking about moving up to a 3 bed/2 bath home, though. It would be nice to have a little more space especially now that my mom is living with us part time. We’ll keep an eye out for a house, but I doubt we’ll be able to buy soon. The housing market is just too hot right now. We’ll probably wait until things cool off in a year or three.

Food

Baby RB40 was on formula for a long time and that cost about $50/month. Now he just eats whatever we eat. I haven’t broken out this cost, but it’s probably about the same. He doesn’t eat a lot, but we buy organic milk and fruits for him. That increased our food cost from a couple of years ago. I’m sure the food cost will increase a lot as he gets bigger. You can see that in the graph above.

Clothing

No more diapers. Yeah! We went cold turkey last August to prepare for preschool. He made a mess a few times, but after a couple of weeks, he was fine without diapers.

Kid clothing cost USDA estimate

Now, he’s really hard on his pants and shoes. Kids grow so much at this age that you can’t expect clothing to last long. However, I think a pair of jeans should last at least 6 months. All his pants have holes in them and I don’t want to buy any new ones because soon he’ll insist on wearing shorts every day. He loves shorts. Anyway, a mom commented on the hole today so maybe we should patch his pants.

kids are really hard on shoes USDA estimate cost to raise a kid

He is also really hard on his shoes. They usually last about 3 months before they are completely beat up. At least shoes are pretty cheap at this age. I usually pick them up for under $20 from Babies ‘R’ Us or Walmart.

Healthcare

We’re on Mrs. RB40’s employer sponsored insurance. Her plan is self + family so RB40 Jr. doesn’t cost anything extra. Nice plan.

Childcare

Thank goodness we don’t have to pay for full time daycare anymore. I heard Portland is one of the most expensive cities as far as childcare goes. Now we spend about $300/month for 2 days of preschool. Next year should be pretty similar. We’ll probably pay a little more for 3 days instead of 2 days, but the increase will be minimal.

Loss of Income – The USDA doesn’t include the loss of income from having one parent stay home. It’s hard to figure this one because it’s just not the loss of income. It will be very difficult to get back on a career track after staying at home for 5 years. I gave up my (low) 6 figures income to become a stay at home dad and I doubt I can ever get into my old career track. It’s worth it for me, though. I had more reasons to quit my engineering career than just our kid.

College

Well, the USDA didn’t include college cost in their estimate so I’m not going to include it on our table either. We contribute about $10,000/year to our kid’s 529 plan. Once the fund is around $50,000, then I’ll probably cut back to around $4,000/year.

Our cost is much lower than the USDA estimate

As you can see, we spend about $5,000/year on our 3 year old. This is much lower than the USDA estimated of about $13,500. The big part of this comes from staying put in the same condo (for now). Our childcare cost is also much more reasonable now that he’s a bit older. Once he’s 5, it will be a little cheaper because he’ll go to public school. I guess all the lessons and extracurricular activities will bring the cost back up.

Anyway, according to the USDA, we’re in a sweet spot for now. The cost of raising a child increases when they are about 10 and it will keep going up. Then, it’ll time for college and I’m sure we’ll get a big sticker shock in 2029.

What about you? Do you think the USDA estimate is on target? Some of our friends send their kids to private school and I’m sure they spend much more than this.

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{ 46 comments… read them below or add one }

C. the Romanian April 9, 2014 at 1:46 am

Nice to read these numbers! Baby Romanian is not yet 1 year old so we don’t have the exact numbers, but we too found out that so far it’s not scary expensive to raise a little kid. Even though food is indeed expensive, he eats very little so in the end, it’s not that much. Fortunately, he’s been healthy so far so costs had been low here too (in Romania, it’s safest to go to private clinics, and these are a bit expensive, like everywhere). Finally, clothing and money spent on toys (is that in your “misc” category?) is probably a bit high, but still way lower than what other parents are spending… he’s extremely happy to play with a box or a pen or anything that’s not meant to be played with instead of toys… but we still bought a few. But overall, if you’re being smart about it, raising a kid shouldn’t be that expensive!

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retirebyforty April 9, 2014 at 9:07 am

Thanks for sharing. Daycare cost a lot when I was working full time. When I left my old job, the cost went down quite a bit. Of course, I don’t make anywhere near as much as I used to make. Yeah, when kids are young, they don’t care much about expensive toys. They can play with anything.

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Clarisse @ Make Money Your Way April 9, 2014 at 2:48 am

I have a seven-year old daughter, she is studying in a private school now. Clothes and toys are not very expensive here, I’m not a fan of branded clothes so we really save a lot when I bought her clothes. My hubs bought her a violin during her birthday and she is now taking her violin class twice a week.

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retirebyforty April 9, 2014 at 9:08 am

How much do you pay for private school? In our area, I think it’s over $10,000/year. That’s pretty high. We got an inexpensive violin under the bed waiting for him. :)

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John C. April 9, 2014 at 3:37 am

Their projections are such generalizations and are way out of whack for most people. We did the same thing as far as not buying a bigger house solely based on having children. Being able to eliminate childcare for the early years is where a ton of the savings lie. I haven’t ran the numbers myself, but there is no way my kids each cost around $13,500 per year.

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retirebyforty April 9, 2014 at 9:09 am

It’s actually not far off if you move to a bigger place and need daycare. If you can avoid those two things, then a kid really isn’t too expensive.

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David April 9, 2014 at 4:45 am

Hi Joe,
Quick question, you didn’t include the money that you’ve been putting into Baby RB40’s college savings account, if you were to put that in, wouldn’t it push up the “cost” quite a bit?

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retirebyforty April 9, 2014 at 9:10 am

You’re right. Well, the USDA number doesn’t include college cost so I didn’t. I’ll add that at the end of the article.

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insourcelife April 9, 2014 at 5:29 am

While I agree that USDA costs seem inflated, I think you should include the loss of income from one parent staying home. In your situation you get to enjoy little daycare costs AND earn income from home but that’s not typical. Either way I’d include daycare savings or loss of income to be fair. Indirect as these may be they are still related to having a child. I’m also keeping track of all of our child related costs in Mint and I posted a first year breakdown last September. I plan on doing it yearly and so far expenses are in line with yours – aside from daycare which for us is by far the biggest expense.

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retirebyforty April 9, 2014 at 9:16 am

Yeah, it’s hard to figure the cost of daycare vs loss of income. Stay at home parents also give up a lot of opportunities to stay home with the kids. Going back to work after 5 years can be tough. If you stay in the workforce, you’d have 5 years to increase your pay and position.

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Mike Collins April 9, 2014 at 6:11 am

I have three kids myself (9 ½, 8 and 4) so according to the USDA estimates I should be spending over $30,000 a year on them. While I sometimes feel they are eating me out of house and home, and they definitely go through clothes faster than I’d like, I don’t think we’re anywhere near that. Even if you factor in activities and expenses like soccer, girl scouts, and preschool, I’m pretty confident we’re below that level.

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retirebyforty April 9, 2014 at 9:20 am

Thanks for your input. What about housing? Did you move to a bigger home when you had kids?

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EscapeVelocity2020 April 9, 2014 at 6:11 am

I think another indirect cost is buying a house in a good school district. In Houston, it can add up to 25% to the home value and 1 -2% to the property tax. Luckily its a fixed cost, unlike daycare and college. You will also probably be unpleasantly surprised by how much more expensive kids get when they hit adolescence. We’re not there yet, but I imagine food and clothes and a cell phone costs (and eventually a car and insurance) become a bigger deal.

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retirebyforty April 9, 2014 at 9:21 am

I think that’s figured into the housing cost. The high income family spends much more than the middle and low income family. I’m sure a big part of that is buying a home in a good school district.
Yeah, I’m not looking forward to the teen years at all.

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Brian @ Luke1428 April 9, 2014 at 7:04 am

That day when the child no longer wears diapers…priceless! We have four kids (ages 5, 7, 11, 13) and I estimate we spent 12k on them combined last year (on clothing, gifts, school, entertainment, and other child related expenses.) That will probably go up as the older ones progress through the teen years. You can definitely raise a child for less than what is being publicized.

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retirebyforty April 9, 2014 at 9:26 am

Oh wow, $12k for 4 kids isn’t bad at all. I’m sure you benefit from sharing.

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Mr. Utopia @ Personal Finance Utopia April 9, 2014 at 7:41 am

Commendable job. I don’t know what the costs for daycare are in Portland, but in Northern California it’s downright ridiculous. To send our 19-month old to daycare full time costs $12,924 per year!! It’s even more expensive as infants. And, believe it or not, there are other centers that are even more costly than this (the one where we first started him was $16,440 per year…needless to say I nixed that one pretty quickly).

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retirebyforty April 9, 2014 at 9:27 am

I think our full time day care cost even more than that. Ridiculous… We were paying $1,250/month when he was 15 months old. Nuts…

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Ravi April 10, 2014 at 6:25 pm

Do you like kids? It seems this is an underserved market. If you could babysit a friend’s kid for a 2 days a week, that’s easily an extra $500/mo, no?

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Andrew@LivingRichCheaply April 9, 2014 at 7:54 am

We still live in a one bedroom with a 9 month old. Not really necessary to move to a bigger place when they’re still small. I do spend a lot on formula though/baby food and diapers. Luckily we do have affordable daycare…grandma gives us a discounted price.

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Wilson April 9, 2014 at 7:58 am

Now that my daughter has been out of diapers for almost a year there aren’t too many expenses, although household milk consumption has gone way up. Fortunately we’ve been getting a plethora of hand me downs from friends and new clothes from parents, so outside of Montessori very few child expenses at this time. This age (3) seems to be a sweet spot for minimal spending for a few more years until formal schooling begins, when activities will start increasing and private school or moving may become strongly advisable depending on the whims of the public school lottery.

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retirebyforty April 9, 2014 at 9:30 am

I think you’re right. Our kid loves playing outside now. That’s cheap and healthy. I’m not looking forward to the day when he just spends all his time playing with the computer. We’ll need to put a cap on TV and computer time.

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Steve April 9, 2014 at 8:08 am

Regarding health care costs, while your premiums may not have increased, I suspect your out of pocket costs did increase (and if they did not, they likely will). Not sure if you had to deal with any ear infections, trips to the ER, etc. but typically one incurs costs for meds, office visit deductibles, etc. Some of those costs were likely because your son got (or will get) sick.

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retirebyforty April 9, 2014 at 9:31 am

We have been extremely lucky so far and haven’t had to deal with any hospitalization yet. *Knock on wood.*

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davidmichael April 9, 2014 at 8:27 am

We have five kids and eleven grandkids as part of a blended family (second marriage). I have observed that kids will cost whatever you have to spend. Some of our grandkids go to public schools and others go to private schools where the cost is $40,000 a year (primary grades as well as private high schools.) And then a lot depends on their health and any learning disabilities.

In the end, it’s all worth it for most of us. It’s a wonderful slice of life regardless of the costs. Somehow we make it through the tough years and remember the best ones (senior citizen speaking).

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retirebyforty April 9, 2014 at 9:32 am

Oh wow, $40,000/year? That’s more than a lot of people take home. I think a kid is well worth it too.

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Justin @ Root of Good April 9, 2014 at 8:52 am

We managed to spend very little for our 3 kids. We didn’t buy new houses or cars when the little ones came along. They were on formula for six months or so, otherwise food costs were mostly what we ate (with a little bit of jar baby food very early on till we realized we can mash up whatever we are eating).

I personally think you can spend as little or as much as you want. Clothes, shoes, toys, etc can all be obtained for free or inexpensively from hand me downs, yard sales, thrift shops (supplemented with walmart/target for some things). Or you can go to Baby Banana Republic (please tell me that store doesn’t really exist!) for everything your kid needs.

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retirebyforty April 9, 2014 at 9:34 am

We got a new car, but our old one broke down before the kid came along so it’s wasn’t unplanned. I think we’re doing pretty well controlling the cost of a child. We don’t buy expensive stuff. They just get ruined anyway. :)

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Mom @ Three is Plenty April 9, 2014 at 10:34 am

Our daycare costs alone are more than the entire USDA estimate at ~$16,800/year. We already had a pretty large house, and didn’t increase our costs there, and while formula was about $30/mth (go Costco!), she doesn’t really eat that much, so we spend about the same on food. Most of her clothes come from grandma, so we don’t spend a lot on clothes (or toys). Really, our costs are daycare, minimal food and activities (we all get stir crazy, so we have a petting zoo membership, and county rec activities).

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retirebyforty April 10, 2014 at 11:30 pm

Yeah, it was like that for us as well. Daycare was just so expensive.

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Dave April 9, 2014 at 11:14 am

Interesting article, I agree the USDA estimate seems high, at least in my case, but if their calculations assume you MUST have daycare, I could see it being close(grandma watches our son for free). Our 2 year old has actually helped significantly decrease our utility bills because we now leave EVERYTHING unplugged, if it has a button, he will be happy to press it repeatedly, and if it does something in response, he pushes it a whole lot more, so our gas/electric bill is $25-35 a month now(we live in Northern California, bay area, mild winters, 4 bedroom house, it used to be about $50 a month). Anyways, all my friends with older children tell me to expect as they get older for the amount we spend on them to increase as food consumption increases, clothes get more expensive as they’ll no longer wear what ever you put on them, private school, or paying for school activities.

I’m not sure if the USDA estimate takes into account inflation, everything will cost more in 10-15 years….also are you supposed to add in the health care costs before he was born? I know all the prenatal appointments and giving birth to him, the hospital charged the insurance $40K, the insurance never pays that amount and reduces it, the insurance only paid $19K, we paid practically nothing, but money still exchanged hands… So if you take the hospitals amount, he started off with $40k in the Health care column.

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retirebyforty April 10, 2014 at 11:31 pm

Thanks for your input. Well, most families do need daycare. You’re really lucky that grandma can help out. :) I don’t think they count the cost of delivery.

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C. April 9, 2014 at 2:41 pm

Many years ago our 18 mo old got scalded by a cup of tea someone carelessly moved from the high counter. 2+ weeks at hospital. A lot of follow up appointments, special compression shirts to prevent gnarly scars for 3 years. We needed to replacing often as he grew. $100,00 medical bills just for hospital. Ins. covered almost all after fight.
He healed excellently, no operations, not terrible scars, could have been a lot worse. Cold water immediately! THEN remove clothes – I lost precious time following that common advice. That was 19 yrs ago, our home looked like fort Knox all child proofed. Yet it still happened.
He looks great isn’t bothered by scar, not too noticeable. We were lucky to have acted quickly, also had excellent doctors & coverage. Worth every cent. I don’t know if our insurance now would cover as much even though we have good plan.
OH, forgot to add I spent 4 months in bed w/preterm labor! Lol That was part of total I think. We kinda stopped tallying it. That cost was forgotten the moment we saw him. I’m thankful of our daily blessings. Our faith got us thru it all.
Does the government calculations include minor incidents?

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retirebyforty April 10, 2014 at 11:34 pm

Oh no! That’s terrible. I’m really sorry to hear that. Luckily, our kid hasn’t gotten hurt badly. Just the usual scrapes and bruises. Thanks goodness your son recovered from the burn. Hopefully the scar will not be too noticeable as he get older.

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Financial Samurai April 9, 2014 at 3:06 pm

I’ve never believed the propaganda that kids are expensive, so thanks for sharing Joe.

If kids were really expensive, how do families who make under $50,000 a year have 5 kids?

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retirebyforty April 10, 2014 at 11:34 pm

Kids are expensive for people with a lot of money. :)

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Clare April 9, 2014 at 6:54 pm

In weird ways, sometimes I think having kids saved us money because all of the sudden, we went out a lot less. We spent less eating out, less on travel, less on clothes (me), less on “extras.”

On another note: not that it’s going to save a lot of money, but I did find w/our 2 boys (one of whom wore through the knees in his pants at an unbelievable rate) that the double-layered knee pants from Land’s End were good value. Both boys, now teens, wear shorts exclusively and have for years. Drives me kind of crazy (I draw the line at holidays, weddings, and other special events), but we live in CA so it’s not totally unusual. The best possible way to save $ on kids’ clothing is to find a good source of hand-me-downs. I found a few and was so grateful. In turn, I gave away as much as I could when our youngest grew out of things.

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retirebyforty April 10, 2014 at 11:36 pm

We took a break from traveling for almost 5 years now. This year we’re going to Hawaii and hopefully next year we’ll be able to go to Thailand. Yay! I really need to find a hand me down source.

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Frugal Pediatrician April 9, 2014 at 10:13 pm

We do spend a good amount on the kids but then this is why I chose to work. We spend very little on ourselves. Yet at the same time my husband’s parents when they were struggling in Korea, would make sure to buy milk and bananas and meat for their children (which were the more expensive hard to get foods back in the 70s). My mother-in-law breastfed all 4 kids for over 2 years each, and it must have leached all the calcium from her teeth. They somehow found the money to buy a violin and flute and afford lessons after arriving in the US, while their house had never been renovated in 30 years! Now other friends my in-laws same age always wonder why their children now can afford to give them so much. Every one of the 4 kids forks over some money when grandma needs another dental implant, and chip in for nice vacations for them. They never expect any of this and always ask us not to give (which we always do). I think as parents our job is not to waste money on unnecessary thinks like expensive birthday parties, clothes, and things that are transient. But things that are important for our children’s growth and education (which oftentimes does not cost that much) we should not deny them. In the end it is going to be much more expensive when that same child has health issues or is not launched well into life. I guess none of us will really know until we are all in our nursing homes or hopefully being cared for in our own home, and how often our children visit us.

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retirebyforty April 10, 2014 at 11:38 pm

Thanks for sharing. Our parent’s generation sacrifice so much for us. It’s pretty amazing. When the parents did that, the kids won’t hesitate to help out. I feel the same way about my mom.

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Joe C. April 10, 2014 at 8:19 am

One thing that might be taken into account is the second child for us seems to cost less then the first just because many items like clothes (even more so if they are the same sex), cribs, toys, etc. can be passed on. I know this has saved us on our second child compared to our first. If we had a third, the savings would get passed on again. It’s almost like dollar cost averaging :-)

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SavvyFinancialLatina April 11, 2014 at 8:10 am

Kids are still expensive and take lots of time. I know I’m not ready for that. If we have kids, it might be closer to our later 30s.

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Alan April 12, 2014 at 7:09 am

My wife is expecting to give birth to twins any day now. We currently live in NYC but are contemplating a move to the Connecticut suburbs to get more space. The catch is that in the neighborhoods we’re looking at where the property taxes are low, the public schools are also crummy, and the private schools cost north of $35k per kid per year starting at preschool. Seeing as how I dont really want to pay $70k+ for school every year for the next 18 years, now we’re thinking about other areas where the property tax is higher but public schools are excellent. Either way, my expenses are going much higher in the next couple years.

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Erin @ Gen Y Finances April 13, 2014 at 10:09 am

Yeah, the USDA numbers seem so high! Obviously, I don’t have kids yet, but we hope to keep costs down by having me continue to work at home full-time or even just work part-time outside of the home. We’re not worried about that for now, as we’re only 24 and 27. We’ll reevaluate around 30/33 :)

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A Frugal Family's Journey April 15, 2014 at 6:56 pm

Completely agree…having kids doesn’t have to break the bank. There are many things a family can do to reduce their cost of raising children.

FOOD: eat home cook meals or share meals when eating out. CLOTHES: trade with other moms or buy used. We found that there are plenty of lightly used clothes out there, especially during the early years where kids grow the fastest. COLLEGE: rather that receive gifts for birthdays, we kindly ask friends and family to donate anonymously to our kids college funds.

There are others but those are just some examples of what we do to cut our cost.

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retirebyforty April 15, 2014 at 9:28 pm

Our kid beat the heck out of his clothes. I don’t think other families would like his used clothes. :) I like the college fund idea and have been encouraging families to do that as well. Thanks for your input.

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