# Fraser Institute Estimates $3,000 to $4,500 as Marginal Cost of Children



## CanadianCapitalist (Mar 31, 2009)

I haven't read the report in detail. Here's a snippet from their summary. Seems on the low side to me personally.



> Examining the basic marginal costs necessary for the healthy development of a child, this paper finds that an annual outlay of $3,000 to $4,500 (depending on the community or region and the age of the child) would be sufficient. These cost estimates exclude any savings strategies such as home gardens, sewing and knitting clothing, couponing and taking advantage of sales, own repair and maintenance work in the home, etc. This cost range is for Canada in 2010 and is drawn from budget standard estimates by social agencies and experts with experience in this area. It can serve as a useful benchmark for child costs. Beyond this basic needs benchmark, however, parents will spend more on their child depending on such factors as after-tax income, perception of economic security, additional obligations, parenting style, marital situation, and time preference.


http://www.fraserinstitute.org/uplo...search/publications/MeasuringCostChildren.pdf


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## MoneyGal (Apr 24, 2009)

I read it in detail. This thing is blowing up on my FB. The Globe and Mail didn't help defuse the controversy by having a mom weigh in that she spent that much on ONE WEEK of ballet camp for her kid! Plus school yearbooks! Field trips! etc. etc. etc. 

I think the discussion is extremely interesting and akin to the early retirement discussions here. How much do you actually NEED to spend to raise a child, expressed as a marginal cost?


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## brad (May 22, 2009)

Funny, we're about to get two kittens, and I figured on budgeting about $3,000 to cover their costs this year -- not just the shots and neutering operations, litter, food, toys, etc., but also repairing the inevitable damage. The last time we had a cat living here it caused $700 worth of damage in the first two weeks. ;-)


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## MoneyGal (Apr 24, 2009)

Yes, but you don't _need _to repair that damage; that's clearly a _want_.


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## Jungle (Feb 17, 2010)

I read the G&M this morning and they said the cost of childcare is not included..


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## MoneyGal (Apr 24, 2009)

It isn't. Is childcare a necessary cost of raising a child? That's the $3,500 question (if you are the Fraser Institute) or the $20,000 question (if you are everyone else who seems to be weighing in on this question).


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## Sampson (Apr 3, 2009)

I think that most parents weighing in on the $20,000 child care cost consider the opportunity cost of losing one income if both partners are working.

I think this is the most challenging issue and not fully explored in the report. It isn't a cost per se, but can the average family live off one income? and can that same family still afford $3,000 per year to raise children?

Clearly if a 20-25 yr old single mom can have kids while working a service job, almost anyone can afford to raise kids, the question is really how much does it cost to raise kids up to a standard you are satisfied with? Wants vs. needs.


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## MoneyGal (Apr 24, 2009)

I know! The whole discussion is extremely personal and highly dependent on your own personal views (just like "how much do you need to save to retire?"). 

What I feel is overlooked in the discussion about childcare costs is: 

1. They are tax-deductible (to a limit) on the lower-income-earning spouse. The "true" after-tax cost will almost certainly NOT be $20K - it will be $20K*(1-MTR up to the deductible limit). If your MTR is low, perhaps you *should* consider foregoing the expense and not participating in the paid labour force (or reducing your participation considerably). 

2. Childcare costs are *temporary.* The question isn't (in my view) "can you afford [nominal cost of FT childcare less tax deduction]" but can you afford it *for four years* (assuming one year of paid parental leave)? 

In Ontario, we are moving to full-day junior kindergarten starting at age four - so the cost is really [after-tax cost] for up to three years.


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## Sampson (Apr 3, 2009)

Very good points MGal.

I am always amazed that we get such significant tax-deductions on childcare costs + we get free money for having children (UCCB + CCTB). This is simply wrong. If I recall correctly about the CCTB, single incomes under about $100k per annum are still eligible for one child. This is a little off topic, but families living off a single income earning more than the average or median household Canadian income shouldn't be getting money. The haves (top 50%) shouldn't be taking away from the have-nots.

We are moving into the expense phase, both kids in early childcare starting next month so I know how much it will cost us. Opportunity costs and psychological opportunity costs (on my wife's mental health) certainly outweigh any costs associated with childcare.

I think the discussion about how much it costs is also very heavily skewed by over active parents that believe programs that cost money and items that cost money result in better child-rearing - that seems to be an effect of our helicopter parent generation. Ask someone from a previous generation or from a foreign country and I bet they'll say something in response to the report like:

"$3,000!" my kid ain't worth $3,000 per year"


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## MoneyGal (Apr 24, 2009)

If you really want your mind to be blown, take a look at OAS eligibility. Much more generous than UCCB and phased out at much higher income levels...


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## Daniel A. (Mar 20, 2011)

Its been a few years but.

I had one kid that needed tutoring for a time cost 400.00 a month.
Child care after school care we were spending 850.00 a month 15 years ago.
The food bill dropped in half after the kids moved out. 
The hydro bill dropped 35.00 a month.
Music lessons and other programs summer school, recreation.
Buying gifts for friends.

Guess one could work at the minimum but if we lived in a well to-do area there is a standard of expectation.


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## MoneyGal (Apr 24, 2009)

But that is a discussion from a middle-class POV. I have a kid who gets daily one-on-one dyslexia tutoring and I pay a lot -- and I'd even argue she needs that level of attention. But the reality is that there are programs in the local public school for learning-disabled kids, and she'd probably be *fine* based on those programs alone. 

The problem with arguing that kids "need" tutoring or paid afterschool care programs (which I also provide to my kids) is that it quickly becomes (IMO) a class-based discussion, and suggests that people who don't have or can't maintain middle-class standards or above "shouldn't" have kids. I don't agree with that.


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## MoneyGal (Apr 24, 2009)

Remember, the study is attempting to identify the *marginal* cost. Not what people are actually spending, or an average cost, or what people "should" spend (which is inherently tied to their standards) -- just what the basic additional cost of adding a child/ren to a family is.


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## CanadianCapitalist (Mar 31, 2009)

Sampson said:


> I think that most parents weighing in on the $20,000 child care cost consider the opportunity cost of losing one income if both partners are working.
> 
> I think this is the most challenging issue and not fully explored in the report. It isn't a cost per se, but can the average family live off one income? and can that same family still afford $3,000 per year to raise children?


Of course, the opportunity cost of dropping out of the workforce for 1 year should be considered. Otherwise, I don't see how any estimate of marginal cost of having a child can be even remotely accurate. IIRC, some 70 percent of households have both spouses working, so ignoring day care costs isn't correct either.


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## MoneyGal (Apr 24, 2009)

CanadianCapitalist said:


> Of course, the opportunity cost of dropping out of the workforce for 1 year should be considered. Otherwise, I don't see how any estimate of marginal cost of having a child can be even remotely accurate. IIRC, some 70 percent of households have both spouses working, so ignoring day care costs isn't correct either.


Well, I'm not disagreeing with you; but the Fraser Institute is calculating the normative marginal cost -- not the actual marginal cost as experienced by (most?) families. 

I mean, the Fraser Institute is a right-libertarian think tank. Their norm would be one non-working parent, which is why their frame is "daycare costs are not necessary."


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## CanadianCapitalist (Mar 31, 2009)

MoneyGal said:


> I mean, the Fraser Institute is a right-libertarian think tank. Their norm would be one non-working parent, which is why their frame is "daycare costs are not necessary."


Fair enough. One does have to tip the hat to the Fraser Institute. They know how to get headlines!


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## Daniel A. (Mar 20, 2011)

Most people don't have access to dental plans either so the cost I'm sure most of us already can relate to.
It does not take much to go through a thousand in a year. 

Your right the topic can be viewed as a class-based discussion rather than marginal costs.
The numbers given for income that the Fraser report uses is at least middle income.


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## andrewf (Mar 1, 2010)

Ok folks, to let you in on a little secret, the Fraser Institute is a conservative trolling outfit dressed up as a think tank. They are, as a rule, intellectually dishonest in the pursuit of their agenda.

In this episode, they tell Canadians that the time of women who do not work outside of the home and raise children is worthless, so you might as well have some kids. Also, it is a waste to provide anything but the basic necessities of life to your children (ie, only the things you must legally provide to avoid child endangerment charges).


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## andrewf (Mar 1, 2010)

MoneyGal said:


> Remember, the study is attempting to identify the *marginal* cost. Not what people are actually spending, or an average cost, or what people "should" spend (which is inherently tied to their standards) -- just what the basic additional cost of adding a child/ren to a family is.


If they are trying to identify the marginal cost of having children, they would include childcare. Paying for childcare or foregoing income to care for children are real expenses ($ out of pocket).


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## andrewf (Mar 1, 2010)

Also note that many of the government services that reduce the marginal cost of having children are services/transfers the Fraser Institute would want to see terminated. They're trying to have it both ways...


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## MoneyGal (Apr 24, 2009)

I updated my phrase to say "normative marginal cost."


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## nathan79 (Feb 21, 2011)

I don't always agree with the Fraser Insitute, but as someone coming from a regular working class background, this study jibes with my own experience as a child. My parents probably raised me on the equivalent amount adjusted for inflation.

It's understandable that other people have middle class and upper middle class expectations for the cost, which is expected from a financial forum.

We didn't have very many luxuries like vacations, but the mortgage was always paid, and food was always on the table. I always got lots of gifts for Christmas, etc. I had very few extracurricular activities as a child; not that I cared. I preferred to spend my time reading books from the library, riding my bike, or getting into trouble with the neighborhood kids.

So I'd say $3000-$4500 is pretty realistic assuming childcare isn't needed. My dad usually worked from home and my mom only had odd jobs, so I never needed childcare. As they point out, many families also have grandparents look after children.


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## Four Pillars (Apr 5, 2009)

Fraser Institute Moron Corporation said:


> Examining the basic marginal costs necessary for the healthy development of a child, this paper finds that an annual outlay of $3,000 to $4,500 would be sufficient.


I'll be spending that much on my son's hockey this winter. Go team! 



Fraser Institute Moron Corporation said:


> These cost estimates exclude any savings strategies such as home gardens, sewing and knitting clothing, couponing ..., own repair and maintenance work in the home, etc.


And churning butter, making soap, baking bread and digging your own well will also save money. They should have called this the Little House on the Prairies study.


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## AltaRed (Jun 8, 2009)

I tend to agree with Nathan79. Without the need for childcare, my spouse and I raised our twins in major cities on that kind of money (adjusted for inflation) and they did not do without. They had the usual toys and clothes, albeit not necessarily a lot of toys, and certainly not new toys as pre-schoolers. A lot of clothes shopping happened at Sears and Woolco and the like.... what do preteens need to know about designer anything especially preteen? They got to participate in field trips and organized sports such as soccer, swimming, track and field and the like, but not the overrated hockey nonsense that is oversold in this country. They even got to go with a school group to the Soviet Union in Grade 9. I don't recall costs really going up until they shared a purchased used Toyota when they turned 18 (and they were responsible for gas and oil changes out of their allowances).


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## sags (May 15, 2010)

On the other hand............if parents only supplied the basic necessities for their kids............

There wouldn't be any Olympic athletes, professional sports players, college sports players, junior sports players, accomplished musicians, professional dancers...........or a whole lot of other things that require time sacrifice, dedication,........and money......lots of money, to compete at the elite level.


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## donald (Apr 18, 2011)

Sags your forgetting about talent!Money can't buy talent!I played a lot of sports growing up and can think of a few examples of guys i know that came from middle class/''upper'' lower class(if that's a word)that reached high levels(whl-western hockey league)
I would be willing to bet that the vast majority of professional athletes come from relatively middle class families and/or ''paycheck to paycheck'' families.If you have a 13 yr old that is head and shoulders above his peers and it's obvious he is gifted and skating circles around his peers chances are high the money will be there(not that different than academic scholarships ect)
Moneygal:i think you over estimate how much public schools would ''help'' with learning dis-abilities!I had/have learning dis-abilities growing up and was ''moved'' out of the standard junior high school classes(i was so young and it was to early) and put in a ''special'' room,not only did it not help(it consisted of the teacher giving us a sega and leaving the room-the ''throw away kids")it wounded my self confidence going forward and i eventually drop out in high school(i did get a g.e.d,but it was credits through job working ie:warehouse work)Your daughter is lucky to have private tutoring.Kids with learning problems from lower class and even middle class(myself)end up dropped out or just scrapping by and seldom go on to university because the gap is just to large(don't have the grades in classes that are below the requirements)


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## nahc (Feb 22, 2011)

AltaRed said:


> I tend to agree with Nathan79. Without the need for childcare, my spouse and I raised our twins in major cities on that kind of money (adjusted for inflation) and they did not do without.


I think my parents raised me pretty much comparable budget. But that was with grandmother for childcare and eating a lot of cabbage and hotdogs (the link ones on sale that you had to peel). Not many toys and no trips. Now, I think with our 2 kids if we stripped out childcare (including preschool) and toys we would come pretty close to the Fraser Institute's number (because food is significantly cheaper nowadays). But I think from personal experience a child brought up this way doesn't really learn to enjoy life, which is a problem. 

I remember really wanting to go on a particular oversea school trip* in gr 9, earning the money from tutoring and being told that I couldn't go because it was wasteful (to save it for the education fund--bad move--I had scholarships that paid for everything). I learnt some important life lessons from this and other instances growing up, mostly to want only what you really need; not to waste money (it's hard work); and to work really hard. This sort of backfired :hopelessness:. Now that I'm out on my own, all my parents complain about is that I don't spend on any sort of frivolous stuff and I work too hard, and what's the point of working so hard if you don't go and buy nice stuff? It's true--I find it near impossible to spend money. While I want my kids to be financially responsible, I don't want my kids to be encumbered by the same problem (which I attribute to growing up on the Fraser Institute Kid Budget). 

*First 6 months I went into the workforce many years later, I saved excess cash to go to this place. Spent the whole trip feeling guilty about not using said funds to pay mortgage off faster. Or donating it to WFP to feed the kids that don't have enough to eat instead of whining about trips not taken.


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## MrMatt (Dec 21, 2011)

Excluding daycare costs it's just fine.
Daycare can be a center, or a stay at home.

Daycare costs are huge, and the fact that they're capped substantially below market rates, and income splitting for stay at home parents doesn't exist is a contributor.
Many of the more educated, higher paid people are delaying having kids due to the cost.


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## Plugging Along (Jan 3, 2011)

I find this thread and he article very interesting. My parents being immigrants, raised me on a very very small budget. I would say even smaller than what the report suggests. I had pretty much all hand me downs from my brothers (and I am female) or home made clothing, garden, only two vacations until I was in school, no camps or anything. I played every sport and did every activity hat was free at the school I could. I was really good at a lot of them and set some provincial records, I was asked to join some competitive clubs. My parents said no because they didn what to spend the money and couldn't drive me because they were working. I turned out fine, but I do wonder about if I could have really excelled if I had been given a chance.

Talent is one, I believe I had in some areas, but raw talent won't get you to the top without the money to train. 

Our cost for raising our two kids and are probably closer to $60k a year. Child car is more than half of that, then it's the tuition for one child in private school, saving for their futures and then activities. All of these would definitely be discretionary, if I look at just the food, clothing and shelter it wouldn't be that much more than the the report. Really the report is about minimums, I don't believe that I should be raising my kids with a minimum when I don't have to.


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## m3s (Apr 3, 2010)

I wore hand-me-downs until I could afford my own. My toys were tools and if you count all the free labour than I earned my keep (I guess I was even a daycare provider too). I played free sports and paid for my own equipment, even the car/insurance/gas to get there. It was motivating to beat all the kids with the fancy expensive gear. I think it’s great to spend money on sports or music, but the equipment/instrument doesn't do much

There’s definitely a trend that those who grew up without easy money are much better managing it later on though. The king of rational spending has said $300/month ($3600) average per kid and I agree they won't suffer (but he also said 1 kid is more than enough) There’s probably a balance in there somewhere. Kids who do nothing but sports/music are not that balanced either.. being an Olympic athlete doesn't even guarantee you're set for life

The Incomparable Advantage of Having to Work for what you Get


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## Jon_Snow (May 20, 2009)

:eek2: @ PA.

60k annually on your kids?

My wife and I live a most wonderful lifestyle on 30k annually. Our decision not to have have kids wasn't a monetary one, but I continue to see ample evidence that not having them isn't hurting our finances one bit. :tongue-new:

Hats off to all the good parents out there.


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## Plugging Along (Jan 3, 2011)

Yes. They are expensive choices we made but that what we planned for before deciding to have kids.

Child care $36k /year. That's for a nanny, overtime, maintenance on the car for her to drIve my kids. $10k of that is deductable, so net is about $32k
School and supplies $7k. It was $12k when both kids where in private school. Just waiting for the little one to enter publuc in two years
Savings $12k for two a year for resp and in trust account
Activities - $8k that's piano for one, plus one sport and one art like activity per season, plays, plus summer camps. 

That alone hits $60k. 

Not included in $60k
Food - they don eat that much but the nanny does, we eat out a little less
Clothing, toys, books, etc
Vacations. we used to go on large vacations with two of us, and now they are shorter closer driving vacations with 4 which are probably cheaper. 
Larger car or house - we probably would have here even without kids. 

No complaints at all though. We planned for his. My kids don't have all the materials hings but we have decided to offer as many experiences and opportunities as possible.


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## Toronto.gal (Jan 8, 2010)

Plugging Along said:


> Talent/the report is about minimum/I don't believe that I should be raising my kids with a minimum when I don't have to.


Identifying & nurturing natural talent when possible, is great, but even in absence of such, children deserve the opportunity to be encouraged to achieve their full potential in life [whatever that may be]. As you mentioned PA, minimum just won't do it, although a lot can be done that isn't costly at all, so by minimum, I'm not just referring to cost. 

There are parents who don't care/motivate/teach enough, or overburden their children with daily activities that they are not even interested in. Some parents, in fact, demotivate the kids by keeping their schedule outside the home, full, which isn't necessary at all. I purposely enrolled my kid mostly in w/end activities not to interfere with his schooling during the week, which I found more important than karate/piano, etc.

Spending $$$$ in activities for the sake of keeping children busy morning until night, and not to nurture talent per se, IMHO, is a waste of money & time, that they could have shared with them instead, ie: reading/travelling, etc.


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## sags (May 15, 2010)

Going beyond athletics or musical success, we have a friend who is a MD with specialties in neurology and internal medicine. 

He wouldn't be the highly successful doctor he is today, without a lot of financial sacrifice by his middle income parents.


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## Daniel A. (Mar 20, 2011)

Maybe those paying child support could try and convince a judge that this is reasonable.

I've looked through many decisions of the courts on child support ordered and don't seem to be able to find many that reflect the Fraser report.


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## Plugging Along (Jan 3, 2011)

Toronto.gal said:


> Identifying & nurturing natural talent when possible, is great, but even in absence of such, children deserve the opportunity to be encouraged to achieve their full potential in life [whatever that may be]. As you mentioned PA, minimum just won't do it, although a lot can be done that isn't costly at all, so by minimum, I'm not just referring to cost.
> 
> There are parents who don't care/motivate/teach enough, or overburden their children with daily activities that theyP are not even interested in. Some parents, in fact, demotivate the kids by keeping their schedule outside the home, full, which isn't necessary at all. I purposely enrolled my kid mostly in w/end activities not to interfere with his schooling during the week, which I found more important than karate/piano, etc.
> 
> Spending $$$$ in activities for the sake of keeping children busy morning until night, and not to nurture talent per se, IMHO, is a waste of money & time, that they could have shared with them instead, ie: reading/travelling, etc.


I agree with what you are saying. The report was focused just on the cost of raising kids, and not the other pieces of it. We spend alot on activities to le them try different things to see what they may like. There are skills I want them to have because I think it will be a skill they will want later in life... Swimming, so the dont drown, bike riding , and skating because we are in Canada. We put both of them in both of these until they are proficient with the skill. Fortunately, they liked all of it, except the skating. Everything else, we let them try as they seem to take interest. Our main rule is tha if they ask to do it, they mush finish the whole session we paid for even if they don't like it and they must try. If after they don't like it, they can quit after the session is done. Funny, we book everything on week nights, because weekends are our family time and our child is over serious in school, and we want them to have more balance. 

I just think this report really focuses on the minimum amount s for kids, and it is hard to provide enrichment if you are not putting any extra money in. It takes some cash to find out what your kids ar interested in.


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## nathan79 (Feb 21, 2011)

Yeah, but you can do a lot of things for not much money if you know where to look. I was on a bowling league from when I was 10 years old until I was 18. The prices were very reasonable, about $200 for an entire season. I also did ice skating and roller skating when I was younger, for even less money. You can also find activities and field trips offered by local community centres, which are very cheap and sometimes free.

My parents tried to enroll me in other things but I preferred having free time over being booked up with stuff.


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## sprocket1200 (Aug 21, 2009)

nathan79 said:


> I don't always agree with the Fraser Insitute, but as someone coming from a regular working class background, this study jibes with my own experience as a child. My parents probably raised me on the equivalent amount adjusted for inflation.
> 
> It's understandable that other people have middle class and upper middle class expectations for the cost, which is expected from a financial forum.
> 
> ...


Haha. My buddy has to pay this in monthly child support. I told him is wife won the million dollar lotto by getting rid of him...


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## marina628 (Dec 14, 2010)

We do not pay any money for daycare ever even though we have a full time housekeeper in the house.We could have a staff of 20 and my husband will be the one who makes breakfast ,packs her lunch etc .I spend about $1000 a year on clothes for my 10 year old , I don't believe in spending big money on the kids when they grow too fast .I can't tell you how many times I have bought a new outfit to get it given away after a month.
I do have a 21 year old who is living alone and she is spending about $450 a month on average on food and clothing which includes many $5.17 transactions at her school for breakfast so I suppose it can be done on these amounts.Average grocery bill for us is about $120 a week for family of 4 so roughly $30 a person .There definitely is no room for any vacations , utilities or medical and dental expenses in that report.


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