Feeling the pinch? Cost of raising kids has increased by 26 per cent

Photo: Shutterstock
Photo: Shutterstock 

Nappies, childcare, baby food - the costs of raising little people certainly adds up. But if you've been feeling the pinch a little more than usual lately, it's not just your imagination. According to new research conducted by IBISWorld, the cost of raising a newborn from birth to four years old has risen by 26.3 per cent over the past five years, with Aussie parents set to spend $13.2 billion in 2018-2019.

This works out to around $3,577 per child per year, excluding childcare. And when you add those daycare fees in, that cost rises to almost $8,000.

"Childcare costs constitute the most significant expenditure for new parents, and childcare centres are therefore the largest benefactor of baby spending, says IBIS World Senior Industry Analyst, James Caldwell, noting that around 45 per cent of Australian children aged 0-four years attend day care services.

In fact, childcare costs generate $7.3 billion from parents of children under the age of 4 -  an average of $4340 per child annually - due to more mums returning to the workforce after having their babies.

"Formal childcare options are most common for children aged 12 months to four years old, but the use of nannies has also increased over the past decade due to the increased flexibility offered by these services and the growing difficulty in securing a spot in formal childcare," Mr Caldwell says.

After childcare, parents are spending the most on

  • Clothing,
  • Food
  • Nappies
  • Furniture 

Let's take a closer look:

Nappies:

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If you don't go to the shops these days without grabbing a packet of nappies, then you're likely one of the parents set to spend $606 on average for each child in your house under the age of four.

"Expenditure on nappies has risen as a result of parents opting to purchase higher quality domestically produced nappies, as opposed to cheaper imports," says Mr Caldwell. But environmentally conscious parents who are increasingly choosing reusable cloth nappies are also contributing to this increased expenditure.

"While these products are reusable, they retail for substantially higher figures than traditional disposable nappies," Mr Caldwell says, which has contributed to the 27.5 per cent growth in nappy expenditure over the past five years.

Food and nutrition:

Along with nappies, food and nutrition costs are also stretching the family budget, increasing a whopping 45.7 per cent over the five year period.

On average, parents are spending $1,227 per child annually on food, up from $912, with a number of factors contributing to the costs.

"The increase in expenditure on food and nutrition has largely been driven by rising health consciousness and effective marketing campaigns highlighting the nutritional needs of babies," Mr Caldwell notes. "Consequently, demand for nutrient-added and organic products has skyrocketed over the past five years, driving up expenditure on food and nutrition."

But working mums are apparently also behind the increase.

"The rising rate of maternal labour force participation over the period has also contributed," Mr Caldwell said, " as parents often opt for convenient and nutritious baby food products to ease the pressure on busy schedules

Clothing and toys:

Bucking the trend, clothing costs have actually decreased, down 16 per cent. In 2013/14, mums and dads were spending, on average, $841, compared to $649 in 2018/19. The same goes for toys, with expenditure down 9.8 per cent.

"This decline is largely attributable to the high-cost of manufacturing in Australia," Mr Caldwell said. "Demand for these product segments has increasingly been met by cheaper imports from low-cost manufacturers in nearby Asian nations."

And online shopping has also resulted in savings in these areas.

"Online-only operators can generally retail products for lower prices than their bricks-and-mortar counterparts, due to lower overhead costs," said Mr Caldwell.  

What the analysts call "modern families" has also changed expenditure in one significant area: the rise for fertility services, particularly IVF, over the study period. This is attributed to the fact that more women are waiting until later in life before having kids, with the average age of a first-time mum rising from 30 to closer to 32. 

"Fertility Clinics industry's revenue is expected to exceed $550 million across 2018-19, representing considerable growth over the past five years," the analysts note.

Adds Mr Caldwell, "Growing acceptance of these alternative methods of having a child, as well as expected advancements in medical technology, should significantly boost the demand for fertility clinics over the next five years."

The findings come from an analysis of Australian industry reports including Sanitary Paper Product Manufacturing in AustraliaChild Care Services in Australia and Online Baby Product Sales in Australia. You can access them all here.