Cost of Living Adjustment (COLA)

Cost of Living Adjustment (COLA) refers to how much more (or less) expensive it is to live in different parts of the country. For families, this dramatically affects child-rearing costs

• especially housing, childcare, and food.

Geographic Cost Variations:

Most Expensive States for Child-Rearing:

• Hawaii: 131% of national average (+31% more expensive)
• District of Columbia: 127% of national average
• Massachusetts: 121% of national average
• New York: 120% of national average
• California: 118% of national average

Least Expensive States:

• Mississippi: 84% of national average (-16% cheaper)
• Arkansas: 85% of national average
• Alabama: 86% of national average
• Oklahoma: 87% of national average
• Kansas: 88% of national average

What Drives Regional Differences:

Housing Costs (30-40% of child costs):

• Need an extra bedroom: $500/mo in rural Mississippi vs $2,000/mo in San Francisco
• Over 18 years: $108,000 vs $432,000 difference

Childcare Costs (20-30% of early-year costs):

• Infant care: $6,000/year (Mississippi) vs $20,000+/year (Massachusetts)
• 5 years of daycare: $30,000 vs $100,000+ difference

Food and Transportation:

• Urban areas: Higher food prices, but less need for car
• Rural areas: Lower food prices, but more driving needed

Real-World Example: Raising a child in San Francisco vs. Memphis:

• San Francisco: $310,000+ (birth to 18)
• Memphis: $180,000 (birth to 18)
• Difference: $130,000 (42% cheaper in Memphis)

COLA Impact on Planning: When using a child cost calculator, always select your state or region to get accurate estimates. National averages can be misleading

• your actual costs may be 30% higher or lower depending on location.