Elisa and Dave Santiago bought a two-bedroom condo with a den in a trendy neighbourhood in uptown Toronto in 2009 with plans to eventually start a family. Then they found out they were pregnant — with twins. When daughters Micah and Yuna arrived eight weeks ago, the joy of becoming new parents clashed with the new reality of what it meant to raise a family in a high-cost city.

As a self-employed naturopath, Elisa, 35, wasn’t eligible for maternity-leave benefits. Dave, 36, had recently left his well-paying accounting job to start his own consulting business, leaving the couple with little in the way of a steady income in the short term. So, four years after they purchased their dream home, the couple put their condo up for sale and moved back in with Elisa’s parents. While Elisa says the decision was largely driven by her need for her mother’s help in raising newborn twins — a huge benefit in a city where daycare costs can reach $2,000 a month per child — the nearly $3,000 a month in mortgage payments and maintenance fees meant their condo had started to look less like a family home and more like a financial burden. “It’s hard to let go of that condo, because I love it,” Elisa says. “But this is the choice we had.”

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The Santiagos are only now discovering what nearly six million Canadian families with dependent children know all too well: The cost of raising a child has hit astonishing new heights. In a society where many parents see buying a house as an important part of starting a family, the cost of housing in cities is rising into the stratosphere, pushing double-income households to the brink. Daycare costs, meanwhile, are now equal to taking on a second mortgage in some regions. The hourly rates of nannies and babysitters are also going up by double digits. Plus, the pressure to save for children’s education is higher than ever, as tuition fees continue to climb. It’s no surprise that parents of young children, says Statistics Canada, now carry debt worth 180 per cent of their after-tax income, well above the already-elevated national average of 161 per cent. Bundles of joy, maybe, but babies have also become financial burdens from which today’s parents may never recover.

Exactly how much it costs to raise a child is the subject of much debate. A Fraser Institute study last month pegged it at $3,000 to $4,000 a year — or $72,000 to raise a child to 18. It’s a figure that excludes both housing and child care costs, emphasizes scrimping and saving, government child benefits and borrowing from family or friends. Meanwhile, an analysis by MoneySense in 2011 estimated it would cost considerably more: $243,660, or close to the $241,080 calculated by the U.S. Department of Agriculture.

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Yet even such huge figures are “woefully insufficient,” says John Ward, a Kansas economist who consults on economic damages for legal disputes, including wrongful death cases involving children. For one thing, Ward says, most of these analyses do not take into account societal costs, such as the property taxes all homeowners pay to support public education. While they do take into account some of the added housing costs associated with growing families, they don’t include a host of other expenses, such as the cost of saving for a university education. Tuition is expected to reach close to $40,000 for a four-year degree in Canada by the time today’s infant heads off to university — or as much as $110,000, including the cost of textbooks and accommodation. Add to this the opportunity costs of raising children: the investment returns that parents could have earned if they had taken the money they spent on kids and saved it instead — at five per cent interest, that comes out to roughly $280,000—and the lost income from having one parent take time off work to care for a child. “If mom was a lawyer and dropped out of the labour force for four or five years, the family gave up the opportunity cost of maybe $60,000 to $100,000 a year in order to bring that child to a point where he could enter the education system,” says Ward. Statistics Canada estimates that even mothers who work full-time stand to earn 12 per cent less over their careers than women who have never had children, a “motherhood penalty” equal to roughly $108,000 over 18 years on a $50,000 salary.

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Ward pegs the all-in cost of raising a child to 18 in the U.S. at around $700,000, or closer to $900,000 to age 22, which is a more realistic picture for today’s families. The calculations work out similarly in Canada, where the total cost of raising a child to 18, including lost income, forgone investment savings and the price of a college education, comes out to around $670,000. For those dreaming of two children, that’s likely to cost well over $1 million.

It shouldn’t be a shock, then, that young parents are the most financially squeezed of any families in the country. Statistics Canada estimates that couples with children account for 30 per cent of households, but more than half of all of Canada’s household debt. Two-parent families with children under the age of 24 averaged $157,000 in debt, or $33,000 more than couples without children.

By far the largest sticker shock that new parents face comes from child care costs, which run from Quebec’s subsidized $7-a-day child care centres, equal to around $140 a month, to as much as $2,000 a month in major cities. Toronto screenwriter Trevor Finn caused a heated debate last month when he wrote in the Globe and Mail that he and his wife earned a combined six-figure income and couldn’t afford both the $1,600 a month in daycare and their small downtown condo.

The Vanier Institute of the Family says that, on average, it costs the typical Canadian family $1,000 to $1,200 a month to put a two-year-old in full-time daycare, or the equivalent to paying the principal on a $360,000 house over the life of a typical 25-year mortgage. “Child care costs are, in some cases, the same as you pay in rent,” says Nora Spinks, the institute’s CEO. “For many families, it is on the borderline of affordability.”

That’s if parents can find a daycare spot at all. It’s not uncommon for wait lists for licensed child care to stretch more than a year. The Vanier Institute estimates there are regulated child care spaces for just 22 per cent of Canadian children under the age of six. That lack of affordable options has led to a booming market for nannies and babysitters. Between 1998 and 2012, the number of people employed in child care in Canada jumped 65 per cent, from 20,800 to 34,400, compared to overall job growth of just 28 per cent for the entire economy, according to Statistics Canada data. Wages in the sector have nearly doubled, from an average of $6.87 an hour to $11.74, growth that has outpaced both inflation and the average wage growth across Canada. According to CanadianNanny.ca, the minimum wage for live-in domestic help averages out to $19,000-$21,000 a year, not including room and board.

That shortage has fed what Spinks calls the “black market” for child care: from parents paying a network of neighbours under the table to watch their kids, to unlicensed and unregulated daycares. Last month, Evtropova and Vyacheslav Ravikovich ﬁled a $3.5-million lawsuit against the Ontario government after their two-year-old daughter, Eva, died in an unlicensed daycare north of Toronto in July. Investigators allege there were 35 children registered at the home-based centre. Parents reported paying an average of $550 a month. It’s horror stories like this that keep parents vying for licensed spots, whether they can afford them or not.

The situation is particularly dire in major cities, where even the cost of home-based care can force parents to look at moving somewhere less expensive, says Kristin Harad, a San Francisco financial planner who specializes in helping parents prepare for the cost of a new baby. “The sad fact is that, when someone calls me and tells me they make $150,000, I’m like: ‘Oh goodness, do you have family nearby? How is this going to work?’ ”

If they don’t want to move, they typically end up scrimping and saving in other ways, with the effects rippling well beyond their pocketbooks. “People don’t realize the trickle-down effect,” she says. “What if you and your spouse want to go out on the weekend? I’m seeing a lot of parents cutting corners, and that adds up over time. Next thing you know, it’s been two, three, or four years, and they haven’t gone on a date with their spouse and the relationship starts to suffer.”

Expectant parents also tend to focus on the wrong costs, says Harad. New parents often come to Harad, worried they haven’t started a college education fund for their baby. Instead, she counsels her clients, who are typically in their 30s, to focus on what she calls the “bookends” of their financial plan: a short-term emergency fund and long-term retirement savings, both of which end up getting sacrificed in the all-consuming cost of raising children. “Parents are always surprised, because then I layer in things like: You’ll need life insurance and disability insurance,” she says. “Then I bring up vacationing and the extra ticket on the airline, or the suite instead of the single room. That’s where the surprises kick in. Parents don’t have a good sense of what it realistically costs to have children.”

Sarah and Chris Jefferies actually sat down to draw up a budget before they had son Jackson, 4, and daughter Emma, 10 months. Even then, the Victoria couple says they were shocked by how expensive raising children turned out to be. “It was all the stuff like activities that we didn’t factor in,” says Sarah, 28, who works for the B.C. government. “It was $100 a month for gymnastics, $50 every three months for swimming. It was when they’re sick and having to take time off work after sick days that are unpaid. Or when the daycare is shut down for two weeks at a time and having to take time off work for that.”

Emma’s birth last November doubled the couple’s child care costs, from $800 to $1,600 a month, or slightly more than what they pay to rent their three-bedroom townhouse. The Jefferies sat down with a financial adviser, who estimated they would have to save $40,000 per child toward their future education costs. That’s meant another $200 a month into RESPs for each child.

Sarah took 16 months off work when Jackson was born, including four months unpaid. But she couldn’t afford to do the same with Emma and has since gone back to work on a modified schedule. “With child care being so high, it’s sometimes not even worth it going back to work,” she says. “But my job is the one with the benefits and the pension.”

In total, the Jefferies estimate they spend close to $32,000 a year on child-related costs—equivalent to $672,000 over 21 years—not including the nearly $34,000 on housing, transportation and food for the two of them, the $300 a month that goes toward paying off their student loans, or the vacation they’re taking this month to Disneyland.

The rising cost of children is a significant factor in the broad decline of fertility rates across the industrialized world, and one reason why government policies aimed at encouraging women to have more babies have been largely unsuccessful. Since 1960, Canada’s fertility rate—the number of children a woman can expect to have over her lifetime—has dropped from 3.81 per woman to 1.63. “If economic factors were decisive, no one in modern societies would have any children,” wrote American demographer Kingsley Davis in the forward of The Cost of Children in the Urban United States, the seminal 1976 study that first pegged the cost of raising a child to 18 at three times the average middle-class income. That has only gone up as child-related expenses have risen faster than both wages and inflation. According to the World Values Survey, conducted by social scientists, Canadians typically say they want one more child than they actually end up having, with money as the top reason for the difference.

Governments frequently wring their hands about what falling fertility rates will mean for the future labour force of advanced countries. But having fewer children can actually be a good thing for the economy, says Lauren Sandler, author of One and Only: The Freedom of Having an Only Child, and the Joy of Being One, released in June. “If you have fewer children, you have more money available for a different level of purchasing,” says Sandler, a mother of one. “If you have fewer children, they tend to be better educated and more successful in their careers.” Despite the social and ethical implications of China’s one-child policy, Sandler says it has nonetheless helped the country’s economy by concentrating a large amount of investment into a smaller number of children.

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The increasing pressure on parents to invest in their children’s future has fundamentally reshaped not only how much we spend on our kids, but where and when we spend that money. Researchers from the universities of Pittsburgh and Sydney examined 35 years worth of data on spending by parents, focusing on discretionary costs such as child care, education, toys, clothes and accessories. They found that, not only had spending on children tripled, even when adjusted for inflation, but parents were paying more for their children over longer periods of time.

In 1972, they found that parents spent comparatively little on children under the age of six and those older than 19. The bulk of spending was concentrated on teenagers who were preparing to leave home to go to college or into the working world. By 2007, that pattern had essentially reversed. Today’s parents spend the most on infants and college-aged adult children, reflecting the rising cost of both child care and education.

That is partly explained by the number of adult children still living at home with their parents, which has jumped from 27 per cent of twentysomethings in 1981 to 42 per cent as of 2011. A Leger Marketing poll for CIBC this summer found that more than a third of parents with children under age 25 said they had put off their retirement plans to help pay for their children’s post-secondary education. It’s a trend that’s likely to continue, as people are having kids at a later age, limiting the amount of time they have after their children leave the nest to prepare for life after work.

Spending on children had also risen much faster among low-income parents than the wealthiest households, the Pittsburgh study found, as parents fought to secure their children a place in the precarious middle class. In 2007, low-income parents spent 14 per cent of their income on things such as education, clothes and child care, compared to 4.5 per cent in 1972. But even wealthy parents were spending more of their income on their children than they did in the past, reflecting, the researchers found, a fear that their children would slip out of the upper echelons of society.

Perversely, researchers have found that the more children cost, the more parents say they enjoy their kids. In a 2011 study from the University of Waterloo, psychologists gave a group of parents information on both the cost of raising children and the benefits, such as the ways that children help support their aging parents. A second group of parents heard only of the costs. When they later surveyed parents on how they felt about their children, those who had learned only of the costs were more likely to say they valued the time they spend with their children compared to parents who had also learned about the benefits, suggesting that parents find emotional ways to justify the enormous financial toll that having children takes on their lives.

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And, despite the costs, having children is almost always an emotional decision, rather than a financial one. “You ask someone who decided not to have children and they can give you very clear reasons: their career, they don’t like children, they had a horrible childhood,” says Spinks. “When you ask a parent why they decided to have a child, they have a lot of difficulty explaining why. They make that decision in their heart. They don’t do a cost-benefit analysis first.” That usually comes later, she says, when parents start considering what it will mean to keep growing their families.

It’s one reason the Jefferies are carefully weighing the prospect of having another child, even though they’re still coming to terms with the sheer cost of raising the two they already have. “We both came from big families and we want more,” Sarah says. “But they’re really expensive. We’d at least like to own a house before we throw another kid into the mix.”

This article was originally published in an October 2013 issue with the headline “Million-dollar babies” at Macleans.com.