Because my wife I do not have children, I feel that it’s important to bring in outside voices to talk about money and kids. This is a guest post from Cathy, who writes about family finances, parenting, and cooking at Chief Family Officer.
I would never in a million years want to give up my children just because they cost too much. But recently, the cost of having children hit home as I was reading J.D.’s post about the “third stage” of personal finance, which comes after one has mastered the fundamentals of living frugally, saving, and pursuing financial goals.
I have to admit: I grew a little envious reading that J.D. was beginning this third stage. I still consider myself to be firmly entrenched in the second stage — and I’ve been in this stage for years already, and will continue to remain in it for the foreseeable future.
And I realized that it’s because I have kids. J.D. doesn’t. Now that he’s paid off his non-mortgage debt and begun saving, he can think about grander things.
If my husband and I didn’t have children — if we didn’t have to provide for them now or worry about providing for them in the future — our non-mortgage debt would be completely paid off, we’d be paying a lot extra on the mortgage, and maxing out our retirement contributions, all while still having a comfortable amount left over as spending money.
Because we have kids:
- We’ve chosen to have a larger cash cushion.
- We’ve delayed paying off our debts.
- We’ve reduced our retirement contributions.
- We have greater expenses in the form of childcare, clothing, medical needs, and life insurance premiums.
I see us balancing saving for retirement and saving for college (and/or paying for private school) for the next 20 years. If we didn’t have kids and didn’t have to perform this balancing act, I think we’d be making reservations for an Alaskan cruise right about now!
I do not regret having children. You could never put a price on the intangible privilege of bringing new life into this world, the joy they bring into my life, or the way they make me a better person. I wouldn’t change a single thing about my life.
My point is simply that this is the kind of financial ramification I didn’t think about before my children were born. Sure, I knew kids were expensive. But if I’d realized how much harder reaching the third stage of personal finance would be after having kids, I think I would have been even more diligent about paying off our loans and building up savings first.
In fairness to myself, I don’t think that I could have fully realized or appreciated the financial impact of having one child — let alone two. At the moment, each child costs us about $800 per month. That’s the total amount for childcare, health insurance, and the additional life insurance policies that we took out when they were born. That’s $1600 that we spend each month before adding in the cost of food, clothing, toys, entertainment, etc.
When you add the additional “savings” cost for future education, it’s easy to see why I don’t feel we’re even remotely close to the third stage of personal finance — notwithstanding how well we’re doing and have done with the fundamentals. But I’m confident we’ll get there — eventually.
For a related discussion, check out the Get Rich Slowly forums: Staying debt free with a baby: Is it possible? Previously at GRS, Cathy explained how to save hundreds by playing the drugstore game. Don’t forget to check out her blog, Chief Family Officer.
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This article is about Choices, Kids
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I’m a new reader to the grs site. Like a lot of commenters, I’d say if you don’t have someone to help share your wealth with, who cares how much money you have. My wife and I fortunate to have good jobs and a son, with another on the way. If someone were to ever ask me what the best investment I ever made was, I’d gladly tell them it was the $15 stuffed animal I bought my son two years ago that he takes with him everywhere he goes.
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$800 a month on each kid? I doubt I spend that much in one year on our son. We do get free child care twice a week at the wife’s preschool but other than that I don’t think we’re extremely cheap about anything. We even buy nearly all organic food. We have relatives we share clothes and toys with, which helps.
Why have life insurance on the kids? Are they providing income you would miss if God-forbid something happened to them?
We’re debt free except our mortgage. We save about 25-40% of our monthly gross depending on the month. We made a conscious decision to live on less and have the wife work part-time. Just want to put that out there for those of you that think it can’t be done.
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Kids are not expensive!
They CAN be, but that is usually because of the choices of the parent as opposed to the child itself.
Rich people have kids. Poor people have kids.
Kids cost what you are willing to spend.
$10 per month or $100,000 per month. Just like anything else really.
This notion that children are somehow mandatorily expensive is ridiculous. They are not.
So, JD, listen to Trent on this, because he is correct.
Also, regarding the financial implication of children, I do agree that having children slows ones wealth building activities. Not because it has to (force), but because you want to (choice).
The biggest change I saw when I had my first child was the simple fact that my life was no longer about me. For the first time ever, someone else was more important. Until you have kids, I don’t think you ever get that – at least I didn’t.
So pre-kid you are free to focus on your prioroties, including wealth building.
Kids roll it, and things change. Your priorities take a back seat, and their priorities come front and center.
That is the gift of children. They make you realize you aren’t that important. They are.
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Thanks so much for putting this into perspective. It is easy as a parent to get discouraged comparing your finances to the finances of someone who doesn’t have kids, and the priorities ARE MOST DEFINITELY DIFFERENT than they are for someone with no kids. This post is a great reminder that we have to keep the fact we have children in perspective.
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Transportation can be inexpensive (take the bus, walk) moderate (reliable used Camry) or very expensive (Ferrari). Housing can be inexpensive, moderate, or expensive. Food costs can be high, low, or in between. Like any other aspect of our lives, children cause the need for financial decisions and trade offs. The minimum costs include nutritious food, medical and dental care, a car seat, diapers, a few school supplies, some life insurance (for yourself), someone to care for your child when you cannot, and whatever critical items of clothing you can’t get via hand-me-downs. Unless you have a child with severe medical problems, most of this can be obtained fairly inexpensively.
The issue is most parents feel they should provide more than just the basic necessities for their children. Braces, swimming lessons, birthday parties, trips to the zoo, bicycles, college – these are all good things for which many parents will sacrifice other desires.
My family’s most current dilemma involves school as our oldest child is now kindergarten age. We can send her to our adequate, but not exceptional, public school for free. Or we can pay to send her to a fantastic private school. After figuring in tuition costs, lack of free busing, and fewer free extracurricular activities, I figure the private school will cost us $4000 per year per child. If the public school was horrid or if the private school was $20,000 per year, my choice would be easy. As it is, I have to decide if providing a better learning environment for my children is more valuable than applying extra money toward my mortgage principal. I want my child to receive a good education, but I would also love to be debt free.
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“Or are you going to appreciate the children and grandchildren that are taking care of you in your final moments?”
Colin, I would suggest that whatever motivates people to have children, that they NOT rely upon their children and grandchildren taking care of them in their final moments. It’s wonderful when they do and can, but the miserable reality, seen every day in nursing homes, is that many either are not able to do so – or do not want to do so. By all means, have them, love them, enjoy them – but save for retirement and buy a catastrophic insurance policy, or whatever is necessary to pay for your care. Don’t plan on your children, who may be raising their OWN children, and have neither money, time, nor the ability, to take care of all your needs.
I thought Cathy’s post was a simple reflection, and quite honest. It’s nowhere near as incendiary as the posts that can be found at violentacres.com on the costs and responsibilities involved in taking care of children. Children don’t live on air; it’s that simple. But there are a lot of people who could benefit from reading Cathy’s post. The people who come here are those who are at least trying to be fiscally responsible. It’s disingenuous to suggest that they not take into consideration the financial impact of the biggest decision they can make in their lives: whether or not to have children. Suggesting that people prepare – or even calculate whether they can afford to do so – is not monstrous, and doesn’t mean that the people who do so are child-haters. I would even advocate more strongly that the people who want children plan to live on one salary – not because all families will have a stay-at-home parent, but because, sadly, many families will not remain intact, and of those families, the number of parents who become single-heads-of-households is astronomical. Morever, the majority of those single heads-of-households are women. If families are already used to living on one salary, at least the fiscal change in their circumstances won’t be so violent.
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I definitely think that all manner of planning should come into play when starting a family. I’m 22 years old and my wife and i just had our first child, and it would have been great if we would have planned a little better. No one really told us the real cost of having a kid, so we were a bit naive in thinking everything would be fin. so now because of crappy insurance im stuck with almost $10k in medical bills, plus my credit card debt im trying to pay off, and im starting college for the first time in april. lets just say my financial outlook at this point is looking a little bleak. my advice to anyone thinking of having a kid? PLAN SAVE PLAN SAVE PLAN SAVE! also, invest in decent insurance with a low deductible.
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Interesting post.
A couple of points:
1) Your daycare expenses are quite high which is difficult to handle. However, once the kids go to school they will go down significantly.
2) Part of the problem is that it sounds like you had poor finances to begin with before you had kids. While I certainly don’t think you should have delayed having kids I don’t think it’s fair to blame them for your finances. Yes, they do cost money but it sounds like that non-mortgage debt was there before they were.
The important thing is that you sound like you are on the right track to improving your finances which – kids or no kids – is the main thing!
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I would love to know where some of you people live. I paid $1200 per month for full-time child care per child (thus the reason I have only two kids!), and the good private schools in my area cost $20,000. And don’t even get me started on the cost of old-fashioned summer camps!
In some respects, I have found that sending your kids to *the best* private school or living in the town with *the best* public school system is overrated. I know many successful professionals who attended average public schools and attended state colleges.
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Reasons to have life insurance for your children:
1). to ensure that they will be able to get it for themselves when they become self-sufficient (unforeseen health problem could prevent qualification).
2). for help paying for a funeral (which we know is expensive).
3). It’s very inexpensive- ours is simply a ‘rider’ on my own life ins.
4). You can purchase a small (cheap) policy that builds cash value and then turn it over to your child when they exit college (that’s what my father did for me).
P.S. I pay WAY more than I would have imagined for my kids (private school) and we are by no means rich. But, like others have stated…we are happy to give up the $$$$ for the XOXO.
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I love children, though we don’t happen to have any (we met each other too late). Children in the developed world are very expensive to the earth’s resources too, incidentally.
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I cannot fathom how you could possibly spend $800/month on two children!! We have two kids as well and our food budget is $250/month. We have no need for childcare since I am a stay-at-home mom. We get free clothes (or they come from granparents) shop at thrift store and garage sales, and they have plenty of toys. We cloth-diaper, too.
I think all couples with kids should take a cold, hard look at their “double-incomes” and add up how much of that extra income is being absorbed through taxes, childcare, transportation, etc. With the resulting figures, most people realize that have two-incomes is not worth it at all.
Also, I think many people need to seperate selfish wants from true needs. A new car and nice house are WANTS (no matter how much you think you “need” or “deserve” it. Food is a need. Be sure you know the difference and manage your money accordingly.
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I hate it when people who have kids and people who don’t have kids fight over it.
Crazy, if you don’t want kids, don’t have any. If you want “experiences” call it what you want it is your personal choice and no one should really judge you for that, so I have to say that I feel for you when it comes to this. I have been to many get together s where all some people talk about are how great there kids are. The truth is I really don’t care how “great” there kids are I am glad that they are happy for their kids.
I am on the flip side of that equation, I have 6 and then people judge me by “how many” kids I have. What is really irritating about the whole thing is that we have always supported our kids, and if we want to have a dozen it shouldn’t really matter to anyone else.
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I am sitting here trying to figure out how it’s a shock to your finances to have children? Maybe it’s my Mormon/LDS beliefs but having a family has always been part of the plan for me. I didn’t get blindsided from my financial goals because we started a family. I’ve always planned for them. I mean, who cares if you don’t have as much $$ as people who don’t have children – your children are priceless!
Plus, I don’t think kids cost that much.
We get a lot of hand-me-down clothing, I buy things at Kid to Kid, we buy everything on sale, I breastfed for the first year, he eats what we eat and I make things from scratch. Health insurance is what it is. And I work so I understand that the price I pay is babysitting costs, but daycare, as a % of what you make, isn’t that high.
I think people put there kids in costly schools and expensive programs to satisfy their own pride. If you help your kids with their studies and teach them at home too, you don’t need expensive schools.
And I paid for my own college – so my kids can pay for a lot of theirs. I think it builds character and makes them responsible to have to work. I started working when i was 16. They can do the same.
Further, let’s think LONG TERM people. If you save a little each month for your kids, they’ll have a great start in college (if you choose to help them with that). We are beginning to save for a church mission and some college for our son, but if you save just $100 a month you’ll have $22,800 by the time they are 19). This will pay for the mission and will help him get started at a college.
My “wealth” and financial situation means next to nothing to me without having a family to share it with. We’re not here to just accumulate a bunch of money and then die. Money is just a means to have the things that really matter: kids and a family.
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I had an abstract feeling of wanting to have kids someday, being slightly workaholic, until 9/11. That’s when I realized that life is short and I would not feel fulfilled going through life without having had a child to share it with. Finances were never a serious argument against it for me, as people told me that children take more time than money, and I knew I was happy to accept hand me downs, etc. So it was an eye opener all the fixed costs that come with raising children, everything from healthy groceries, to doctors and dentist visits, bigger and safer car, life insurance (for yourself, not the kids!) keeping to a stable job with benefits, housing choices (size, school zone etc). We are commited to living simply but it is a whole other ballgame when there are children in the picture. I am not saying this to dissuade anyone, but as a public service announcment, that if it is a goal to have children, like any financial goal one should evaluate and prepare for it both financially and in terms of commitment. For example for the vast majority, one can not have children AND retire early, you have to choose.
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I don’t think kids are expensive, and honestly I don’t care. There is no price that can be put on our family life and our boys. It’s just irrelevant. Childless or a house full of kids, it is all about choices and priorities. My best friend is my age (mid-40s) and she and her husband have no kids. Their life is very different from ours. For each of us, our lives make sense.
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This post annoys me with its lack of substance. It’s title is “The High Cost of Having Children”, but its content is essentially, “mine cost $1600/month, that’s a lot!” Yeah, I guess it is a lot. There’s no breakdown at all as to how much any individual item costs, lots of things are left out, and it generally doesn’t provide much insight at all.
You might as well write about “The High Cost of Owning a Home” and then say, “Mine cost $600,000, that’s a lot!” Well, sure it is, but it doesn’t help me at all with planning to purchase one. And that brings up my issue – I’m 27 and recently married and planning on having kids in the near future. Articles on this topic could be so helpful, but they’d have to have some real info in them.
Beyond all that, the author’s expenses are ridiculously high. The average family in the US makes about $40k before taxes, so say no more than $30k after taxes. Given a $1000/month mortgage payment for the same family, that leaves them with $20k. Take another $1600/month out of that and you’re left with a whopping $800 to spend on *everything* else, including transportation, utilities, food, clothes, entertainment, etc to spend for the rest of the *year*. That’s right, $800 left over for the year, not for the month.
Yet, every day I see average families with kids doing OK. You know why this is possible? Because they don’t pay ridiculous childcare, health insurance, and life insurance costs. Certainly I can see why the author would choose to buy these things, but at the same time, I see them as luxuries and not necessities. If I modify that list for my own situation, it looks like this: Childcare: free, this is their mother’s job (quite literally). Healthcare: about $100/month, this is the company health plan premium when moving to a family plan, and it covers an unlimited number of children. Life insurance: I’d pass on this, I don’t think it’s necessary.
So, where the author lists $1600 for those three expenses, I can list $100. That doesn’t make kids sound very expensive to me, but that’s because I’m not targeting the most expensive child-rearing experience possible. To make a car analogy, the author could have said “Man, I love my car, but man is it expensive!” When you find out the author is driving a brand new Mercedes S-Class, you kind of think to yourself, “Well, yeah, of course it’s expensive”, and then you realize that you could probably drive a car for a lot cheaper, but the author didn’t give any clues as to how, so you’re left to figure it out on your own.
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I was listening to Clark Howard this morning on the Bill Handel show, and laughed when Handel said Clark’s mission was to teach people to live on $12,000 a year…Clark said no, he could live on $8,500 a year! Then he pointed out that his wife and college-attending daughter cost quite a bit more than that, and even the frugal Clark is OK with that–he still manages to save for the future and buy cereal at 80% off retail.
I think the writer’s point here is that we parents weren’t prepared for just how much kids cost. I love mine, and would not be nearly as happy without them, despite their $30,000 annual price tag. The good news is having that extra spending money later–woohoo!
It’d be nice if young couples had a better grasp of how much to budget for having children–they’d probably take on less debt and live more frugally ahead of time instead of trying to make up for lost time later.
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Just a note of sad reality…
Most people who I know, who have kids, do it consciously and on a whim because another kid usually means a few more dollars in their pocket. They’ve usually got 2-4 anyway that they spend nothing on (state feeds them, take free stuff from charity), and every new kid is another dependent and corresponding credits for their 1040. They spend so little on their kids it’s always a net economic gain to have another one.
Has nothing to do with most GRS readers life situations I bet (anyone earning more than $30k-ish a year couldn’t get most if any of these free goodies courtesy of the taxpayers) or this post, but that’s how it is out in the real world, and why the people who can’t support them have lots of children.
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As a mother of two teen boys, I love what “weakonomist” said (first comment), and enjoyed Cathy’s post. There are so many factors involved with the expenses of raising children. I did not read all of the posts, but planning can be difficult because many children have special needs with expenses that are often not met with medical insurance, especially if alternative therapies are used.
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Most financial advisors say to invest in your 401K before you invest in college savings. Your kids can get college loans based on their future expected income – but you cannot get a loan to retire.
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I am surprised that people here are unable to understand that costs are so different in different parts of the country. The least expensive childcare I could find for my 3 year old is 40/day. It’s a beautiful building with great facilities and the teachers are lovely. Still, I looked a lot before choosing a place because you need to consider how the teachers are paid and what their benefits are — unhappy people don’t make great teachers. You have to be comfortable with where you leave your child. I was very lucky to find such a nice place that’s good to their staff and reasonably priced.
Like anything else, these things are complicated, and everyone makes their own decisions for their own reasons, and that is fine.
I’d still urge a SAHM (or dad) to consider all the costs of having one or two incomes. I saw a post from the SAH side, so wanted to mention the other. Obviously both choices have expenses, including personal satisfaction (I missed working and wanted to return to the workforce), long term savings and contributions to social security — when MY parents split up, my mother had insignificant SS because she’d worked less to take care of us. It can also effect your return to the job market. It can be hard (and certainly is now) to return when you’ve been many years out of the workforce. Fields change, requirements change, and catching up with those is difficult. I love the time I stayed home with my children (3 years), but I really wanted to go back to work and I’m very lucky that I found a job based from my home. I don’t have clothing expenses or commuting, and I’m very available for emergencies. I gain personal job satisfaction and savings for retirement, including contributing to social security (even though I’m always told it won’t be there when it’s time for me to retire).
I’m not going to figure out every cent my children cost me every month, but I can tell you, 200/week for one child adds up fast. My 5 year old costs for full-day kindergarten and care on snow days and holidays. It’s hard to find care for less than that, at least in Central Massachusetts.
I guess I just think everyone needs to remember that everyone is different and location plays a huge role in cost of living, including cost of raising children, even when your kids do play with the cardboard box in the backyard for years in a row.
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I am almost 42.
We have 5 children.
I have been the sole provider, working in the education sector (read: low salary relative to the rest of the workforce). My wife homeschools our children.
We’ve never carried consumer debt. We had a car loan once (18 years ago) that we paid in full in less than a year.
We paid off our house 2 years ago.
We are building wealth (have been for a while, actually)
It can be done.
I prefer to think of it as “the high blessing of having children.”
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“A hundred years from now it will not matter what my bank account was, the sort of house I lived in, or the kind of car I drove…but the world may be different because I was important in the life of a child.”
Forest E. Witcraft
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@Matthew144 (#32)
“1. [Kids] are the ultimate luxury good.
4. [Grandkids are] truly the ultimate luxury good.”
Which is it?
“5. Kids increase a Father’s [...] earning power, especially in his younger years.”
Conversely, they do they exact OPPOSITE for the mother.
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Oh, I don’t know… $100 life insurance premium to make sure my children have a trust fund and/or good financial cushion should they lose one or both parents seems worth it to me. We don’t have to spend that much right now because it’s subsidized through my husband’s employer, but we’ve purchased gap insurance in the past. Totally worth it.
And if you think mom’s job is to stay home full-time, great. Just remember that not all of us are like that, and great child care is an essential resource for those of us who want to/need to work. We will pay what it takes. You truly get what you pay for.
What I got from this post was the idea that, wow, yes, I knew having kids would cost a lot, and I thought I was prepared. And then I actually had kids and realized that my preparation wasn’t enough!
I love my kids, not least because I think they’ve helped me move further down the road of financial responsibility. Some people pick up good financial habits easily; other people need good reason to change. No, I’m not as well developed as I should be financially, but you know what? I think I would be worse off without my kids, despite our $1600/mo child care bill. Now we have more reason to care, and it’s made a huge difference for us.
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Thanks for the great article, I have marked your blog to check out when I have time. I have not been able to relate to JD’s 3rd stage of personal finance and hadn’t really put my finger on why I hadn’t it just hadn’t really clicked with me which is unusal since I typically enjoy his writing, but now after reading your article I can understand why I am not getting it, because I have a long time of raising three kids ahead of me before I am truly ready for the 3rd stage!!
And thanks JD for having a guest article on this subject.
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I don’t see Cathy’s post as complaining about the cost of children or anything of the sort. The message I’m getting from her post is that for people with children the road to financial freedom may be a little longer than for those without, and not to lose patience while traveling that road. The point she’s making here is that reading blogs and books by personal finance gurus without kids or that don’t take families into consideration can lead a person to think “I’m not doing this very well” or “I’m not getting anywhere”. The fact is, kids are an added expense any way you look at it, and it’s going to take someone with kids longer to reach a financial goal than someone of equal income who does not have children. Patience is the key here, both in parenting and in reaching you financial goals.
Thanks Cathy, and good luck!
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( Snowballer says: Most people who I know, who have kids, do it consciously and on a whim because another kid usually means a few more dollars in their pocket.)
Excuse me? More money in my pocket? Who would have that type of mentality, I have 6 kids and your saying my thought is “hey honey I am pregnant here comes the money train!!!!!!!!” Get real!!! You would have to be kidding if you think people actually plan to have kids to get more money!!!! We have fully supported all of our kids, the ignorance of that post was unbelievable. What kind of people do you hang around that have that type of mentality? The tax deduction from a child does NOT = money in the bank.
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OK, I’m a bit confused as to what this post is for. I’m disappointed that the author hasn’t done better financially. Is this just a post to make parents feel better if they are not as far ahead as they had hoped? Yes, raising kids is expensive. I have 2 of my own – 1 in diapers. However as a parent, it’s even MORE important to pay off the debt, although it might be harder at this point.
I just don’t understand the “advice” on this one. My advice would be going back to Sara who some said was too frugal… Sara is doing it right, pay it ALL off now before you have kids. I didn’t have any consumer debt when the kids came along. The sooner you start paying off the debt, the better positioned you are for the cost of children.
I guess on some level I’ve been lucky, but luck also comes from planning, hard work, and sacrifice.
We take free hand-me-downs from friends and family for clothes – so we basically buy a cute dress here or there, socks, and underwear. That’s it. As for food, they eat what we eat, so we just make a bit more rice or beans or pasta. Medical has been more and so has our life insurance, but we have 20 year term, so we’re talking an extra $50/month for that.
We vacation by car and visit National Parks. Last year, we saved so much money by driving and not flying/renting a car to visit grandma that we were able to hit Disneyland on the way back for 2 days and still spend less money than if we had flown and not done anything fun. My idea of hitting Disneyland is on a budget though. We don’t eat at the park, instead we go off site to McDonalds or back to our hotel off property, and we don’t buy a bunch of stuff or pay to meet the characters.
However, we pay for music and dance lessons, and sports teams for the kids. It’s only because we can afford to do so AFTER we pay our other obligations, including our retirement being fully funded.
Childcare is a financial mistake many people make. I pay for childcare only because my income is high enough that it doesn’t make sense for me to stay home. Most people don’t fall into that category, but still work only to make enough to barely pay the sitter.
I do agree, though, there is no “right” time to have kids. They are a blessing, no doubt. And if you set yourself up with some hard work and foresight before the kiddos come along, you’ll be much better off for it.
I also suffered with infertility, and 4 miscarriages. So I don’t advocate waiting. If you want kids, you never know that you can have them.
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Before my wife and I got married last year, we had long talks about how we envisioned our future. We decided as a couple that we would delay having children until we a) have a few years under our belt living with each other, b) establish our careers and c) making sure we take care of our finances and eliminate our student loan debt. It does make it really hard when all of friends are starting to have kids. We would enjoy our kids growing up together. Already, we have seen the financial hardships are our friends are going through. That’s one thing we are not envious of.
Stupidly Yours,
Matt
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>>”5. Kids increase a Father’s [...] earning >>power, especially in his younger years.”
>>Conversely, they do they exact OPPOSITE for >>the mother.
Depends on who stays home, doesn’t it?
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“A hundred years from now it will not matter what my bank account was, the sort of house I lived in, or the kind of car I drove…but the world may be different because I was important…in the lives of others.”
Honestly, I’m on the childfree side of the fence for a multitude of reasons.
I am pleasantly surprised that the majority of comments are balanced and thought out. Most places are very, VERY anti-child free and consider anyone without kids to be (take your pick) selfish/insane/criminal/to be pitied, etc.
I do think that with getting my financial act together with my wife we can both contribute to society without having children…teaching, charity work, etc.
Hence the tweaked quote from the poster above. If you want kids, great!, bt if you don’t want children I think that ‘s a great option too.
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I would also like to take a minute to respond to those readers who keep saying, If you don’t have a family/kids to spend your life with, who cares how much money you have?
Not everyone who wants kids can have them. Not even by adoption. Not every person who would like to go through life with a partner meets the right person.
Are you seriously telling me that these people have no worth? Or are you just saying that their lives aren’t worth living?
I’m guessing that at least some of you have managed to make people who’ve been less fortunate even more miserable than they might otherwise be. Conversely, it is also possible to build an extended family with people who care for you even if you don’t marry – or have kids.
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Wow! “That’s $1600 that we spend each month before adding in the cost of food, clothing, toys, entertainment, etc.” Having “come out on the other side” of child rearing in the black and with a substantial amount of money in savings, I cannot believe it costs you so much! Of course, I stayed at home with my children until the oldest was in high school. We lived on one paycheck. For a while, we only had one car. You can save a lot of money by not needing work clothes and having only one car! I became the “garage sale queen.” Used clothing, toys, etc. saved us a ton of cash! We grew, canned and froze most of the veggies we ate. The weeding also kept those kids entertained/busy! We lived on 3 acres, so there was plenty of room to run and play. When I went back to work, my paycheck became “the college fund.” We saved for retirement all along. One thing I have heard thrown out there recently is: “You can take out a loan for college, but you can’t get a loan for retirement.” I think this is so true. As far as your children’s education is concerned, your kids should also be expected to contribute to their college experiences. Let them know far enough in advance how much you are willing to give toward it each year. Also, they need to know how many years you are willing to contribute. Four years is all we gave ours. Funny how they managed to graduate in 4 years! Lots of stuff to think about. But I do think that just starting at $1600 is excessive. Cutting corners is hard work, but very worth it!
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The article is OK, but as others said — light on details and concrete suggestions. Maybe she can do a follow up?
We have 2 kids, and we’re at the 3rd stage. But, we had no consumer debt and significant savings when we started our family. We were also borderline “old” — DH was 40 and I was 33 when our 1st was born.
DH has been a stay-at-home dad almost since my son was born. That wasn’t the plan. We thought we’d do the dual-income daycare routine, until #1 came out. Then, it was a decision about who had to go back to work. I don’t want to take the discussion off-topic with the whys of our decision.
We are pretty frugal, so our issues are more about “the opportunity costs of having children”. DH and I were making $150k+ combined before kids. We would undoubtedly be FI by now, had we not had kids and forgone one income. We knew that, and had them anyway. It was a conscious choice. (So was having the kids “old” — we had agreed that we would foster/adopt if we had fertility issues.)
However, having one parent as “household manager” helps us keep our expenses down: less stress, more time for smart shopping and financial management, minimal childcare expenses, home cooking, parental tutoring and enrichment, etc. So, I wouldn’t be surprised to find out we’re about where we would have been if we had both kept working after the kids were born.
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This is a great article that helps me stay focused on the big picture. One thing my hub and I did 6 yrs. ago to be able to save more was cut down the #1 expense – taxes. It was an “ah-ha” moment when we were introduced to Sandy Botkin. We were able to save an extra $10K every year, and dump that into savings. The key is not to spend it! Chk it out here: http://www.taxdeductionstrategies.com
Oh, also I’m a big believer in saving for retirement 1st b4 kids college–they give loans for college, but they don’t give loans for retirement.
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Everyone, remember, term life insurance is not expensive…I pay under 200/yr. for my 300,000/20-yr. insurance (I am a stay-at-home mom; husband is insured for MUCH more. This premium has a rider to include $15,000 worth of life ins. for each of my 3 kids!) Parents, don’t make excuses for not protecting your kids’ futures–GET LIFE INSURANCE–but buy TERM, not WHOLE LIFE (expensive rip-off)
BTW- My husband is a police officer and it IS necessary (still cheap). And, No, I have no interest in the insurance business.
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I find it amusing when people try to count up the “cost” of having a child.
To those of you who think $800/m/child is excessive… is that because you have a spouse at home caring for them? If you count in the lost wages of that caregiver what is the cost then??
When my child was young and as a single parent I didn’t have the option of not having child care, and infant care at that time was $560 CDN per month. Now I understand it is more like $800 JUST FOR CHILD CARE. Add food and clothing, and it is much more.
But other than the obvious costs (child care, children’s clothing, etc), how do you calculate the savings of NOT going to the movies because it is more fun to stay home and play? Or the cost of seeing a movie that you don’t want to see because the 8 year old will DIE if you don’t see “Monsters vs. Aliens” when you would rather see the new Julia Roberts movie?
When I was pregnant I was told that “Children cost every dollar you make. Be it $10,000 or $100,000 or $1m” and it is true (and false, like all ultimate truths) because there isn’t ONE decision I make in the day that doesn’t factor in how it will affect my daughter.
When I had her I was earning less than $10,000CDN per year. Now I earn many times that much, but still every dollar is prioritized to provide her with her needs, then me with my needs, then her with her wants. My wants come in last place.
But my happiness is depenant on knowing that I am doing my best for her. What cost is that happiness worth? Every penny.
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@ Tyler — You mentioned that you don’t include life insurance because you don’t believe it is necessary. Assuming your wife’s “job” is to take care of your children, what will they do for income if something happens to you?
Just curious about what the contingency plan would be.
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It seems to me from reading the comments, when looking at children-related expenses there needs to be two sets of numbers. One set for a family with a SAH, one set for no SAH.
There is so much discussion about being frugal on clothes, toys, etc. For me, these expenses are trivial compared to childcare (which I’m not willing to skimp on), medical, and college savings.
I think the main takeaway of this post is for the younger people out there. Don’t waste away your money now and expect to save later in your 30s and 40s when you settle down. If you plan to have a family – start saving for it now – don’t wait because it gets much harder.
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Kids aren’t as expensive in countries with a national healthcare system, government tax subsidies that actually make a difference and a cost of living that isn’t overinflated. Perhaps this is another anecdote on the depressing state of the American economy, and the inability of the US government to do anything but raise taxes and devalue your hard earned money.
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There’s only so much room in a guest post to fill in all the gaps, suffice it to say that we are actually doing quite well, financially. My point is simply that having children has changed our priorities and slowed our achievement of non-child-related goals like retirement savings and being debt-free. In other words, having children is slowing my arrival at the third stage, as defined by J.D., but I’m definitely not complaining about it – just pointing out that simple fact.
@TosaJen – Can you clarify or expand on what you’d want to know in a follow up post? Alternatively, a lot of your curiosity may be satisfied by checking out the posts over at Chief Family Officer – needless to say, there’s a lot more info about me there than there is here!
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@Beth: I do have some (fairly small) amount of life insurance through work. I believe it covers two or three years of my salary, and the premium on it is very low (in the neighborhood of $100/year). I also have our savings, and my 401k, which continue to grow.
So, in the event that I was to die, my wife would be left with a minimum of three years of my salary. If she wanted to be extra frugal, she could probably live on this for 10 years. Once we have children, that time span will be shorter, but by then, my 401k and other savings will be bigger as well.
So say she has five years of expenses covered. This gives her five years to get back on her feet. She’s a smart woman, and she’s not incapable of working for a living (she works now, and will continue working until we have kids).
So, if I die, my family is not set up to live carefree for the rest of their lives, but they are set up with a cushion to land on so they can pick themselves up and carry on. Considering that I’m pretty unlikely to die in the next 25 years, I think this is an adequate level of protection.
If I lose my life insurance through work (say by changing jobs to one that doesn’t offer this benefit), maybe a moderate life insurance policy like this is a worthwhile investment, but it’s a small investment and makes nearly no dent in a number like $1600/month. I still think that life insurance costing hundreds of dollars a month (as is implied by this article) is an unnecessary luxury.
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@ all the posters who are questioning what % to do what with vs. save for kids education and/or pay toward better schooling:
I think this is probably one of the first generations that are thinking of themselves first rather than their kids. Any previous generations would sacrifice almost EVERYTHING to give it to their kids if it was going to give them a better chance at a successful life.
I’m not talking about a sacrifice so your kids can wear the most expensive clothes or drive a new BMW they day they turn 16 either. I’m merely talking about banking every dime you can to give them the biggest head start possible. And teaching them the lessons learned *before* sending them out the door to live on their own.
One thing everyone seems to forget here, is that there is one big, huge caveat to all our plans. Death. You don’t know how much time you have to get your kids on the right path. My dad died when I was just going out on my own (1 year into my now 13 year marriage) and he was just starting to teach me some of his life lessons. I hope to start much earlier with my son, as I don’t want him to have to find his way in the dark as much as I have, or to try to correct mistakes once you find the path.
Everyone should be making every sacrifice they can to give their kids a better future.
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What can I say, I love GRS and I love the guest posts. The honesty of this post is cool. Our family’s experience is that having kids really improved our financial focus, but we’re moving much more slowly towards our goals. Financially, having kids has been a mixed blessing.
Like all things in parenting, nothing can prepare your house, your relationship, your heart, or even your account balances for the impact. Becoming a parent is a seismic experience. (And, for the record, I’d do it all over again in a heartbeat and would choose my kids over having a bazillion bucks any day. Okay, most days.)
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La BellaDonna and Jla01– a big THANK YOU for your comments. I’d applaud if you could hear me.
I’m glad people appreciate the value of family. Just don’t rub the salt in our wounds if we don’t have what you have.
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@Cathy: I found that a few statements piqued my curiosity:
“I still consider myself to be firmly entrenched in the second stage — and I’ve been in this stage for years already, and will continue to remain in it for the foreseeable future.
And I realized that it’s because I have kids. J.D. doesn’t. Now that he’s paid off his non-mortgage debt and begun saving, he can think about grander things.”
There are a whole lot of people who will say this isn’t strictly true. You’ve made a bunch of choices along the way that make this true, in addition to the kids. That’s where things get interesting to read about.
I will take a look at your blog (probably have already) when I get the chance!
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Honestly, I keep waiting for my kids to “get expensive” (they are 18 and 20). My husband and I got a late start on both work (advanced degrees) and kids (age 35 at first). We did not have the high income of the previous poster (teachers). It’s all about choices all the way. I have written about our college choices and will eventually write about other choices we have made over the years. As in “Your Money or Your Life” consciousness is the way to go!
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We are having twins this summer and are anticipating paying between $1000 and $1300 per month PER CHILD for daycare alone starting next year. And not especially spectacular daycare, either—just the only places we have found relatively close to where we live where we’d feel that our kids would be safe and well cared for. That’s just what the cost is around here. (We live in a big city, not in the suburbs or in a rural area.) I understand the thinking that for that price, kids should be learning Chinese and trigonometry and be able to cure cancer, but it just doesn’t work that way.
And yes, if I stayed home, we’d be “saving” all that money every month, but (1) I’d be losing a lot in both immediate and long-term earning power by taking myself out of the game for five years (and then having to figure out a way back in later on), and (2) I find my career fulfilling and believe that happy parents = happy children, even if we’re not home with them 24/7. I like my job and my company, and giving that up isn’t something I’m especially eager to do. If it made crystal-clear financial sense for me to stay home, I would probably do it, but it’s not crystal-clear.
There are other financial considerations, like the fact that if I weren’t working, adding the three of us to my husband’s health-insurance plan would cost about $700 a month, whereas adding our kids to my employer-paid health-insurance plan would only cost about $150 a month. That’s just one example.
When you add up the long-term opportunity cost of not working, does the math still make sense for you? And do you actually like your job? Those questions should also make it into the considerations. If you hate your job, it might make more sense for quality-of-life alone to stay home with kids. But it’s not necessarily the most frugal choice, and those of us who choose to work aren’t necessarily killing ourselves just so we can buy our kids a bunch of expensive junk, either. My husband and I want to travel a lot when we retire, and we want to retire young, so it makes sense for us to both stay in the game right now. Nobody gets 401(k) matching for staying at home.
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