33, Pregnant, and Getting Close to ER

[Katsmeow]

Quote:

Originally Posted by lereh892 Re: 250k to raise a kid. How they get the number is they add in things like pro rata portion of health insurance, your house, the car, utilities, etc. If you have a three person household and you spend $4,000 a month, voila--the kid costs $1,333 per month--that's how they do the math. obviously you would need these things anyway, so they're not truly incremental costs (although one could argue that you got a BIGGER car and house because you had kids).

I agree with you that it isn't a pure pro rata cost, but it certainly not something you would need in that amount anyway.

We once had 3 kids at home. Now we have 1 at home (another who is in college comes home at holidays). So how does that affect our costs? By a lot.

Yes, my mortgage is the same whether I have kids at home or not. But, we live in a smaller, less expensive house than we lived in when all kids were at home.

All of the house maintenance costs, utilities and even insurance are less now than they were when we had the larger house. When our son moved into an apartment near his college last fall our utility usage did go down. Our food bills did go down (of course, in his case, we are now paying for his food bills since he is in college).

When we had 3 kids at home, we needed a larger vehicle than we need now. With 2 kids at home, one of our vehicles is fine for both of them but the other car is not very comfortable for 2 in the back seat. OK in a pinch but not really comfortable.

Certainly there are many easily direct costs of children. Health insurance is more because we have kids on the policy. Vacations cost more.

But, people often don't count the costs where they can't see the incremental cost difference and assume it is nothing. While it may not be pro rata is not nothing.

People often don't think about their auto fuel bill as being a child related cost. Yet, it is. Lots of our driving is and has been related to kids. You don't think of that as a child related cost, but it is a big one. And, you put more wear and tear on your car. A part of every repair and oil change should be attributed to the fact you have children.

In our area, we have some toll roads. In our case, over 90% of what we spend on toll roads is attributable to our daughter.

Furniture - Again, people often don't think of furniture bought for a kid's room as a kid-related expense. Or new sheets, or towels. They think of them as a household item. They are. But, you wouldn't need them without the child. The child's share of home consumables (toilet paper, soap, toothpaste, etc.)

It all adds up.

[someguy]

Quote:

Originally Posted by Katsmeow It all adds up.

Not to mention costs that are even harder to quantify. For example, career opportunity cost resulting from the high demands of raising children. Obviously if both parents are fully retired, that's much less likely to be an issue. But even in that case, there are some, such as one's professional network drying up in the chance one might need to go back to work, or want to, taking on only lucrative short-term gigs.

[aida2003]

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Originally Posted by daylatedollarshort We pay almost $300 extra a month just for car insurance for young adult drivers on our policy and that is with no accidents or tickets for any of us. I've shopped around and can't get that down even with USAA. Believe me I have tried. Our umbrella insurance is another $1K a year since the kids started driving. Our experience has been closer to what Katsmeow wrote in terms of cost of kids, especially when they are older and driving age. I have price shopped braces, too. I am sure some of the cost is due to a high COL area, but I think all added up we spent easily $20K just on braces over the years, maybe more.

If it's OK to ask how much did you increase your umbrella insurance and at what age of your children? Right now we have a $1M umbrella, but we'll need to think about increasing (double it?) when the kids start high school perhaps.

I think, OP should use her opportunity to work for a few years in NYC and when it's time to start school for the child then consider moving and retiring. I don't think I'd personally want to leave such a lucrative job so early knowing that she will have a small chance to make the same money in the future. I didn't get the impression that she hates it.

[daylatedollarshort]

Quote:

Originally Posted by aida2003 If it's OK to ask how much did you increase your umbrella insurance and at what age of your children? Right now we have a $1M umbrella, but we'll need to think about increasing (double it?) when the kids start high school perhaps.

I think there are many factors that impact premiums, from home offices to what your house is made of to credit scores, so my experience is probably not necessarily indicative of what others might pay in premiums or need for coverage amounts.

USAA has a good page here:

https://www.usaa.com/inet/wc/faq_Umb...kredirect=true

[FUEGO]

Quote:

Originally Posted by Katsmeow All of the house maintenance costs, utilities and even insurance are less now than they were when we had the larger house. When our son moved into an apartment near his college last fall our utility usage did go down. Our food bills did go down (of course, in his case, we are now paying for his food bills since he is in college).

In our neighborhood, there's only so small of a house you can buy. And it comes with 3 bedrooms. If you want to live in this part of town and have a yard, you probably won't find a small house with 2 bedrooms. So there's a floor as to how small you can get. Sure you could allocate the cost of those bedrooms to the kids, but I have plenty of single or DINK or retired empty nest neighbors living in these 3-4 BR houses since you can't get any smaller around here.

Utilities are less without kids, but our gas and electric bills are mostly heating/cooling related that don't fluctuate with kids. Water usage - sure. Some electricity and gas for the water heater, sure. What does a couple of CFL's, a cell phone and a laptop use? 50-100 watts combined? = Under $100/yr

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When we had 3 kids at home, we needed a larger vehicle than we need now. With 2 kids at home, one of our vehicles is fine for both of them but the other car is not very comfortable for 2 in the back seat. OK in a pinch but not really comfortable.

3 kids fit in the back of our 15 year old civic and accord just fine. The accord is what we take on road trips due to being even more comfortable. Eventually we might upgrade cars (to a slightly more expensive minivan of mid size SUV) since road trips will be the main usage of our cars and hauling even more cargo could be handy. But there's always roof racks that don't add much cost.

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Certainly there are many easily direct costs of children. Health insurance is more because we have kids on the policy.

Depending on where you fall on the ACA income scale, kids might actually save you money. Household size and AGI determine your income, and more kids = larger household and bigger subsidies. At lower enough AGI levels you get free State Child's Health insurance (like medicaid plus I guess).

Maybe we're lucky or good at preventing injury, but we average under one sick visit per year, no ER and no broken bones (yet).

Let's not talk about what we might be spending on braces though...

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Vacations cost more.

Sometimes. But you might also save money. Our youngest is 3 and that means we aren't going to spend a month trekking across Europe or hiking the Incan trails to Machu Picchu. A relatively short road trip and renting a house or apartment for a week is probably all we want to do with the little guy.

We take cruises, and the kids obviously add to that (around double). But due to them being in school a lot, we travel less than we otherwise would.

Quote:

People often don't think about their auto fuel bill as being a child related cost. Yet, it is. Lots of our driving is and has been related to kids. You don't think of that as a child related cost, but it is a big one. And, you put more wear and tear on your car. A part of every repair and oil change should be attributed to the fact you have children.

We find as we spend more time doing kid-related stuff, we spend less time driving or spending on our own entertainment. If I'm out till 9 pm for kids' skating night, I'm not meeting friends for drinks, going out to eat, or catching a movie. Sure, we might drive and that cost is kid related (we actually don't drive much due to school in neigborhood and many attractions are walkable or within a couple miles, but most do drive), but it's supplanting spending elsewhere.

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Furniture - Again, people often don't think of furniture bought for a kid's room as a kid-related expense. Or new sheets, or towels. They think of them as a household item. They are. But, you wouldn't need them without the child. The child's share of home consumables (toilet paper, soap, toothpaste, etc.)

Ok as to toothpaste, shampoo, toilet paper etc. My kids go through that stuff like crazy (they make "potions" out of the shampoo/conditioner. )

But you can probably get by on the cheap for furniture. Craigslist. Sheets and towels - hand me downs, thrift store, gifts for b-day from the grandparents that don't know what else to get them, etc. Sure you can go pottery barn Williams sonoma ethan allen for furniture and linens or you can get it all for free or cheap.

Just my own personal experience as the owner of 3 children. You can spend whatever you want on raising kids. $400 per month is probably fine. $1000 is probably fine.

[pb4uski]

While your current net worth is $1.5, it will be $1.3 after you buy the house... and candidly, $200k isn't going to buy you much of a house in MSP.

You probably need to think through how you will access your 401k monies and avoid the 10% penalty, but that can probably be done with a 72t.

Since you'll be buying an older home figure on a couple hundred a month in maintenance (things break) and then you have major repairs to consider (periodic roof replacements, furnace replacements, appliance replacements, etc) on top of that. Ditto with the car, you'll likely have substantial repair costs with a 10 year old car and will need to replace cars occasionally so you need to factor those cost into your budget.

While healthsherpa.com suggests that your $300/month cost for health insurance is doable you need to include OOP costs in your budget and that might be $3-6k a year or more. Also, health insurance inflation will likely be higher than the general rate of inflation... ditto with OOP costs.

While you have done extremely well, you still have a way to go to fully retire but stay the course. It might be feasible to move to MSP sooner and downshift if you and DH each had part-time jobs, especially if they were close by or if you could work mostly from home.

Quote:

Originally Posted by BumblingtoFI ....For now it seems sensible to keep working/accumulating, settle in with the new baby, and keep working on the ER plan. ...

That makes a lot of sense to me... and be sure to take time to enjoy that new baby.

[Katsmeow]

Fuego

I think the difference here is that you are largely talking about where you are now with 3 small kids. So, for you, to say there is no difference in cooling/heating cost whether there are kids or not or to say that electricity costs are the same is based upon your projection of what you think would happen.

In my case, my youngest is 18 and she is the only one full-time at home. I've actually seen in our utility bills how the usage has gone down as kids have left full-time residence at home. I know they use siginificant amounts of fuel because I see the change in fuel usage when they leave.

I know they eat a lot because I see how the food bill changes when they leave. I know how having a teenager on our auto insurance policy costs multiple thousands of dollars a year more, because I've paid it.

And, I'm sure your Honda Civic is fine with 3 small children in the back. Come back and talk to me when they are 3 teenagers. Is it possible? Sure. But we did a lot of road vacations with our kids going in a car of that size with 5 people teenage and up would have been painful (and we wouldn't have much luggage).

My kids didn't have furniture from the places you mentioned. We went to budget stores...but it wasn't free. My point is not that people can't try to economize (which they can) but that this is an expense that people don't usually consider in thinking about the expenses of kids.

As for health - the point is that you don't know what will happen. Even the healthiest of kids can have serious issues. Sometimes a kid needs an expensive medication (one of mine does). In the last 30 days, my daughter incurred medical bills in excess of $20k. Her share of it won't be that since there will be discounts and such which reducing the ultimate out of pocket cost. But, once processed we will have blown right through the in network out of pocket limit. Stuff happens. It is easy to think that kids will never have a health issue, but life doesn't work that way.

[daylatedollarshort]

Quote:

Originally Posted by Katsmeow Fuego I think the difference here is that you are largely talking about where you are now with 3 small kids. So, for you, to say there is no difference in cooling/heating cost whether there are kids or not or to say that electricity costs are the same is based upon your projection of what you think would happen. In my case, my youngest is 18 and she is the only one full-time at home. I've actually seen in our utility bills how the usage has gone down as kids have left full-time residence at home. I know they use siginificant amounts of fuel because I see the change in fuel usage when they leave. I know they eat a lot because I see how the food bill changes when they leave. I know how having a teenager on our auto insurance policy costs multiple thousands of dollars a year more, because I've paid it.

+1. This has all been our experience, too. Our costs have increased dramatically as they have gotten older. Even at community college, one text book for one class for one kid might be $200.

[someguy]

As teenagers my sibling and I (both very active in sports, including competitive ones) ate a ton of calories 7 days a week. I remember grocery bills over $400 (in today's dollars) per trip, with 2-3 carts full of food. Our mom was a very thrifty person and we didn't eat very fancy or particularly healthy back then.

[sheehs1]

Quote:

Originally Posted by Katsmeow Fuego I think the difference here is that you are largely talking about where you are now with 3 small kids. So, for you, to say there is no difference in cooling/heating cost whether there are kids or not or to say that electricity costs are the same is based upon your projection of what you think would happen. In my case, my youngest is 18 and she is the only one full-time at home. I've actually seen in our utility bills how the usage has gone down as kids have left full-time residence at home. I know they use siginificant amounts of fuel because I see the change in fuel usage when they leave. I know they eat a lot because I see how the food bill changes when they leave. I know how having a teenager on our auto insurance policy costs multiple thousands of dollars a year more, because I've paid it. And, I'm sure your Honda Civic is fine with 3 small children in the back. Come back and talk to me when they are 3 teenagers. Is it possible? Sure. But we did a lot of road vacations with our kids going in a car of that size with 5 people teenage and up would have been painful (and we wouldn't have much luggage). My kids didn't have furniture from the places you mentioned. We went to budget stores...but it wasn't free. My point is not that people can't try to economize (which they can) but that this is an expense that people don't usually consider in thinking about the expenses of kids. As for health - the point is that you don't know what will happen. Even the healthiest of kids can have serious issues. Sometimes a kid needs an expensive medication (one of mine does). In the last 30 days, my daughter incurred medical bills in excess of $20k. Her share of it won't be that since there will be discounts and such which reducing the ultimate out of pocket cost. But, once processed we will have blown right through the in network out of pocket limit. Stuff happens. It is easy to think that kids will never have a health issue, but life doesn't work that way.

+1 I have to agree with Katmeows assessment. I had no idea starting out just how expensive kids can be. I also have seen some fairly significant reductions in heating, cooling, water costs as mine left the house and became "independent, not to mention gas usage for cars, being on my homeowners with car insurances, being on my health care, activities with their friends dental and orthodontic and vision, allergy shots, ALL of the birthday parties starting around PreK4 and continuing thru, activity cost at a YMCA and then high school, etc. Until they are a bit older one may not know what sorts of things their children will need.
I felt like I got a huge raise when they became financially responsible for themselves!!

[FUEGO]

Any insight on what's driving the heating and cooling cost reductions when kids leave the house? "Close the damn door!" is standard practice at your houses, right?

Hey, maybe I'm in line for a nice fat cost under run on the heating/cooling budget line item once the kids start leaving the house in another 8 years...

The other important thing to keep in mind is that it's only a 18-22 year cost duration and not "forever" like other living expenses a 30-something retiree must budget for. And as for the much higher costs some say you experience once the kids enter the teen years, that's only 5 years (age 13-18) plus whatever you provide during college. I don't say that to minimize the reality of the burden, but rather to put it in the right context.

It's almost better to budget the $400/mo like OP suggests, then add in a big fat lump sum to cover "high costs during teen years" and "college assistance" to the extent that is also in your plans.

Let's say high cost teen years add $10k/yr for 5 years (braces one year, some crazy med expense 1 year, new-ish car 1 year, insurance 2 years, plus misc stuff). All the OP needs to set aside is $25k if retiring around when the kid is born. Let that $ sit for 13 years at 5% real returns and you have the $50k at age 13. $25k represents 2% of the OP's current investment portfolio (minus the $200k house purchase). Not a big deal, but a slight bit more than rounding error.

Our oldest is entering the double digits in under one month (which is hard to believe). We have yet to see any huge costs related to kids. Right now the oldest two are at a friend's house playing Rock Band. I spent $0.20 on gas to pick up another friend of theirs and drop them all off. I'll probably walk to retrieve them assuming sidewalks are ice-free by then. I'll spend another $0.30 on gas later tonight to drop them off at grandma's house.

[Walt34]

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Originally Posted by FUEGO Any insight on what's driving the heating and cooling cost reductions when kids leave the house? "Close the damn door!" is standard practice at your houses, right?

It was at our house but I still remember Dad complaining loudly about a $30 gas bill. At the time (~1967) the only gas appliance we had was a water heater. The way he acted you'd have thought we were letting the hot water run all day. Well, with three teenagers we probably just about did.

And I remember both parents being astonished at the size of a Jerry's 24" packed sub sandwich I brought home from a local shop for lunch, I ate all of it, and was hungry by dinnertime. This was from the original shop, not the cheap little franchise ones they make now.

I have little doubt that as we moved out the grocery bill grew considerably lighter.

[Bestwifeever]

Moneysaving tip for raising children: guide them into a sport in a facility that has showers. The water and energy to heat same savings are enormous.

[FUEGO]

I took a look at my water bill. $56/month variable usage costs (the rest is fixed price for a water/sewer connection, trash, recycling, watershed impact and stormwater runoff).

Natural gas for hot water is $15/month.

Heating and cooling run a combined $1000/yr (plus another $800 or so including usage and the fixed connection fees).

That's with 3 kids, washing tons of clothes, cooking 98% of the time at home and running the dishwasher all the time.

Splitting up the variable utility costs five ways, each kid uses about $28/month. I'm still having a hard time getting from $400/month per kid to $1000.

Of course, "Close the damn door!" and "Did you secretly buy a few shares in the power company?" are occasional refrains at my house.

So many of our expenses are fixed costs. Cars, houses, etc. have huge fixed costs and much smaller variable costs.

[Walt34]

Quote:

Originally Posted by FUEGO ..."Did you secretly buy a few shares in the power company?" are occasional refrains at my house.

In our case it was true- Dad worked for the power company! That still didn't placate him. Some people are just impossible to please.

[Unpaintedhuffhines]

At the risk of just plain piling on, completely agree that kids are just plain expensive. I didn't add it up, but wouldn't surprise me at all if it added up to $250K (worth every penny, even if that is what it cost).

Clothes, activities, an old used car for when they turn 16, CAR INSURANCE, kid gets in a wreck because they are 16 and that's what they do, food, going out to eat, vacations, school related expenses, stuff you could never have though of, etc. I even remember when they got out of diapers thinking "holy crap, I just got a pay increase." If your son or daughter wants to play select sports, it's not just the dues, it's uniforms, traveling to play tournaments, etc. Yeah, you can certainly tell them "no," but it's not easy when they are excelling at a sport and want to step to the next level.

So, for us, there are probably a few months where it only cost $250, but I'd bet those were the rare exception.

[Katsmeow]

Quote:

Originally Posted by FUEGO Any insight on what's driving the heating and cooling cost reductions when kids leave the house? "Close the damn door!" is standard practice at your houses, right?

We have indoor cats, so certainly. Actually, I don't think it is one thing. Certainly my son's room doesn't have its light turned on very often since he is at college. But, it is more than that. The washing machine/dryer are used less often. The dishwasher is used less often. The refrigerator door is opened less often. His computer isn't plugged in. He isn't playing video games and so on. Kids do things like laundry, run the microwave, watch TV, play video games, use the computer and they do more of it as they get older.

In our case, part of it is that we were able to actually move to a smaller house after our oldest departed. So there was a huge reduction because we moved to a house that was a third smaller the first house. The new house was also newer and more energy efficient.

In your case, you may not get as much of a reduction as we did since it sounds like you don't like in an area with high AC usage and high heat. I'm in Texas and cooling costs are significant in any event.

Quote:

The other important thing to keep in mind is that it's only a 18-22 year cost duration and not "forever" like other living expenses a 30-something retiree must budget for. And as for the much higher costs some say you experience once the kids enter the teen years, that's only 5 years (age 13-18) plus whatever you provide during college. I don't say that to minimize the reality of the burden, but rather to put it in the right context.

This is true, but I think not relevant to the OP's question which was dealing with the cost of raising a child and thinking it would only add $4800 a year. I agree it is not a forever cost -- indeed DH retiring when he did and me semi-retiring was based upon this being a time limited cost.

That said, while costs were certainly be higher during say the 12-18 years (plus college if you pay for those), that doesn't exclude the possibility of costs being higher at a younger age.

We had numerous things that came up before that age (there were not frivolous things, they were true needs). Not every year, but not predictable either.

Quote:

It's almost better to budget the $400/mo like OP suggests, then add in a big fat lump sum to cover "high costs during teen years" and "college assistance" to the extent that is also in your plans. Let's say high cost teen years add $10k/yr for 5 years (braces one year, some crazy med expense 1 year, new-ish car 1 year, insurance 2 years, plus misc stuff). All the OP needs to set aside is $25k if retiring around when the kid is born. Let that $ sit for 13 years at 5% real returns and you have the $50k at age 13. $25k represents 2% of the OP's current investment portfolio (minus the $200k house purchase). Not a big deal, but a slight bit more than rounding error.

The problem with the $400 a month is that the OP is basically saying that is the incremental cost per month in having a child over having no child at all. I don't think that is likely to be true. For direct costs, perhaps, but as mentioned there are lots of other costs people just don't include because they don't see them as child related costs (food, utilities, stuff for the house, gasoline, etc.).

So, I think $400 a month is way too low because it requires a degree of optimism that seems unlikely to be fulfilled.

If you think right now that $50k would be needed ($10k a year) for the adolescent years based upon today's costs, then you have to set aside $50k for it now. You can't set aside $25k because while it might grow to $50k in the time period, the $50k in expenses would also likely go up.

Not to mention, of course, that $50k for the period in question could be laughably low. For example, just auto insurance adds thousands in cost for us. And, since we are supporting our son during college, that extra isn't just for a year or two.

Quote:

Our oldest is entering the double digits in under one month (which is hard to believe). We have yet to see any huge costs related to kids.

I really do, I get that. The point is mostly that I think you are (1) looking at the costs you can see and not how having kids increases your overhead and (2) not considering some of the larger costs as they get older. Hand me down clothes are fine for small children. Someone in high school is going to need more.

I know you mentioned in an earlier post that if you weren't doing X with the kids then maybe you would spend more on other things because you would be traveling. That is, of course, entirely possible. The difference is that most of the things you mentioned would have been discretionary expenses. Most of the expenses associated with kids aren't discretionary at all. Some are of course. But basically kids are a commitment. If the market is down and you want to spend less in a year it is easy to not go on that $5000 vacation. On the other hand, you can't just decide not to pay for your child's medical needs.

[Fred123]

Quote:

Originally Posted by FUEGO Any insight on what's driving the heating and cooling cost reductions when kids leave the house? "Close the damn door!" is standard practice at your houses, right? Hey, maybe I'm in line for a nice fat cost under run on the heating/cooling budget line item once the kids start leaving the house in another 8 years... The other important thing to keep in mind is that it's only a 18-22 year cost duration and not "forever" like other living expenses a 30-something retiree must budget for. And as for the much higher costs some say you experience once the kids enter the teen years, that's only 5 years (age 13-18) plus whatever you provide during college. I don't say that to minimize the reality of the burden, but rather to put it in the right context. It's almost better to budget the $400/mo like OP suggests, then add in a big fat lump sum to cover "high costs during teen years" and "college assistance" to the extent that is also in your plans. Let's say high cost teen years add $10k/yr for 5 years (braces one year, some crazy med expense 1 year, new-ish car 1 year, insurance 2 years, plus misc stuff). All the OP needs to set aside is $25k if retiring around when the kid is born. Let that $ sit for 13 years at 5% real returns and you have the $50k at age 13. $25k represents 2% of the OP's current investment portfolio (minus the $200k house purchase). Not a big deal, but a slight bit more than rounding error. Our oldest is entering the double digits in under one month (which is hard to believe). We have yet to see any huge costs related to kids. Right now the oldest two are at a friend's house playing Rock Band. I spent $0.20 on gas to pick up another friend of theirs and drop them all off. I'll probably walk to retrieve them assuming sidewalks are ice-free by then. I'll spend another $0.30 on gas later tonight to drop them off at grandma's house.

I've always found that it's helpful, when debating a study, to read the actual study. It's interesting. The quick summary is that, even for low income families, $400/month/child is a fantasy. The minimum cost is about twice that.

[jim584672]

Some concerns about the OP:
No pension
Not a lot of years in Social Security
Lots of years ahead of you
Possible ACA repeal or reduction, something to consider

I would not feel comfortable pulling the trigger in your situation.

[haha]

Quote:

Originally Posted by Bestwifeever Moneysaving tip for raising children: guide them into a sport in a facility that has showers. The water and energy to heat same savings are enormous.

Teenage boys are not taking those long showers to get clean.

Ha