How much do children cost?

[Olav23]

I'm just wondering, is there any rule of thumb to estimate how much a child will cost, as a portion of your income?

I know there are general rules like, rent/mortgage should remain less than 1/3 of your gross income, but is there any such thoughts on costs of children?

I have diligently saved for about 10 years now, and am starting to get that "baby fever" at age 32 (wife is 30). Without children, i estimate I can retire by 50. But I have no idea how it affects the budget to have 1 or 2 children.

I realize this can stretch from having a child in public school, state college, cheaper after school activities like public sports, etc, all the way to private schools and ivy league college educations, but I assume there is probably an average somewhere.

If it is up to me, it is public school and state college (unless they can work through college like I did, or get loans to upgrade the college experience). But, it is very hard to estimate a budget when you have this big variable expense in the near future.

I guess I just wanna estimate when I can ER, with or without kiddies

 

[CyclingInvestor]

A healthy child 1-3 years old will set you back $20K-$40K. Up until last year
you could get 100% financing, but now you need to put at least 20% down.

Sub-prime children are $5K-$10K, but the resale market for these has dried
up, so make sure to return them in the 3 day "no-questions" window if you
change your mind. Financing for sub-primes has also dried up, so make
sure to get a firm commitment before making an offer.

 

[skyline]

I'm just wondering, is there any rule of thumb to estimate how much a child will cost, as a portion of your income?

Olav - I've been soul-searching around this very question (as it strongly impacts my FIRE decision), and have so far figured out that there are way too many variables for anyone to answer this other than yourself.

Ask yourself - will your kid(s) have the latest cell phones, game consoles, wear designer clothes, and drive BMWs to school with $40K violins in the truck? Or will they be LBYM along with mom and dad? I think you could easily get by on less than $5K/year, with sky's the limit on the other end of the curve. Some folks (like a few of my coworkers) see their children's spending power as an extension of their own social standing, and those people will probably never FIRE.

What I've decided is that kids make as much or as little financial impact as you can afford (I've realized that there's LOTS of room for adjustment), so set aside what you think you're comfortable with, and between you tightening your belt and your kids doing the same, you should be fine. Of course, that's the same YMMV cop-out answer everyone else gave me when I asked, so hopefully this helps: For me, I've decided to budget about $12K/year total for 1 or 2 kids with public schooling, excluding public college (which I'm assuming will cost $40K/year in today's dollar equivalent per kid.)

I live in a pretty darn high cost part of the country in case that helps...

 

[macdaddy]

It will set you back at least a few years... kids are expensive.

 

[brewer12345]

No question, kids are expensive. But if you have to ask...

 

[Tracy42]

I estimate about 20% of our retirement budget will be allocated to expenses solely associated with our 1 child (8 yr old). This includes private elementary school through high school. Without that, it would be more like 10%. Tracy

 

[LOL!]

I disagree with the above. If you have reasonable health insurance, kids can be inexpensive. I've got 2 of them. They will not stop us from retiring by age 50. Our kids were born while we were in our late 30s. With hand-me-down clothes, books, toys and public schools, they cost very little. Sure there was day care, but that was at most $600 a month. Our public schools are outstanding, so costs did not rise when they started going to school. Our oldest in 15 ... she can make her own money now.

So kids are only as expensive as you let them be. They could cost virtually nothing or they could cost a fortune. Generally, media reports on their cost are exaggerated.

 

[crazy connie]

The figures are there so do the math.

Health care
Food
Education
Housing
Entertainment
Care for working parents

All have wide swings depending on the choices. LBYM and you can survive.

 

[Moemg]

Kids are expensive but worth every penney .

 

[W2R]

I asked friends about this before we had our daughter, 30 years ago. They told me, "you spend what you want to spend". That seemed to be accurate for us.

Of course, that doesn't mean we didn't decide to spend a ridiculous amount once we were better off! But with second hand stores, and the generous hand-me-downs from other mothers, a child doesn't have to cost a lot if you can't afford a lot. They hardly eat anything.

 

[runchman]

How better to spend your money than a trip to dairy queen on the bike path with the 2 kiddos? 9 bucks for 2 blizzards and a shake for dad.

When they are grown and out of the house I will really, really miss having my 2 little 'expenses' to pal around with.

- John

 

[justin]

If you have reasonable health insurance, kids can be inexpensive. I've got 2 of them. They will not stop us from retiring by age 50. Our kids were born while we were in our late 30s. With hand-me-down clothes, books, toys and public schools, they cost very little. Sure there was day care, but that was at most $600 a month. Our public schools are outstanding, so costs did not rise when they started going to school. Our oldest in 15 ... she can make her own money now.

So kids are only as expensive as you let them be. They could cost virtually nothing or they could cost a fortune. Generally, media reports on their cost are exaggerated.

I agree with LOL here. I've got two very young children, but I haven't found them to be that expensive. Childcare will probably be your biggest expense the first 5 years. We have Grandma take care of the kids and give her $300/month for her troubles. Insurance (if you're paying it yourself) can be a big unknown. If they are healthy, it won't be that much. If you're working, it may be almost free (as in our case). For food/diapers/clothes/miscellaneous, we estimate somewhere around $150 per month per kid for expenses (lots of hand-me-downs included in that).

If you can take advantage of public schools and public universities, your education expenses should be minimal.

Housing - with a couple of kids, you'll need at least an extra bedroom or two. No more 1 BR apartments. We already had a 4 BR house (knowing when we bought it kids were just over the horizon).

Cars - a larger car might add a little incremental cost to auto expenses.

Don't forget all the money you'll save though. Tax credits and deductions are plentiful (although they take a big hit in 2011!). These offset a large part of kid expenses in our experience.

Your other expenses will change and might decrease. At least in the early years, your vacations will probably be cheap, 1-2 day trips to local attractions. The zoo, the science museum, the airport to watch planes, etc. Lunch for 4 at the local Mcdonald's or pizza/chinese buffet is the same price as lunch for 2 at a more upscale restaurant. Instead of spending $25k for a new mid-sized sedan, you might be spending the same on a minivan or SUV.

Honestly, some of the best experiences are cheap or free w/ kids.

 

[brewer12345]

Honestly, some of the best experiences are cheap or free w/ kids.

Indeed. We have a lot of weekend outings to one of the many local parks. A recent favorite was a free admission folk festival put on every year by a local university.

 

[justin]

Indeed. We have a lot of weekend outings to one of the many local parks. A recent favorite was a free admission folk festival put on every year by a local university.

Definitely. When you have young kids (I think yours and mine are about 1 yr apart), the cheap/free things are just as much fun as a trip to Disney. Some parents must not realize this though. Things probably start to change at some point, but the first 4-5 years, you really don't have to go all out on expensive outings/vacations because the kid could care less whether they are chasing butterflies in the backyard or hugging some guy in a mickey mouse suit.

Definitely a lot of "diminishing marginal returns" on kid expenses, at least in the early years from my experience.

 

[LOL!]

.... we estimate somewhere around $150 per month per kid for expenses (lots of hand-me-downs included in that).

To put this into perspective, I know many folks who pay more than $150 a month for cable and gym membership.

 

[lazygood4nothinbum]

my brother just inherited pretty much the same as me plus he's got the family engineering biz with which he makes lots of money. but i only have to pay for a convertible while he has three kids who all want college and cars. i'm done working. he'll be working until he's dead.

kids are even more expensive when you have more money. my brother and i were not as expensive for my parents as his kids are for him. my parents had us in their early 20s before they had so much money to spend on us. whereas my 53-year-old brother's youngest is 10 now. so my brother gets to spend his peak earning years on his kids. relatively, my parents got off light.

 

[fazerman]

I understand your concern about changing your FIRE date. If you are concerned more about FIRE, I would say, maybe children are not your desire. For me, I have 3 kids who are 8, 5, & new born (4/19/07). I love kids and they are worth any cost.

That being said, here is the real monthly cost of our very healthy children(I'm a bargain shopper too):
Baby--> formula/diapers/Dr visits/cloths --> $150-200
Infant (2-4 yrs) --> more food/Dr visits/cloths --> $50-$75
Toddler (5-8 yrs) --> even more food/Dr visits/cloths/sports activities/added car expenses for all the driving --> $75-100

Add to these costs the fact that my wife no longer works (by our choice) but that subtracts a substantial amount of income potential. If your wife plans to continue working, add anywhere from $150-200/ month per kid for child care. Another factor, you probably will not want to be working 60+ hour weeks, the whole idea of having children is to enjoy being with them as they grow up.

That's just my best guess. We do not have college savings and plan to help with college only if we have the means at that time. We do not buy lavish gifts for our kids, we are not afraid of 2nd hand clothing, we do public schools, & stay home wife.

Bottom line: Having kids adds some expenses, the amount is up to the parents and your will power to resist buying them something every time you see their cute loving smiles that melt your heart. Children are worth it to me, even if I have to work a few more years to FIRE.

Just my 2 cents <--see, bargain shopper spends only 2 cents.....

 

[Sandy]

Hard to predict their costs. Assuming kids are heathly, you can clothe them and entertain them fairly inexpensively, food is not much different when young, but increases as they age, and is off the charts as teens, especially if they are athletic. Quality child care, if you can find it, is pricy. As they get older, child care costs decrease, but costs for organized events increases - any organized activity (not needed for the little ones, even it offered) from cub scouts to city league sports, to faith-based events, school trips etc, all nickel and dime you to death. Some are pricey. You kid wants to be in the band? chess club? track and field? You name it - there are basic participation fees, equipment rental fees, trip fees, national membership dues, etc.

I have mentioned this before, there are indirect costs, especially if you have more than 1 child: size of house, size of car, location of house (school zone).

And your time is no longer your own. Your priorities and activities change.

But, I would not trade the experience of having them for anything. Having twins, I got the bonus package, and they add an immeasureable amount of love, awe, fun, exhaustion, and yes, expense to my life. Worth every penny.

 

[justin]

If your wife plans to continue working, add anywhere from $150-200/ month per kid for child care.

Is that per week or per month? Prices in my area are about 4x that much (and I'm not in a high cost of living area!).

 

[slepyhed]

I've got a 5-year old. One thing I've noticed is that you have to be ever-vigilant about "needs" vs "wants".

I'm not just talking about clothes and toys, those are obvious. I'm talking about "needing" a new minivan instead of holding onto the old compact car until its worn out. You might feel you "need" a bigger house with more bathrooms. Some people I know "need" to send their kids to the most expensive private schools.

 

[Sue J]

Yes, they are expensive, but like many things in life your costs will vary by the choices you make along the way.

We have 2 sons and when we started the adventure in 1984 we decided that I would stay home and we would live on my husband's income. So we had no child care expenses. Being a 1 income family changes your perspective on a lot of things when you make decisions about needs vs. wants. Many times we made choices based on "good enough" rather than the newest, most expensive or what everyone else was doing or buying.

Major compromises were family vacations, the vehicles we drove and home improvements. We would make a trip to see (and stay with) family while others took major expensive vacations. We drove cars until they weren't worth fixing and replaced with newer, but used, cars. We never felt the need to go for a minivan or SUV. We haven't had new furniture or redecorated since the 80's. We did home repairs when needed and made things last.

The process of raising children goes through stages. At first there are pregnancy/newborn expenses. Maternity clothes, crib, car seat, high chair, etc. Many of us get these as gifts or hand me downs or loans from friends. Kids grow fast so you go through a lot of clothes and shoes. My sister had 2 boys and then I had 2 boys and a sister-in-law had 2 boys so we passed around a lot of good stuff. As for baby food, we ground up whatever we were eating and also added things like strained fruits and baby cereals. I was the rare mom who used cloth diapers instead of disposable.

Both kids went to pre-school 2 mornings a week at ages 3 or 4. In our area this was not expensive and it's certainly not necessary. Clothes get more expensive as they get older, we still had a lot of hand me downs from the cousins. As they get older and into sports and activities we had a nice used sporting goods store (www.playitagainsports.com). Many kids try all kinds of sports and there is a lot of gently used equipment around. The same goes for bikes and scooters and skateboards.

The next large expense was orthodontia at about 10-13. In our area this was $3500-$4000 and we paid about $125 monthly. Also around this age is music lessons and instruments. Depending on what they play and how well they do your costs can get high. Just like sports, many kids try an instrument and don't stick with it, so the used market can be large. For us, drum lessons were $10-$13 a week.

Next is driving and car expenses. A 16 to 18 year old added to your policy can run close to $100 a month. Some families feel the need to buy the kid a car, we certainly didn't! But when we bought a replacement car the old one got passed on to the teenager. We paid the car insurance if they were just added as a driver. When it comes to having a 3rd car and the kid using it for work, then he paid for the car insurance.

College expenses...... This is a whole other world! One of our sons went to a state university for 4 years and always lived in the dorm and had the food plan. Our state supports it's state college less than some others. When he started in 2002 it was about $13,000 a year and increased to about $16,000 a year by the fourth year. That included the room and board but not books and transportation, etc. Also, he got $2000 a year as a merit based scholarship from the school which helped. The other son goes to a state university that is close enough to commute to so his costs are more like $8600 - $9000 a year. You can save a lot on books at half.com. Our expenses with kids at state colleges is a lot smaller than families who have kids in private colleges. Again, it's about your choices.

So, yes, having kids will have an impact on your finances. To us, it was something we wanted to do. Without them we could have had lots of good stuff and much better vacations and a much better retirement plan. But we don't regret any of this. It was a good decision for us.

 

[Sue J]

Sorry, double post.

 

[free4now]

Here's an article that gives some hard figures:

http://business.mainetoday.com/financialsense/001736.html

Looks like with college it could easily cost 300k-500k to raise a kid in today's dollars.

I'm recently FIRE'd at in my mid-30's, and deciding whether I want to have kids, because it's clear I couldn't afford them without going back to work on my 1.2m nest egg in the SF Bay Area.

I feel fine about scrimping myself to afford FIRE, but enforcing scrimping on my kid so I can FIRE seems a bit selfish. I grew up in a relatively poor family where my peers always had more of the toys and access to experiences that I wanted. I survived the experience well, but it was hard on me in a way that I'm only now discovering now that I'm FIRE and have the resources to really do what I want to do.

 

[justin]

Here's an article that gives some hard figures:

http://business.mainetoday.com/financialsense/001736.html

Looks like with college it could easily cost 300k-500k to raise a kid in today's dollars.

I read the article a different way. It says that those earning $41,700 or less will spend $134,370 to raise one kid. This is the spending level that I'm at. Add in 4 years at a state university (even paying all the expenses), and I'm barely at $200k. Probably ballpark accurate.

Add to that the fact that these are the gross total of all expenses, not a present value of those expenses. Even though I know I may need $60,000 to cover four years at a state school, that expense won't arrive for 17 years after the kid is born. I could set aside $30800 today and have $60,000 in 17 years at a 4% real rate of return.

And these expenses the article cites are for typical families that spend 101.3% of everything they make. Not exactly the LBYM types, on average.

 

[free4now]

Add to that the fact that these are the gross total of all expenses, not a present value of those expenses. Even though I know I may need $60,000 to cover four years at a state school, that expense won't arrive for 17 years after the kid is born. I could set aside $30800 today and have $60,000 in 17 years at a 4% real rate of return.

I think it's way optimistic to think you can get 4 years of full schooling for $60k 17 years from now. 15k a year is well below the poverty line just for living expenses... I wouldn't want to be the kid who has to live on Ramen noodles.