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How Expensive Are Kids?
Old 03-04-2009, 03:01 PM   #1
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How Expensive Are Kids?

I have been fiddling around with projecting "empty nest" expenses. DW and I still have about 10 years before the last kid is out of the house (We hope anyway ).

I have seen some wide variation in numbers for what is costs to raise a kid from birth until 18, ranging from $250,000 to $500,000 (not sure I believe the latter number).

I can attribute about 15% of our current budget numbers which are directly impacted by our children (college savings, car insurance, education expenses, etc.) What I can't quite get a handle on is all the peripheral/misc. expenses, such as groceries, utilities, entertainment, etc.

So my question is; for you empty nesters...how much did the kid(s) leaving affect your budget/expenses?
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Old 03-04-2009, 03:13 PM   #2
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Many of the "costs to raise a child" estimates include the spouses lost wages and an education at an Ivy League university. That's where the inflated numbers come in.

If however your kid has low aspirations and only eats a can of pork and beans once in awhile they don't cost much at all. In fact if you send the kid out to beg for money every day, they could actually decrease your expenses.

So based on that I would suggest that you know more than anyone what your kid costs.
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Old 03-04-2009, 03:15 PM   #3
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Very expensive. My advice: don't have any kids, just grandkids, they're much cheaper.

When we had kids, I can't say they affected our budget or expenses, since they were woven in so tightly that we couldn't visualize a budget without them. It was only after they left that we realized that gee, we have some discretionary income.

If I had to guess, the total cost for all three of our kids was much less than 500k, since we had nowhere near that figure to spend. I don't know, maybe 30-40% of our income went for kids? We didn't have much income at first, so initial yearly expenses weren't much, but over nearly 20 years, we may have spent 300-400k. We kept that lower by telling them they could attend any college they wanted, but we would only pay the equivalent of in-state tuition. They had to attend college in state or provide the difference (which they ended up doing).
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Old 03-04-2009, 03:30 PM   #4
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Originally Posted by tgotch View Post
So my question is; for you empty nesters...how much did the kid(s) leaving affect your budget/expenses?
I can't really quantify it, but with no kids we noticed decreases in:

food - also with no kids to feed, no kid's friends to feed
Nat-gas - thermostat lower, fewer ins and outs, less hot water usage
gas - if they don't live here, they don't borrow cars
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Old 03-04-2009, 04:57 PM   #5
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DW and I retired at 58. Without having raised a family, we could have easily retired on our wedding day at 22 and lived like royalty for the rest of our lives. Now we spend what little discretionary $$$ we have left (thanks to this crappy market!) on a fund for a special needs grandchild and college funds for the rest of the grandkids. We've never once had an issue of not knowing how to dispose of excess funds!

Of course, that's our favorite way of spending our money!

tgotch - child expense is so variable, you're going to have to go back and do some estimates based on your own lifestyle, etc.
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Old 03-04-2009, 05:14 PM   #6
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Approximately 40% of my expenses are directly kid-related, but I am a divorced father of three so I believe my situation would not very well represent a married couple's expenses. If I were to include indirect expenses (such as owning a larger house than I otherwise would), the percentage is probably close to 50%.

That percentage excludes saving for their college, which doesn't show up in Quicken as an expense now. In 2021 and 2022 when my two youngest might be in college together at the same time, kid expenses will be approximately 75% of my total expenditures.

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Old 03-04-2009, 06:01 PM   #7
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Originally Posted by tgotch View Post
I have been fiddling around with projecting "empty nest" expenses. DW and I still have about 10 years before the last kid is out of the house (We hope anyway ).

I have seen some wide variation in numbers for what is costs to raise a kid from birth until 18, ranging from $250,000 to $500,000 (not sure I believe the latter number).

I can attribute about 15% of our current budget numbers which are directly impacted by our children (college savings, car insurance, education expenses, etc.) What I can't quite get a handle on is all the peripheral/misc. expenses, such as groceries, utilities, entertainment, etc.

So my question is; for you empty nesters...how much did the kid(s) leaving affect your budget/expenses?
The lessening of any financial drain caused by my daughter leaving home was much more gradual than you might think. It's not like one day, the outgo was huge and the next day, she was moved out and it was gone. When she first left home to attend college we paid a certain amount for her expenses but required her to work part time and pay part as well, since we felt that would be a valuable experience for her. As she got older she was able to handle more and more of her own expenses. Your children will always be your children and you will probably always spend something on them.
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Old 03-05-2009, 07:59 AM   #8
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Again, I am back to Kotlikoff's and Burns' book (Spend 'til The End). Chapter 28, Pricing Procreation, is a good primer for your question. It is only four pages long but packed with the mathematics involved.

They determine that the Value (or Cost, if you will) of Procreation is:

.............Living Standard Per Person

Annual Earnings... No Children... 1 child... 2 children... 3 children

$20,000................$6,571........$8,264.....$7 ,692.........$7.218

$50,000................$12,514.....$11,155....$11, 174.......$10,665

$200,000...............$28,291.....$26,101....$24, 282.......$22,779

Their conclusion is that Procreation can pay and even when children come at the cost of your living standard, that cost can be surprisingly low.
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Old 03-05-2009, 09:55 PM   #9
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Thanks for the feedback everyone.

RonBoyd, thanks for the link. I decided to buy this book from Amazon used for $5.50, looks like good info.
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Old 03-06-2009, 09:01 AM   #10
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Thanks for the feedback everyone.

RonBoyd, thanks for the link. I decided to buy this book from Amazon used for $5.50, looks like good info.
With a 2 income family, where people live above their means unnecessarily, you have to save for college (useless when you have community colleges and local places), you have to keep the bas---ds busy, soccor, violin lessons, all sorts of crap (another guilt trip), you have to have a 5 brm house (put em all in one bed and tell em to shut the f--k up).

You don't need a book to understand this. Kids don't know they are poor, and this is the reason we are in hock up to our eyeballs today, we gave them everything and bankrupted ourselves.

My wife did not work when we had our son, she believed it was her duty to raise him, to feed him, to mother him. I guess our greed got away from us, since we don't have those values anymore, as we hire others at the cheapest rates posibble to nanny our children so both parents can pursue a career. Only when he was safe in school did find find a part time job.

In essence we went without, lived below our means as I worked 2 jobs to make ends meet and save a few bucks.

Despite what is politically correct, a mother was designed by nature that if she has children she naturally has to nurture them. I guess the chase of greed and me me me got us into the mess we are in today.

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Old 03-06-2009, 09:34 AM   #11
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That's a good question--we notice when our son is home visiting we spend a lot more on groceries but not much else--he's self sufficient.

From personal experience and hearing others talk, be sure your kids know exactly where you stand on helping them out with any big expenses, including college, weddings, and home ownership (i.e., help with down payment). Some parents are able to and want to provide these and others can't or don't--either is just fine, not saying you should or shouldn't help out. But problems arise imho when the kids don't know where the parents stand. So if you haven't already, let them know.

That will also help with figuring out how much the empty nest will cost.
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Old 03-06-2009, 10:08 AM   #12
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it's not the cost..

It's not the cost that i am worrying about. It's the emotional, physical strain that kills me.

Since you are talking about cost. Here is an example for you. Have you ever take a friend out for dinner? Now, think that you have to do that for about 21 years before he/she can return a favor.


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Old 03-06-2009, 01:12 PM   #13
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Do you know how much you spend on groceries every month? If so, then divide it by the number of people in the household. That will give you a rough estimate, but a lot better than randomly shooting a number out of the sky.
For us, last month, we ate all month for what amounts to $4.45/person/day. On average though, we're closer to $5/person/day.
Granted, if you have teenagers, you can slide the number up an extra 50 cents/day or so.
Cell phones for the kids? We don't have it for them yet, but that should be pretty easy to figure out.
Entertainment should be easy to figure out too. Just keep track of the cash you give them, and you'll soon know.
Utilities:
Heat - That's the most difficult I would think. After all, if the kiddos are taking a 20 minute shower, and you're taking a 5 minute shower, that would skew the numbers a bit. As to heating the house, we'll probably keep it the same when we retire.
Electric - ours would change slightly. Only because we use a home automation system that turns the lights on whether we're there or not, and off at a certain time in the morning. And our heater/hot water are both heated using propane, so no change in electric expense there.
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Old 03-06-2009, 01:26 PM   #14
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That will give you a rough estimate, but a lot better than randomly shooting a number out of the sky.
The chart I referrenced above:

.............Living Standard Per Person

Annual Earnings... No Children... 1 child... 2 children... 3 children

$20,000................$6,571........$8,264.....$7 ,692.........$7.218

$50,000................$12,514.....$11,155....$11, 174.......$10,665

$200,000...............$28,291.....$26,101....$24, 282.......$22,779

Means, for example, that the value (or cost) of three children would effect each persons living standard by:

$20,00 income = an increase of $647 annually

$50,000 income = decrease of $1,849 annually

$200,000 income = $5,512 annually

Relatively small amounts, I would think... depending, I suppose, on which you believe a child is; a cost or a value.

(Certainly, my summary is simplistic but if you read the book it is explained thoroughly -- or, if it is real important to you I could -- in PM -- go into more detail... yeah, hold your breath.)
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Old 03-06-2009, 01:53 PM   #15
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Originally Posted by RonBoyd View Post
The chart I referrenced above:

.............Living Standard Per Person

Annual Earnings... No Children... 1 child... 2 children... 3 children

$20,000................$6,571........$8,264.....$7 ,692.........$7.218

$50,000................$12,514.....$11,155....$11, 174.......$10,665

$200,000...............$28,291.....$26,101....$24, 282.......$22,779

Means, for example, that the value (or cost) of three children would effect each persons living standard by:

$20,00 income = an increase of $647 annually

$50,000 income = decrease of $1,849 annually

$200,000 income = $5,512 annually

Relatively small amounts, I would think... depending, I suppose, on which you believe a child is; a cost or a value.

(Certainly, my summary is simplistic but if you read the book it is explained thoroughly -- or, if it is real important to you I could -- in PM -- go into more detail... yeah, hold your breath.)
Those rates are way out of the ball park IMHO (at least mine even on a % basis). Why is income going to determine expenses, if you lBYM? The formula I always used the past 45 years was INCOME - EXPENSES = SAVINGS (where expenses were ALWAYS below NET income. This chart, if someone used it, could dig a DEBT grave too deep to get out of. Well, maybe that is what has happened!
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Old 03-06-2009, 02:25 PM   #16
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As others have said, only you can calculate how much the kids are costing you.

With us, getting them off the payroll was a big bump in disposable income. DD went to college followed by DS before she had graduated. That meant 7 years of kid(s) living out of state in college. When DS graduated and got a job we had also downsized from a 5 BR 3,500 sq ft house to a 3 BR 1,400 sq ft apartment so the drop in expenses was quite dramatic.

Early years were also very expensive in that DW quit work as we believe it is better to have a parent at home. She earned the same as me (both were programmers doing process control in the chemical industry) so that was a 50% loss in salary for what what turned out to be 13 years.
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Old 03-06-2009, 05:00 PM   #17
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Those rates are way out of the ball park IMHO (at least mine even on a % basis). Why is income going to determine expenses, if you lBYM? The formula I always used the past 45 years was INCOME - EXPENSES = SAVINGS (where expenses were ALWAYS below NET income. This chart, if someone used it, could dig a DEBT grave too deep to get out of. Well, maybe that is what has happened!
Well, because it has nothing to do with savings. They are talking about how much your "living standard" is affected by children. Whether a person is a spendthrift or Mr. Scroog makes no difference; the "living standard" would be modified the same.

Income - Expenses, BTW equals Discretionary Funds that can be used for any purpose... not necessarily savings.

In any event, I have no argument with what you are saying -- except as applied to the Kotlikoff/Burns formula.
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Old 03-06-2009, 05:13 PM   #18
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IMO discretionary income, once spent, becomes an EXPENSE, unless, of course it is saved (which includes any income producing asset).

I guess I am thinking that many may look at this formula and say "hey we make $X an we have X in the family so we HAVE to spend to this level" or we are not X.

Maybe I am just reading this wrong.
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Old 03-06-2009, 05:27 PM   #19
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IMO discretionary income, once spent, becomes an EXPENSE, unless, of course it is saved (which includes any income producing asset).

I guess I am thinking that many may look at this formula and say "hey we make $X an we have X in the family so we HAVE to spend to this level" or we are not X.

Maybe I am just reading this wrong.
Yeah, and I am sure it is because I am explaining it poorly.

What they are saying is that children of someone earning $200,000 a year "cost" more than someone making $20,000 and this needs to be given great consideration. An example would be college/university expense -- a lower income person would not/could not spend what the higher income spends. Couple that with, for instance, how the tax code is written and you will begin to see what they are saying.

But again, it is their book -- not mine -- and full understanding will only come through your own interpretation of Chapter 28.

(In other words, I seem to be in an axe fight without an axe -- even though I started it.)
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Old 03-06-2009, 05:34 PM   #20
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Ron: OK, I think.
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