Costs of Children

[bongo2]

I have four kids right now, all under 6. None of them are currently in daycare or preeschool, but they do quite a few activities like swim lessons and so on.

For most of my long-term expense planning I usually figure my costs in the future are going to be pretty much the same as they are now (adjusted for inflation). One big exception to this is the whole college thing, so I have a separate notional savings for the cost of putting my kids through college. Should I also be considering another chunk of money to get my kids through the teenage years? Or do kids cost pretty much the same amount from age 2-18?

I'm also curious if anyone here has managed to retire early with three or more kids.

 

[wabmester]

Here's a study that answers the cost question:

http://www.extension.umn.edu/distribution/businessmanagement/DF5899.html

Summary: food and clothing expenses approximately double over time. Transportation costs go up when you buy the kid a car. Other costs are pretty constant.

 

[renferme]

I raised 2 kids - both grown up now.
I can honestly say that the older they get, the more costlier they get. And that's even if there is no inflation.
They eat more food, they buy more clothes, more expensive clothes, their entertainment costs are greater, their 'toys' cost more, everything costs more.

 

[cute fuzzy bunny]

Dont forget bail money

 

[Nords]

"Transportation costs go up when you buy the kid a car."

"... they buy more clothes, more expensive clothes, their entertainment costs are greater, their 'toys' cost more, everything costs more."

Hunh?!? Did I pick the wrong parents when I was growing up?!?

Our car insurance rates may rise when our kid starts driving, but buying a car is not the parent's problem. In a compromise, we've been putting aside $2/week in a "Kid 401(k)" that, over an eight-year period compounding at 1%/month, will produce about $5000. There's a lot of learning there on savings, matched contributions, and compound interest. In 2008 the kid can cash it in and see what that'll buy. Any other money is going to have to come from a job or from grandparent gifts!

Clothing has been pretty cheap through age 11, but in the next year or so we'll start a quarterly clothing allowance. It'll be enough for anything from Goodwill, many items from Wal-Mart, and some items from more expensive stores. We also have a sewing machine. If there's a fad or a fashion it's gonna have to come from a job or from birthday presents.

But we'll keep paying for riding lessons, taekwando, and surfboards.

I'm not sure about the bail money... no one ever paid mine!

 

[wabmester]

Hunh?!?  Did I pick the wrong parents when I was growing up?!?

Are you trying to tell me you didn't get a new Porsche at 16? Man, what a dull birthday that must have been. "Son, now that you're 16, you'll need an outlet for those raging hormones. So, I got you tae-kwan-do lessons!"

Next, you'll probably tell me that you didn't even get a weekend at Mustang Ranch when you hit puberty....

 

[Peterv]

Can't really help out with costs of kids as I follow the wise advice of the late Cynthia Oti who until her death in a plane crash a few years ago had a finance and investing talk show on KSFO in San Francisco. Cynthia's secret for a secure financial future was to "never take financial responsibility for something that eats."

It's served me well and may help others out there not yet encumbered with offspring.

 

[Bob_Smith]

Our situation has been pretty close to Nords'. The kids haven't cost much.

College for two daughters (one now 27 and one a senior in high school) will cost me about $27,000 total. That's the total for two, not each. The older daughter got through debt free. I paid $7,000. The younger will be debt free, or very close to it, with scholarships, her earnings, and my contribution. I'll kick in $20,000.

Cars? If they need to use a car they can use one of ours. Car insurance bumps up with a teen driver. Car insurance costs $915 per year with a teen driver in my situation. Not a huge item. I'd be paying at least $600 anyway.

Clothes are pretty much a non-issue in my situation. Last year I spent $581. The year before it was $505. That's for one daughter.

So my kids have not been costly. But more importantly, they've been one of the best things that have happened in my life.

 

[Nords]

Re:  Bob, how'd you do it?

Bob, I've been spending a lot of time at the College Board website and I see their current four-year public/private projections range between $57-$120K.

So your results kinda caught my eye. While our kid is a relentless scholar with a fine head for numbers and a developing hook shot, I had no idea college could cost so little without significant debt or a SPORTS ILLUSTRATED biography. Any specific tactical advice?

Wab-- for my 16th birthday I got what I think was the last job in my hometown-- digging ditches at a local golf course. It paid $4.25/hour and I occasionally scored dollar tips at the starter's hut. It was the best college-scholarship program I ever qualified for.

 

[wabmester]

I'll consider having my kid dig ditches to pay for college, but that sounds like a lot of digging. I've held jobs since I was 11 (the youngest paperboy in my town), worked my way through college (doing science and computer programming), and now look at me. Burnt out on the rat race when I hit 40.

Maybe I'll pay for her education so she can focus on school and savor the working years....

Then again, somebody around here said that rather than paying for the kid's education, we should save up for an early retirement fund that they get on their 40th birthday. I like that idea.

 

[Nords]

Re:  I like that ER fund idea...

... although too much of a good thing could lead to affluenza.

I've been keeping an eye out for any way I can to employ my kid and put the earned income into a Roth.

Whether it's managing the rental property books, cleaning the place up between tenants, or helping with repairs, that part-time income can sure add up. The only problem is finding a brokerage or a fund company that will even look at less than $1000...

 

[unclemick]

My 95 watercooler lecture(temp job) got one engineer who I knew from the days when I was a direct employee to get his kids started on DRIP stocks - Wendy's and Coke I think. Leaving the Roth aside for moment and the hassle of buying the first share, it's a way of geting started/educating.

Moneypaper and Netstock Direct have webpages. I believe the published curves still show north of 4-8 stocks meaningful diversification is approached, Bernstein not withstanding(15 Stock Diversification Myth)

 

[eukrate]

Costs are low until college hits. I've got 2 in public univs now one is $12000/yr , other is $21000/yr. They work summers to help but thats only $4000. Two more years of this. Just prepare for 4 yrs of major pain. Later come the weddings

 

[Bob_Smith]

Re:  Bob, how'd you do it?

Bob, I've been spending a lot of time at the College Board website and I see their current four-year public/private projections range between $57-$120K.  So your results kinda caught my eye.  While our kid is a relentless scholar with a fine head for numbers and a developing hook shot, I had no idea college could cost so little without significant debt or a SPORTS ILLUSTRATED biography.  Any specific tactical advice?

Hey Nords,

We visited many colleges and my daughter really liked South Dakota State University in Brookings SD. I liked it too. This is an out of state school (we live in Iowa) so the costs are higher for us than in-state students. On the other hand, my daughter is a good student and did get scholarships there (and locally). Here's the cost breakdown for an Iowa student attending SD State (including a 4% annual inflation bump up from current costs):

South Dakota State University 2003/2004 School Year:

Tuition per credit $108
16 credit semester $1728
General Activity Fee -16 credit semester: $272
University Support Fee -16 credit semester $848
Books (estimate) 16 credit semester $300
Resident Hall Rent double occupancy per semester $931
Average Meal Plan per semester $830
TOTAL SEMESTER COST $4909
TOTAL YEARLY COST 2003/2004 - $9818

Inflation 4%:
Year 1 - $10,211
Year 2 - $10619
Year 3 - $11,044
Year 4 - $11,486
Total - $43,360

Spending Money - $720/year - $2,880/four years

TOTAL COST FOR 4 YEARS = $46,240

Here's where the money will come from:

Scholarships: $8,000 ($6,000 SD State & $2,000 local)
Parent: $20,000
Student Current Savings: $6,000
Student's Earnings Next Four Years: $3,000/year -- $12,000/four years
Tax Credits: $3,000

Total Funds Available: $49,000

So we'll have about $3,000 to spare, and depending on how costs rise, she has a pretty good shot at making it debt free.

 

[Nords]

Re:  Thanks, Bob!

Hunh, I bet there's no beach volleyball at that particular SDSU.

Although since my kid is the only one in the world who's never played in snow, she might find that South Dakota is a real adventure. And she'd be confident that her parents would only visit at the height of summer.

Thanks for the price breakdown, that's a lot better than the college board. Thanks to the military, I never went to a real college or had a real job or had to make a real profit so I can't regale my offspring with wise lessons learned from my school days. I never considered the tax angle either.

I've heard that the state/local universities are the way to go for the lower-level courses and most majors. I also like the idea of having the kid shoulder some of the burden. She'll be moving out in summer/fall 2010, not that we're counting...

 

[John Galt]

Well, I bought all 3 of my kids their own cars when they turned 16.
Never really thought much about it at the time (big spender days).
Both daughters got sports cars. I recall one of my friends said I was "making it hard on the non-Jones".
I thought that was cute. My youngest told me her
friends thought I was spoiling her. Maybe so??

College was a different deal. The most I paid was half
of the "net" cost, after student loans, scholarships, aid, etc.
Figured they were adults and would appreciate it more later on. Plus I paid for 100% of the college I got.
I'm
quite sure that colored my thinking.

Re. "bail money", my son is a real straight-shooter
(literally and figuratively) now, but when he was a
teen I told him "The next time the cops call me I'm
going to tell them I never heard of you!" About 2 weeks
later they called in the middle of the night. I got out of a
warm bed and picked him up. No matter what happens they are always
your kids. In my life, nothing else comes close, no
matter what the monetary cost which is huge.

John Galt

 

[trumpeting_angel]

I was fearful that I'd done too little about my daughter's financial education, since my ex-husband and I never got very organized about an allowance. So at age 14, I took an idea from an article I read, and I gave her a 6-month allowance. In her own bank account with its own ATM card. We added up the clothes she'd likely need, snacks, movies, shampoo, everything we could think of, and I put it all in the account.

I was with her when she made her first purchase: a new pair of sneakers. Went to the discount stores, searched the sales, wrung her hands, and finally bought a pair identical to the ones that were wearing out. She knew she liked them and she knew they'd fit her, and they were on sale!

Her favorite store she calls "Sal's Boutique," the Salvation Army. She just made a huge purchase (semi-formal dress) at a not-cheap store, and then waved her hand dismissively at the shoes: "They always have lots of white shoes at Sal's."

I was going to do a full year, but we were both too scared to! Quarterly would have been easier, but I wanted it to challenge her. It has, it's working!

This summer she'll be working for me (eBay) to help pay for prep school. A ridiculous extravagance; thank heaven for financial aid, a talented ice hockey goaltender, and a ready stream from eBay as long as you've got a willing packer!

Anne

 

[John Galt]

Hello Anne. Cute story! Wish I had tried it with my kids.
They mostly just got whatever they wanted, from
whatever store caught their eye. They are all grown now, but I am still paying for the habits instilled in
their youth. BTW, one of my best friends is a local farmer whose "sideline" is selling on ebay. He told me one year they made more money on ebay than they did farming.

John Galt

 

[trumpeting_angel]

Hi John!

I have a friend who is an antiques dealer who helped me get going. It is indeed possible to make money on eBay; last Christmas he and I grossed somewhere around $8000 in two months' time. (Things do sell better right around Christmas; it's not that easy the rest of the year.)

Just like any store, though, only worse: you have to be careful not to catch auction fever and BUY stuff you don't want. I try never to browse eBay unless I know I need something; then I try to go straight there and not get sidetracked. It's very easy to overspend; sellers run into problems all the time with buyers who have suddenly come to their senses and realized that dime-store wooden plaque wasn't really WORTH $45! All it takes is two bidders . . .

Anne

 

[Skylark]

So how do you make money on ebay? Cruise estate sales and garage sales looking for items?

 

[cute fuzzy bunny]

I could probably make $20k selling crap I dont use anymore.

Only problem is I wont do business with Paypal and cash sales are harder and dont net as much money. You also get frequent nimnol's that dont read the auction print in 30 point type that says "no paypal".

 

[John Galt]

Here is what I do. A couple of local papers let you run
ads for "stuff" at no charge. There are some limits.
Anyway, every month I run ads for items which we
do not need/no longer use, etc. Been doing this for
3 years at least. It's a nice source of cash and it helps
with reducing the clutter around here.

John Galt

 

[Zipper]

Kids shouldn't be driving until they are 18. As for buying them their own cars at 16........that's lunacy. Make 'em pay for their own driver's ed, then give 'em access to the family vehicles at 18.

 

[John Galt]

Hey Zipper................"lunacy"? well maybe. It seemed like the thing to do at the time. I loved my kids and was
making plenty of money, so........................
Knowing what I know now, I would not do it, but
hindsight is always 20/20.

John Galt