The Financial Burdens and Benefits of Having Children
By: Mia Gradelski
Tags: Money, Wealth, Children, Financial Literacy, Business

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Apparently, the average number of children per family in 2019 was 1.93. Not sure what .93 is but let’s just round it to 2 to count them as a full person with a body. For Americans, I was pleasantly surprised, expecting to see the number as double, not because having more children means you are less responsible or bored at home producing more, but rather because having less is not only more responsible but a much easier financial choice that I wouldn’t figure most Americans had in mind with the financial literacy rate at only 57%.

When we look at the average house size in the states it has grown exponentially in the last 50 years. According to the U.S. Census Bureau, new homes built in this country grew 62% from 1,660 sq feet in 1973 to roughly 3,000 sq ft to today. Along with consumerism and the ‘bigger the better’ modo, we seem to go a bit overboard and not necessarily weigh our options appropriately with anything in life anymore, especially when it comes down to the holidays. PSA: Just because it’s on sale, doesn’t mean you need it. But when it comes to children, compared to buying a home, it is far greater of a financial decision and cleaning commitment new parents will ever make.

When I was younger, I constantly thought about this with my best friend’s family. I didn’t want to ask what was the reason the parents decided to have 9 children and nothing wrong with that, just curious but observing as a best friend to one of the 6 sisters, they not only looked miserable together constantly arguing and screaming down the street always cramped into their minivan, sharing everything and never quiet going to sleep, they were financially starving, which is completely their choice! And a result, bigger is only more expensive and not always worth the cuddles and lovey dovey of having children. Personally, as an only child myself, never bored or lonely, I plan on having 1 child because I want to dedicate everything to that sweet cookie, never want them to go through screaming matches and bickering or go broke because we wanted extra love. They will learn how to deal with people at school and through work experience. I never learned more from hands-on dirty work with tedious tough people. An only-child is also the best therapy and certainly, you’ll have an easier time allocating our money, with whoever it may be!

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Hard Taught Lessons

As much as I want to blame Common Core Education for not teaching us the real implications of having kids besides seeing the cute Christmas photos and arts and crafts artifacts kids make in commercials or in real life, what about the parents, finances and everything else in between that only adults have to worry about?

The process of paying for a child, insurance, education, toys, gifts, smiles, medics, parties, activities, and everything we miss before becoming a parent, reminds me of the pandemic mistakes we’ve made thus far that my friends are already regretting as they are fleeing home due to cabin fever.

#1: The huge home office craze

#2: Dog buying spree

These are just temporary irrational decision fixes that people have made during this pandemic just in this moment of time, soon in trouble once we get back to normal life.

So back to kids. Along with the laundry list of endless responsibilities and counting, families seem to not mind and this is the problem. These are the top reasons families have children that of course, disregard finances:

-Investment in happiness

-All things joy

-Better luck for one of them to become successful and provide for the family

-Avoid loneliness, especially when parents get older

-Learn how to work with others not be a parent hugger

-Feel supported

-Have a friend in need

Having a child is one of the only things in life that you spend thousands of dollars investing into for no guaranteed return in the future besides a 1 out of a billion chance the child will become a billionaire.

You are spending money and using not necessarily wasting your mental energy, strain, pain and body, late nights, job security, peace of mind and adulting for someone who you will hope will bring you either a more prosperous life or just happiness down the road. Similarly to education, you get as much as you put in. Just because you go to an IVY League and study your butt off for the greatest test scores to get on the Dean’s List but have no internship, outside experience, connections, don’t act like a good relatable person who can communicate and isn’t motivated or takes advantage of trying new things and making mistakes, might as well save up that money into a ROTH IRA or pay off debt. That will make you a better return of a few million unless you value education and actually don’t mind embarrassing yourself to get somewhere in life.

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Breakdown

Just like with purchasing a home and frankly anything tangible, year after year, the cost of raising a child becomes more and more expensive due to inflation and our strong economy that raises prices to keep jobs afloat and wages up.

But this hasn’t stopped Americans until the early 2000s with the fast-paced trendy rise of entrepreneurship, late fertility and pregnancy, and debunking the pressure and or stigma to rush into parenthood or start a family by age 30.

Back in Time

Celebrities are great role models in this as well. Look at Ryan Seacrest or Hoda Kotb for example. Ryan is 45 without a wife or kids and Hoda, 56 just engaged over the summer with 2 adopted children. Especially during WWI and II when men were drafted into the war and life expectancy was only till 80, women felt the need to not only marry right after HS but also have early child birth. Now with the advancements in technology and scientifically proven benefits of specialized diets, my personal favorite the Mediterrean paleo/keto, people are not only living longer, but we’ve also learned as a society to destigmiatze this notion that we need to have everything by a certain age. It has come time we’ve broken the barriers as a society and by age 23, you don’t have to graduate college, at 30 not married and 40 don’t have to have a baby or whatever it may be. We’ve all heard our own and can finally find the time to live on our own path.

Brightside

I’m glad to hear that Millenials in particular who have to deal with student loan debt are cautiously reconsidering kids and taking their time. But without having the liability of debt from their careless years of spending as teens and no experience budgeting, I don’t know if they would still take this kid thing seriously because now they have the excuse of debt working in their favor otherwise, they most likely would follow their parents with giving birth earlier than ready.

By ready I mean financially ready. To ensure optimal success and no financial hardship, all major decisions should be based on your financial plan, not emotions, trends, late-night decisions, or fights. In my experience, those usually lead me in the wrong direction.

These are the top reasons why millennials avoid having kids at their typical age:

-Too expensive

-Focus on relationships they already have to nurture

-Not a ‘selfish’ choice

-Happy without kids

-Spend more on themselves and do adulting things

-Peace of mind in a child-free household

Financial problems are at the heart of our livelihood and the decision-maker between what we can and cannot do. There shouldn’t be any shame in following your own schedule and what feels right for you because, at the end of the day, no one will be providing you a place to live, paying off your debt, participating in P2P lending, helping take care of child care expenses, and the other randomness that happens with a child that is fun and painful if not prepared for.

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Older but Wiser?

These days, since Millenials have a little bit more common sense through the promotion of financial literacy in schools and amongst households, they are pushing back one of the most eventful parts of life: having a child to as late as retirement which could cause even more financial hardship, despite assuming you will have more dedicated energy and time for them, as do our grandparents.

Although this is becoming more and more popular, especially during the pandemic when people are bored at home, if you know what I mean, it may be worse than having a child earlier since you have a shorter life span, have to plan for emergencies and make sure your kids know what to do if you pass.

When you are older, these are the issues you must consider in order for your child to actually feel like a child and not like an abandoned grow up:

-Figure out your situation with who will take care and responsibility/custody of the child when you pass away

-Less energy when you are older to play with kids

-Less money, more conservative when retired, no stable income=risky during recessions(historical data estimates every 10 yrs)

-Annoyed and more tired, have to spend money on babysitters and in fact, may spend less quality time with your children

-Children will grow up and see you as a grandparent instead of a middle-age parent

-Less time with your children unless you live till 120 yrs old

-Have to find a dedicated person to help you and the child

-Child might not be old enough to delegate the tasks that you could do or take care of you (a reason people want kids in the first place for free care when parents are older)

Something else important to note but once again varies greatly per individual, Business Insider writes, “Research has suggested that children born to older women are likely to have shorter lives. In a study of 200 years of demographic data about a large group of Swedes, mother’s age at birth was one of the most significant non-external factors affecting how long a person lived, along with the mother’s lifespan.”

Wherever you are in life, your financial health is first. What your parents, friends, uncle’s sister’s brother’s aunt’s cousin worked for them doesn’t mean it will for you. Especially with money, you can never rely on others to help you get out of your troubles if expecting, so weighing your time horizon, future prospects, and concerns if something happens to you is a must to be on your way to more sleepless nights and crying.

Real Cost

Now since we’ve gotten the hard truthful part out of the way, my strategic plan for any workout or difficult test, the good news is alas! We’re all dying to know how much do those strollers and diapers actually cost over time. Well, as you might image, there are thousands of variables that range from your location, how old the parents are, to where you shop and what discounts you can get there.

For instance, in Europe, there is free health care and education, the main reasons why Europeans are the happiest people on Earth. Yes, they have to pay higher taxes on goods but when it comes to financially straining decisions that put most Americans bankrupt, it is worth it to move there for those reasons. After all, the #1 cause of going broke is due to outstanding medical insurance and bills. Despite being the wealthiest country in the world, America has the highest costs for health insurance and basic needs because everyone has private health insurance. No universal health care, the stupidest thing in the world. This is something parents don’t consider until they weigh these options of producing another human being in a medical facility also known as a hospital that is certainly not for free. Of course, you only get the complimentary delivery and overnight stay in Europe.

Having a child is an exciting, accomplished, and fulfilling thing in one’s life. You finally have the responsibility of caring for another human’s existence to make them or 9 siblings the best they can be. But from weddings to graduations and boyfriends, there are a ton of hidden fees that we cannot even cover since they are always unknown! I didn’t hear about the subscription for Disney Plus since a few months ago! Now that’s a new expense some family probably wasn’t expecting until the noisy child came along and wanted it!

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As with every expense, every household and individual should have a dedicated emergency savings account that is liquid in cash. This does not mean allocating only a few thousand and expecting to sell your gains in the stock market and pay tax on it. These emergencies can range from losing a job to a leak in your house, unless you don’t have home owner’s insurance or an umbrella policy and in that case, I highly recommend to avoid out of pocket costs!

When it comes to savings, historically, women outperform men with their portfolio returns because they are more risk-averse. They also carry on less debt, spend less, take advantage of retirement plans, and seek advice. Men tend to see investing as gambling and competition, not so much about achieving goals in the near future, something I highly recommend avoiding as that will get you nowhere as a day trader trying to time the market. As a result, all the brokers I’ve met that are men suggest 6–10 months only of leeway(emergency) savings which is clearly not enough. Yes, cash loses its value over time due to inflation but if you are stuck in a pandemic, lose your job, renter, and don’t have any liquid cash to keep you afloat, you will be scrambling and homeless. It is a win-lose situation depending on if you are willing to keep cash up front for emergencies as a backup. Just like with insurance for a flight, you have the option to pay a couple hundred more dollars god forbid the plane crashes. Obviously, you don’t want it to happen but it isn’t unpredictable. Emergencies can happen. Women suggest 2 years in that case for a comfortable living and no need to change you living conditions while you have time to seek a new job and not sell your investments to buy food.

Bills

These are the most crucial bills to keep in mind as your baby by a blink of an eye will become a tech-savvy teenager and will need more internet power than you will:

-Electricity and utility bills

-Higher grocery expenses

-Rise in health insurance

-Clothing that won’t last long until after puberty

-Babysitter, daycare, and education

-Maternity and paternity leave

-Entertainment

-Bigger home

-Extracurriculars and all those crazy activities

-Life long disability insurance

-Driver’s Insurance

-Wills and Trust-if something happens, your children will inherit your assets and you will save thousands putting the initiative upfront going through a lawyer and court during those tough times

By State and Income

The wealthier you are, the fewer children you tend to have. This may or may not be based on the level of financial education and literacy you have about the costs of children and the downsides you are reading here or maybe becuase the wealthy value their hard-earned money and don’t necessarily want it to be spent on toys, toys and more toys. They want to live a nice life as well as they’ve worked all their life for it. These were two of my parents decisions when I asked them why they wanted an only child. Despite being both immigrants from Europe, they took the initiative to learn on their own the cost-benefit analysis, before their daughter wrote this article herself for her future. I always get confused writing in 3rd person so I will stop. My parents both lived in smaller households and lived a comfortable life compared to some of their neighbors and other family members that had to minimize costs and downsize just for more kids. Not always a logical decision but once again, always up to the individual just in my case, I always prefer less = more.

Obviously, depending on where you live also matters.

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Bottom Line

In general, since everything is becoming more and more expensive these days, I would allocate upwards to $280k for your child until they reach 18 for any household in America. If you want a cheaper baby but still the same quality one, head on to Europe. I guarantee they won’t kick you out of the delivery room or school. Regardless if they start working in the summer for some side hustle money at 15, taking in taxes and them spending most of it, 18 is a good benchmark before college as they will have to learn how to properly budget and eventually get a job a few years down the line.

Opening an investment account such as a ROTH IRA, 529C plan for college savings fund, and savings account so they could start building interest on their own hard-earned lemonade stand is a great way to get them learning early about what money involves and the magic power of compound interest. I would advice staying away from Robin Hood unless you just want them to learn what buying and selling means but in that case, just go to the mall, they will catch on quick I promise.

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There are specific requirements and allocation amounts for both the ROTH IRA and 529C so I would make sure to brush up on those as they will be extremely beneficial when your child is grown up and already with a full-time salary, ahead of 99% of the population just through opening and contributing 5k per year to a ROTH.

Having a baby is a tough 20-year process and the best way to be prepared is always going back to your finances. They never lie. Take it easy, never rush it, and make sure you do you becuase you can never go back!