There is a belief that is common in financial independence circles that children are little more than little money suckers. Some people think early retirement is mainly for DINK (Dual Income, No Kids) families.
It is true that kids cost money, but how much do they really cost?
What type of return do we get on this “cost”? Can people retire early with children? What if they only have one income?
This post was inspired by a post made by Steve at “Think, Save, Retire,” entitled Want to retire early? Make lots of money and don’t have kids. To be fair, his post was somewhat in jest in response to the chorus of complaints that early retirees hear, “You only retired early because you made a lot of money and don’t have kids.”
I’m here to tell you that children add to our riches, though it may take us a bit longer to retire. And it can be done without ever making six figures.
How to Not Spend $13,000 per Year per Child
An important piece of the Millionaire Map is controlling spending, so how much do kids cost? They aren’t free, but they don’t usually have to be super expensive either.
According to the USDA, it costs $13,000 per year per kid. This means it costs $233,610 to raise them, not including paying for college, weddings, etc.
No. I’m sure they have some smart people they employ at the USDA, but no. Maybe they should stick to agriculture.
Let’s go through some assumptions. The more kids you have, the more ridiculous the assumptions get.
Spend Less on Housing
They estimate that 29% of this is spent on housing, so around $4,000 per year. Our total mortgage is less than the estimated housing cost of 2 kids. But we have 3 kids, so it should cost $12,000 per year to house them. I guess my wife and I each pay negative $3,000. Sounds reasonable.
Many Americans have way bigger houses than they need. There’s nothing wrong with that, but it just doesn’t need to cost an extra $4,000 to house each kid. Who buys a bigger house each time they have a kid anyway?
We have a 1,000 sq ft home, and it is more than enough. Bigger would just mean we’d buy more stuff to fill it and spend more time cleaning and maintaining it.
Spend Less on Food
The cost of feeding an average kid is allegedly 18% of $13,000 or $2,340 per year or $195 per month. Apparently the USDA does not shop at Aldi and buys organic.
Granted, our kids are little still, but our food budget is around $300 per month. According to this, it should be around $600 for our 3 kids + food for mom and dad + food for having friends over + sometimes food for the food bank.
Our kids are not undernourished, though we don’t buy a ton of junk food. We eat a lot of fresh produce, dairy, protein, some carbs, and ice cream (more dairy for those keeping track).
Transportation Because Kids Don’t Fit in Cars
Transportation is 15% or about $1,950 per kid per year. I guess I could see spending that on a used car for them when they turn 16, but what about the other 17 years?
Most cars hold at least two kids comfortably, but I can see why you would want to buy a brand new suburban for each kid. That makes sense too.
We did buy a minivan after our 2nd. I think it was around $3,700 cash. I also bought a truck with a back seat for around that price. It gets me from home to work and is helpful for yard work and renovations.
Most people who have kids would still have a vehicle even if they didn’t have kids. I should start charging my kids $2,000 rent to use the back seat, I will be rich in no time.
Oh, I know what it is. You have to upgrade to Uber XL when you Uber.
Some of this could be flights I suppose, though I wouldn’t say those are required to raise a child. We do like to travel though and will probably fly somewhere with them sometime. But not for $2,000 every year.
Childcare is Expensive
This is another big one and probably the most legitimate one on the list. They estimate around $2,000 per year per child. This might be legitimate from what I’ve heard. We don’t typically have childcare other than occasional date nights.
Keep in mind that childcare is mainly younger ages, so it is probably estimating closer to $6,000 per kid during the childcare years. Also since some people don’t have childcare expenses, for those that do, it may even be more than that.
My wife stays home during the day and works nights teaching at a community college part time (when I’m home from work). We made the decision when we had kids that she would stay home with the kids. This decision seemed best for our family and was doable with my median income and our low cost of living.
We don’t have those childcare expenses, but we also don’t have the income she was bringing in as a full-time teacher.
Other Real Expenses Because Children are Expensive
Clothes. Yep, we buy them, though often used or handed down.
Toiletries? We do have to buy diapers, wipes, and a bit more toothpaste and toilet paper. We generally buy these new.
Babies need stuff like high chairs, strollers, bottles, beds, and things like that.
Utilities. We spend more on water and a bit more on electricity probably.
Education. Public schools have some fees but aren’t that expensive to attend.
Gifts. We give gifts but try to keep it pretty simple for our kids.
Medical. Doctors and hospitals charge you a lot of money to deliver your baby, but this is a one-time expense generally. Things happen in life, and medical bills are something you don’t usually have a lot of control over.
Healthcare could get real expensive, but hasn’t been a huge ongoing expense for us. We do pay more for family health insurance than couple or individual plans.
Entertainment. Movies cost more. Amusement parks, water parks, etc cost more. Flying costs more. City, State and National Parks are cheap and make great entertainment. We prefer experiences to buying things.
So You’re Saying Kids are Cheap?
No. They are expensive, they just don’t have to be nearly as expensive as people make them out to be.
According to this, our children expenses should be around $39,000 per year. I can tell you confidently that our total spending is usually less than that, and we travel across the country at least twice per year.
We are all healthy, and have food, water, shelter, health insurance, transportation, education, etc. We truly lack nothing.
They will be more expensive as they get older since we’re planning to help them with college and wedding expenses that weren’t included on these bizarre government statistics.
They also cost time, which may be even more valuable. If my wife was working full time and we didn’t have day care, we would have a good bit more money. I’d also have more time to work side hustles. There is a big opportunity cost.
Yet, Children Make Us Richer
Children are expensive, yet somehow they make us feel richer than before.
This has been true with each of our three kids. My wife and I were happy before we had any kids. We felt blessed in every way even though we had way less money than we have now. Being childless didn’t mean we were lacking anything.
But once we had our first kid, we felt richer. After our second kid, we felt richer still. And after our third daughter, richer still. How could we be any richer? I don’t know, but if we have another kid, I imagine we will feel it.
They make us feel rich in ways that are intangible. You can’t put a price on the joy of a child entering your family, watching their first steps, hearing them say daddy, tucking them in, or watching them grow up into reasoning, responsible, loving adults.
My parents both had big families growing up, and some of my greatest joys growing up involved spending time with everybody at the lake including many of my 30+ cousins, siblings, aunts and uncles, and my grandparents.
The Bible says that children are a good gift from God, and I firmly believe this to be true.
An Ode to the SINKs and DINKs
Some people have kids.
Some people do not.
It may be by choice.
Or maybe it’s not.
Whatever the case,
Keep running the race.
Your life is no less,
You are still blessed.
Keep growing your income.
Accumulate a great sum.
You’ll retire first, yup.
Perhaps we’ll catch up.
Retiring Early With Kids
Given equal incomes, similar levels of frugality, and similar investing acumen, the dual incomes and the childless will retire first every time. That doesn’t mean people with kids and single income streams can’t retire early too.
There are so many variables and different definitions of retiring early that it’s difficult to compare every circumstance.
In the itty bitty corner of the internet known as FIRE or Financial Independence Retiring Early, early retirement starts at 25 or 30.
However in my little corner of Iowa, people will look at me crazy if I say I’m hoping to retire by 50 or 55.
Whether you have children or not, the principles of early retirement and financial freedom are the same. Life is about trade offs and spending your time and money on the things that add the most value to your life.
If you insist on having a big house, new car, and living extravagantly before you’ve grown your wealth, you won’t become a millionaire.
However, avoiding a big house and fancy cars doesn’t automatically make people millionaires either. As the saying goes, stuff happens. I know I couldn’t do it without my wife.
The keys are to know the difference between wants and needs, to consistently spend less than you bring in, and to wisely invest the difference.
Some of the richest people I know have never been millionaires, but their house is full, and their heart is fuller.