Before Having Kids, Consider Spending Lots Of Money

Most responsible adults who want children will strive to save and invest as much money as possible before becoming parents. However, after being a parent for six years, I realize this advice might not be ideal for living your best life.

Everybody knows raising children is expensive, especially if you live in a major city. From the cost of childcare, to preschool, to college, parents better save a hell of a lot of money if they want to give their children a good chance at making it!

But there has been a growing conflict inside me that now feels too large to ignore. It is the battle between frugal spending to set a good example and spending more to enjoy life.

Children Observe And Absorb Parental Habits

You may not think your kids watch your every move, but they do. So when you wonder why your kids are always on their phones or iPads, it might very well be because you're always on your electronic devices.

My parent's frugal habits have stuck with me since I was six years old. No drinks when we go out for dinner, only water. Wear my hats, shoes, and t-shirts until they have holes in them. Eat every morsel of food on our plate so as to not insult the millions who are malnourished.

The great thing about being a frugal parent is that your children will likely adopt frugal habits as well. It's almost impossible not to after 18 years of living together.

Once the foundation of frugality is set, your children increase their chances of achieving financial independence on their own. In turn, this will give parents mental relief and reduce anxiety.

In addition, we want our kids to experience the pride and joy of making something of themselves. If everything is given to them, they might feel like deadbeat losers with no purpose.

But Most Of Us Get Wealthier As We Get Older

Although kids are expensive, most households still get wealthier after having kids. That's the nature of investing and working. The more time invested in the market, generally, the greater your wealth. The more time you spend at work, generally the more raises and promotions you will receive.

Although I don't have a day job, I did leave work in 2012 with 100%+ of my net worth invested in risk assets due to mortgage debt. Thanks to the luck of a 10-year bull market combined with frugal spending, my net worth has grown.

I'm also 11 years older, meaning I have 11 years less to live. As a result, I naturally want to spend more money on experiences and things I don't need.

For example, although we bought a larger home in 2020, I've been itching to buy an even sweeter home just several years later. In 2025, our car will be 10 years old. Ideally, I'd like to buy the newest Range Rover. But that car would cost about $130,000, an absurd amount.

At six years old, my son is starting to understand more about the ways of the world. He realizes some people have no homes, don't have cars, and can't afford to get on an airplane to go on vacation. In three years, when my daughter is six, she will likely start realizing these same things.

Purchasing either of these unnecessary things could jeopardize the frugality habit we're trying to instill in our children. Owning these items might also make me appear selfish given there is so much suffering in the world.

The Lesson Of Keeping Housing Expenses Low For FI

Instead of buying a larger home that costs 100% more, it may be better to just live in our current home until both kids are out of the house (2038). This way, our current home is all my kids will ever know.

They will come to understand that despite becoming wealthier over the next 15 years, their parents were frugal and kept their housing lifestyle the same. Around middle school, they will understand that our housing expenses as a percentage of income or net worth continued to shrink over time.

Keeping housing expenses to 10% or less of your income is one of the key strategies for achieving financial independence. Plenty of people spend 30% – 50% of their income on housing. This percentage keeps them stuck on the hamster wheel for longer.

Another important strategy is to limit the purchase price of your home equal to 30% or less of your net worth. Stretching to buy a home has caused countless financial hardships and restless nights.

Following these two housing expense strategies will pay huge dividends after your kids are on their own.

At the same time, however, I have advocated that the best time to buy the nicest house you can afford is when you have kids. More heartbeats at home better utilizes the space and amortizes the cost. And life is more enjoyable when you live in a nicer home in a great neighborhood.

The Lesson Of Owning An Inexpensive Reliable Car

Once a family has their housing expenses under control, the next beast to tackle is transportation expenses. Americans have a love affair with cars. I myself became a car addict in my 20s by buying and selling a different car for eight years in a row!

With the average new car price at around $50,000, paying too much for a car is one of the most common personal finance blunders. As someone who came up with the 1/10th rule for car buying, I should lead by example.

The longer we own our vehicle, the lower its value will likely be as a percentage of our income. This reality may help prevent our children from splurging on transportation. Owning an old car may also help instill the spirit of stealth wealth.

Driving By Example

Let's say I own my car until 2030, or until it's 15 years old. At that point, it might be worth $10,000, but my passive income might have grown to $450,000. The car would only be worth 2.22% of my passive income. I can afford to buy a $45,000 car, but why bother if my current car is still safe and runs well?

If my kids want to own a car after their 16th birthday, I can more easily tell them to get a job that pays 10X the cost of the car. If they object, I'll just point them to our current car, which they've ridden in their entire lives. They will have no choice but to work for what they want.

Then when my kids are off on their own, they will hopefully think thrice about splurging on an automobile with their first full-time paycheck like I did. Maybe they'll be big proponents of public transportation or autonomous vehicles that have safer technology than the average human driver. If so, they can use their savings to fund their Roth IRAs or max out their 401(k)s.

Safety is a big one for me because a childhood friend died while driving at high speeds when he was 15 years old. Driving in a big city is chaotic. Teenagers drink, smoke pot, text, and do other distracting things while driving. I don't feel comfortable having my teenagers drive at all.

The Lesson Of Keeping Travel Expenses Low For FI

The final expense to wrestle with is travel expenses. My wife and I don't fly first class, so there will be no conflict here. Every hour we fly not in First Class feels like making money doing nothing! The most we will likely do for a family vacation is pay for Economy Plus.

Paying big bucks for a hotel is also painful because we like to be out exploring all day. Besides, the main things we'll do in a hotel is shower and sleep, so why pay a fortune? A three or four-star hotel is good enough.

My wife and I traveled light and cheap for decades before having kids and it was so much fun. We long to go on adventures again once our kids are old enough to appreciate and remember (8+ years old).

Hedge Your Spending Before And After Having Kids

The more you care about raising financially responsible kids, the more you may fear spending money on luxury. I define luxury as anything beyond the basics, e.g. first class instead of economy, Rolex instead of Casio, etc.

At the same time, you don't want to suppress your lifestyle too much if you worked so hard to accumulate your wealth. Hence, spending lots of money on travel, homes, clothing, watches, jewelry, and nice cars before having kids makes sense. It's a hedge against 18 years of frugality once you have kids.

You just have to plan to have enough money to comfortably raise your kids once they come. Having a target net worth before having kids is one idea. Continuing to work through their college years is another. Once your kids come, you can then become more frugal as you focus on providing for them.

The Perfect Time To Splurge After Having Kids

An alternative solution is to buy the best of everything by the third year after your first baby is born. After all, kids don't remember much before their third birthday.

Lock down that mansion, buy your favorite luxury automobile, and own the finest toys. This way, these are all the things your children will ever know. You can then own these items until they go off to college and never have to splurge on anything better before they do.

If your Ferrari breaks down in year 12, then you can buy another one no big deal. Given it's already one of the most expensive cars, it won't seem like you're splurging. In fact, you'll have a lot more options to downgrade in price, like to a BMW, which may be viewed as a frugal move by your children.

The same thing goes for living in a mega-mansion. During their sophomore year in high school, if you decide to downgrade from a 10,000-square-foot mansion to a still massive, 7,000-square-foot home, your kids might also see this as a spendthrift decision.

Ironically, starting your kid off at a high base may help them better appreciate the changes you will make since everything eventually gets old.

Or Just Feel Happy With Enough

Writing this post makes me a little more motivated to upgrade my car and my home given my daughter is only three. Why not live it up from ages 45 to 60! These are the prime years of my life.

But at the same time, it feels great owning a paid-off, eight-year-old car. It's only got 42,000 miles and can easily last until its 15th birthday, seven years from now.

During the 2022 bear market, I found it comforting that our house was less than 15% of our net worth. I've experienced zero stress affording our current home, which is different from how I felt during the 2008 global financial crisis.

Back then, I had gone all-in on a home in December 2004. I only had a good two-year run before I started sweating bullets that I might lose everything! After that time period, I vowed to never overextend myself by that much again.

If my kids and wife are happy in our current home, that should be good enough. Learning how to better appreciate what we have is an important skill.

Be Careful Being Ultra Frugal When You're Young

When you have little money, every dollar spent is more impactful. Therefore, it's natural to want to spend more in your 20s and 30s. Just don't go overboard.

Due to my car addiction in my 20s, growing up overseas for thirteen years, and constantly traveling for my job until age 34, I don't feel like I restricted my life too much.

Sure, there were nights in New York City when I declined invitations to save $100 on food and drinks. But for the most part, I feel like I spent enough to enjoy life.

Further, buying my first property at twenty-six took me into $464,000 of mortgage debt. So in a big way, I spent way more than I had! And because I loved this two-bedroom condominium overlooking a San Francisco park so much, I felt like my money was well spent.

Balancing our spending before and after having kids is a tricky one. However, if we've got a financial plan before having kids, we'll likely lead a financially responsible life before and after they arrive.

It's up to parents to constantly educate their children about the realities of life. We must explain how the decisions we made while we were younger led us to our current situation today. And if all else fails, we can differentiate between our money and their money.

If they want something beyond the norm, then they should figure out a way to get it on their own. To end, you may get a kick out of the Rich Kids Of Instagram show. I truly do wonder how these kids feel when the cameras aren't rolling.

Reader Questions About Having Kids

Are you a parent who is faced with the dilemma of wanting to live it up but also teach your children good financial habits? If so, how do you ensure any superfluous spending by you doesn't negatively affect your child's personal finance habits? What is a better way of spending money before and after having kids to maximize your entire lifestyle?

1) To master your finances, sign up for Empower, my favorite free wealth management tool. I've used Empower since 2012 to track my net worth, analyze my investment portfolios, and plan my retirement cash flow with ease.

2) If you have children or are thinking of having children, you'll love reading Buy This, Not That, my instant Wall Street Journal bestseller. The book helps you make more optimal decisions so you can live a better, more fulfilling life.

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21 thoughts on “Before Having Kids, Consider Spending Lots Of Money”

  1. We bought our kids brand new safe cars before going off to college last year. Recently my daughter asked me why I still drive the Subaru Outback and not a “fancy car”. Cars go for 200k miles with proper maintenance and I would rather have that money invested. My response was “honey we can afford to buy the Subaru dealership, but why?” do the math. lol
    Spend your money on experiences, travel, a nice home, and starting your kids off debt free after college. imo

    1. I don’t know CC. Buying your kids brand new safe cars they drive around in college is what makes a lot of kids uncomfortable. What message does it tell kids who likely have no income that they are driving around in a $50,000 average new car?

      Then again, if you’re rich enough to buy the entire dealership, maybe your kids are used to being wealthy, and owning a new car is not that big of a deal, especially if it is an economical new car.

      So what type of cars did they get?

      1. Your making a slight assumption that a brand new safe car has to be 50K. Due to government standards, pretty much any new car is going to be safe. And there are many new cars less than 30K MSRP. And even a selection under 20K:

        I know when our son went off to college (many years ago), rather than new, we bought a one year old Hertz rental car with about 20K miles from Hertz. Rental cars are (at that time they were, not 100% sure now) actually pretty well maintained by the rental companies.

        1. True. Although, still driving a brand new $30K car in college seems off.

          So the question we will hopefully discover is, what type of new car did CC buy for their kids.

          This might be where the Keeping up with the Joneses phenomenon starts!

  2. I think gratitude is a significant thing to all of this. Practicing gratitude every day for the things around us is important. I was paying golf with a guy one day and he said that I seemed pretty content and how I do it. I said practice gratitude. He looked at me like I was crazy. Then I asked him to name 7 things he was grateful for and he couldn’t come up with one. I said look at the blue skies , the green grass, see that hawk in the tree. Feel the wind, breathe in the clean air. My kid gets about everything but she is not spoiled but grateful. If she wasn’t I would stop doing it. We need to love our kids and they will follow our example. Words don’t teach.

  3. Airforcegav


    To answer your question, I suggest letting them be participants in frugality for achieving something special together, like a fantastic vacation. Set out the goal as a family, and let them “help” to achieve it. For example, decide together you will eat out once per week less for some period of time leading up to save that money for the goal. They dont need to know how much the vacation actually costs or how much they truly helped. Just that their actions and sacrifices directly impacted positively towards the goal. Then, when it’s time, they will feel pride and learn to work towards what they want. We took our daughter all over the world and had her help towards a special European Regent cruise for her 16th bday. I dont miss a single penny of that money and she is very money conscious, even now knowing how expensive it truly was. Best of luck!

  4. In my observations, kids don’t care about lots of the nice things that upper middle class and rich parents enjoy. Until in their teens, kids don’t really see any difference between a Toyota and a Land Rover, skiing at the local mountain vs Vail, a large house with a great view vs a normal surburban home with a simple fenced backyard. So don’t buy this stuff for your kids thinking it will enhance their experiences, justify it by buying it for your own enjoyment. And don’t worry so much about your kids picking up your expensive tastes yet. Filet Mignon and hamberger is just beef to little kids.

    Regarding whether you’re teaching you kid bad habits, it’s all about taking the time to talk/teach your kids. I’ve told my kid we made puchase trade-offs with our house. We justified buying a house with a nice view by budgeting for average cars because that was the trade-off we think is best for our enjoyment. And when our kid is making his own money, he’ll have to do the same with what he’s got. And if he wants more, he can work like the dickens, get an IB job, create a sucessful startup, etc. to fund his own desires if he wants more.

    1. I remember definitely being aware of the haves and the have Nots when I was in the sixth grade in Malaysia. The reason why is because the difference between the rich and the poor or so striking.

      The poverty that I witnessed was what drove me to start making some money in high school. It also drove me to study hard enough to get into aThe poverty that I witnessed was what drove me too start making some money in high school. It also drove me to study hard enough to get into a decent college.

      In middle school, I was embarrassed to drive around in my dad’s Paintless 1976 Datsun, with three missing hubcaps.

      But his frugality also put a throttle on what I could have or want. So I said every kid is different or kids are much more aware than we think.

      Talking about trade-offs is good though. We can’t have everything. How old is your son?

      1. I agree that stark contrasts can hit a kid’s self-esteem so my examples were more middle class vs upper middle class situations (which I assume is the most common situation for your reader base). Driving your 8 year old kid to school in a 7 year old Camry vs a new Bentley isn’t something most kids are embarassed about (and if they were, I’d say there’s some parenting to be done). Also agree that once a kid hits their teens, some may become hyper-sensitive about their image with middle school being the worst.

        My kid just turned 18 so we’ve been most of the kid raising cycle.

        1. Agree about the subtle differences.

          I guess environment/surroundings has a much bigger impact. And if you grow up in a poor country, but are not poor, that impact is even larger.

          It was jarring for me growing up in Malaysia, to witness the massive wealth disparity versus relative parity here in the U.S.

  5. Damn Millennial

    Hard to be perfect in life I think being the best parent comes down to showing up and giving your kids a loving home environment. Most kids wont be paying attention to money until like you said middle school age. Gives you a solid 10 years to do whatever you want then 11-18 you can cut back on spending and teach them other values. Even then nothing is perfect.

    My goal is to make sure I am doing the best I can to be happy myself so it naturally spills over to my kid. I think a lot of parents try to change so much about their life for the kids that they become a shell of themselves.

    To the money point most of your readers probably saved a ton wile younger so they might regret not travelling while they could and doing other adult things, I do see that a lot.

    For me I am trying to not over stress about saving at this point front loading savings takes off pressure.

    Even MMM bought a Tesla this week, I think everyone learns they can spend on what they want if they work hard and invest.

    1. Yeah, maybe, instead of limiting the splurge to after age 3, parents can spin aggressively until about age 10. But I’m not gonna take that risk.

      The farthest I would push splurging is until age 7. I can already clearly see entitlement developing if you give them too many sweets and toys. They expect more and more.

  6. Ms. Conviviality

    I’m the bad aunt that spoils her nephew. For his 3rd birthday, I got him one of those kiddie cars that he can drive because he is absolutely in love with all things that have wheels. About a week later, he says to his mom, I want my next monster truck to be black. My sister then tells her son that your aunt spent a lot of money to give you that gift. You’re very lucky to have such a generous aunt. He responds to his mom, “It’s good that you work a lot.” It was impressive that the three year old was able to relate the fact that to make lots of money one must work a lot. I know my sister is very conscious of not wanting to spoil her son so it seems that it’s clicking for him.

    1. That is impressive he made the connection at age 3 between work and being able to buy toys!

      Fun to a fun aunt. I hope to be a fun Uncle this summer, when my nephew visits.

  7. I still remember a tidbit from when I was quite young. One day my father came home and announced that he would no longer purchase soft drinks for the family. We were given a choice of home brewed ice tea or kool aid like drinks. He kept canned soft drinks in the garage (always bought on sale) for his packed lunches but they were off limits to us. We never even tried to sneak one.
    I remember coming home one day and seeing the Mr. Softee ice cream truck. I ran upstairs, grabbed my allowance, and ran to buy a soda. By that time I was used to ice tea and I did not even enjoy the soda. Last time I ever did that. Father knew best!

    1. That’s a great story. It shows the power of lessons taught by parents while young and how we easily absorb them!

      So many times, my son will bring up some thing that he learned from us one or two years ago that I totally forgot about. Kids are always watching and observing!

      We need to leave by example, not just talk talk talk and lecture. This is one of the reasons why I believe in the saying “have children and the money will come.” as well as my new quote “ have children and the body will come.”

      Eventually, we’re gonna want to get in shape to try to increase our chances of living as long as possible.

  8. Sam,

    Like you, I grew up in a pretty frugal family. Only water at the table we went out for dinner. Those habits stuck with me and they’ve helped me on my financial journey. So, I’ve tried to set the example of being frugal with my children and to teach them good financial habits. In our conversations, I try to add some gems of financial wisdom, especially from your book.

    But now that my kids are getting older and things have become financially better, I’m starting to relax a bit more. For my oldest, I only have 4 more years, or about 226 weekends before she leaves for college. With the busyness of life, it’s not a lot actual time together. So I’m living it up a little bit more. I let the kids have drinks half of the time when we go out.

    1. Thanks for picking up a copy of my book and sharing some of its wisdom!

      The busyness of life is right. If your kid is 14 years old, I assume a lot of her personality and habits have been developed. If we have raised responsible children by then, who understand the value of money, we could be more spendy in our ways.

      We can also remind them we are spending our money, if they complain why they can’t spend in the same way.

      Enjoy the last four years! It’s been over five years since I coached high school tennis and all the seniors in the group are now working. Fascinating to see what they are doing with their lives.

  9. Little things do rub off on us. I remember going shopping with my dad and how he would always look for generic brands for everything from food to clothing to save money. “Why pay more for the same type of product?” he would always say.

    He would also boast about things like how he was still wearing the same coat or pair of jeans for over 10, 20 years etc. I definitely adopted that. Although I get a few new items of clothing each year it’s usually b/c I’m replacing something that got too tattered or shrank in the dryer too many times. I still have many items in my wardrobe that are over 15-20 years old, but that I’ve taken good care of.

    Another interesting thought that just came to mind is how my dad would never let me see him smoke. He had a bad nicotine addiction that he couldn’t shake until he ended up with cancer in his 60s. I always knew when he went to smoke because I could smell it afterwards, but he did his best to hide it. He’d go somewhere out of sight and would try to rinse with mouthwash afterwards to disguise it. Thinking about it now, his sense of shame with his bad habit, his frustration of failing to quit countless times, and always talking about how bad smoking made me hate smoking as well. Even though he was a long-time smoker, his attitude about it influenced me. I’ve never smoked a cigarette in my life and I’m quite thankful about that.

    1. Thank you for sharing these examples. I have definitely code forward to hell you spend money and desire things.

      Also, to be able to have the same clothes in your closet for the past 15 to 20 years shows the benefits of staying in shape.

      You’ve inspired me to look into my own closet and try on some oldies as well while I suck in my tummy a little :)

      The saying at Goldman Sachs, when we first joined as first-year analysts, was to buy oh well fitting suit, and wear it for the next 10 years.

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