One of the main reasons why people delay having children is its cost. Rising prices for daycare, preschool tuition, and shelter plus the opportunity cost of not working, partially explains why our population replacement rate is declining.
The cost of raising children worried me so much that I actually had a $1 million net worth target before having kids. In retrospect, having such a large net worth goal was clearly unnecessary. But the goal did reflect the type of financial anxiety I felt while working in New York City and San Francisco.
My wife and I weren’t ready to have kids until we were in our mid-30s. San Francisco was already expensive enough. To add a child then when we already didn’t have enough time or energy due to our respective occupations would have been unfair to our kid.
Therefore, we logically waited until we had more wealth and more time before seriously trying. We were familiar with the often-cited statistic that it takes $250,000++ to raise a kid to adulthood.
After several years of parenting, however, I now realize there are some unexpected financial benefits of having kids I didn’t anticipate. Further, having children isn’t as expensive as you might think. For folks thinking about having kids or new parents, this article is for you.
How Having Children Saves Us Money
Here are five financial benefits of having children.
1) We don’t travel by plane anymore.
My wife and I spent on average $25,000 a year for six years traveling internationally until our son was born. Now we travel to the California Academy of Science Museum, a seven-minute drive away. The cost to attend every day is just $120 a year.
The museum kept our boy entertained for up to two hours between ages 0 – 3. When we didn’t go to the California Academy of Science Museum, we went to a free public park with a playground. When we were not at a public park, then we were playing on our deck or in our back yard.
Since kids don’t remember hardly anything under the age of three, the return on travel just wasn’t there. They already don’t sleep well at night. Introducing time zone changes and new sleeping arrangements only make their sleep worse.
Besides, my wife and I have already traveled to over 60 countries. Further, I grew up in five countries before coming to America for high school. We were traveled out by the time our kids came.
The ideal age to travel with kids is after they are five years old so they can remember their experiences. Therefore, we won’t be traveling by plane as a family until our youngest turns five in 2025. In the meantime, there are plenty of great places to explore within a 5-hour drive of San Francisco.
From flight delays to long lines to unruly sick passengers, flying is already an unpleasant experience. To then fly with children just isn’t something we look forward to.
Total savings: $2,041 /month, $24,500 a year
2) We eat out way less often.
Because it’s difficult to eat out with babies and young children with short attention spans, we tend to eat more at home. We used to go out to eat three times a week because San Francisco seriously has some of the best restaurants in the world. Each meal for two would usually cost anywhere between $30 and $150.
Total savings: $1,000 / month, $24,000 a year
3) We go less often to shows, movies, plays, and sporting events
A two-hour show plus commuting now feels like an eternity away from our children. There is this weird inherent alarm that goes off every time we’re away from our children for longer than three hours a day. As a result, doing the whole dinner and a movie thing was out for the first couple years of our son’s life. We can do dinner, but no show. Or we could do a show, but no dinner. Can’t have both!
Further, if we went out, we needed to pay for a babysitter. Therefore, today we mostly just watch Netflix or other streaming shows on TV after our children have gone to bed. If you’re looking to watch a new show, check out Severance on Apple TV+. It is deliciously sad, creepy, and real.
You might want to look out for my Love Is Money TV idea I’m pitching as well! So far, the Netflix executives are ignoring me. Don’t know what’s up with that!
Total savings: $500 / month, $6,000 a year
4) We maximize the value of our house.
When we were working or traveling, our house was maybe utilized for 12-14 hours a day. Now that we work from home and hardly travel, our house utilization rate has skyrocketed to ~20 hours a day. Someone always has to be home to take care of the kids.
And if one of us isn’t home, that person is only gone for at most four hours at a time. The best time to own the nicest house you can afford is when you have kids. It’s backwards to upgrade to a larger, nicer house once the kids leave the nest.
Our old house used to cost about $5,500 a month all-in when it was just the two of us. The two of us could have happily lived in a $4,500 a month place or less. Therefore, we were wasting about $1,000 a month of space. With the birth of our son, our waste went to $0 as we fully utilized the house every day.
Total value increase: $1,000 / month, $12,000 a year
5) We didn’t have to send our son or daughter to daycare.
Full-time daycare costs $2,500+ a kid here in San Francisco. That’s $30,000+ a year in pre-tax expenses. Given we were two stay-at-home parents before the pandemic began, we were able to save $30,000+ a year in daycare costs for two and a half years. But to keep our sanity, we did spend $800 a month on childcare assistance.
We’ve also both been stay at home parents since our daughter was born in December 2019. Hence, again there’s been no need to send her to daycare for the past two-and-a-half years either.
Total net savings: $1,900 – $3,800 / month, $22,800 – $45,600 a year for five years and counting
Total Financial Benefits Of Having Children
If I add up all the savings from our now homely lives, we’re talking about ~$100,000 a year in financial benefits for having children! Now I’m sure some of you are scratching your head and thinking not spending money is not the same as saving money. True, but we set aside these expenses before having kids.
Of course, children also come with additional expenses such as food, diapers, tuition, lessons, higher healthcare premiums, a bigger house, and so forth. But for the first three years of each child’s life, the expenses weren’t that much.
Where the expenses can really pick up is if you decide to send your kids to private school. Here in San Francisco, private elementary schools can run $30,000 – $40,000 a year. If we send both children to private elementary school, that’ll be $60,000 – $80,000 a year. Ouch!
But $60,000 – $80,000 a year is still less than the $100,000 a year we were saving or anticipating spending.
How Having A Child Can Make You Money
“Have children and the money will come,” is an old saying across many cultures.
So far I’ve discussed ways our children save us money or increase the value of what we already have. But the most important financial benefit of having a child is the tremendous amount of motivation they will give you to work harder and invest smarter.
There’s nothing a parent wants more than to provide for their family and ensure their kids get the best opportunities possible. Therefore, you will naturally find ways to make more money.
Since our son was born, for the first two years, I never worked so many 5 am – 8 am and 10 pm – midnight shifts. These were the only times when I could get any work done since a writer needs quiet!
There were so many times when I wanted to just take it easy with my writing, podcasting, or business development activities. But every time I saw my babies, my energy gauge would recharge.
It’s hard for me to quantify how much more money I’ve made since having children. But I would say at least $90,000 more a year since 2017 because that’s the cost of healthcare and preschool tuition for two kids today. I made it a goal to make more money to cover these additional expenses.
Having kids also made me focus on building more passive income. We were fine with $150,000 a year in passive income for the both of us. But when our son was born, I focused on getting to $200,000 a year in passive income by the time he was three. And when our daughter was born, she encouraged me to generate an additional $50,000 by the time she turns three as well. I did so by generating more income online and reinvesting it.
Investment Courage Due To Having Kids
Before we had kids, we were perfectly fine living in our cozy 3/2 fixer we bought in 2014. We raised our son there from 2017 – 2019. However, with a daughter expected at the end of 2019, it propelled me to buy a bigger house.
Though I had sworn to never again buy another fixer, in 2019 I bought a larger fixer to remodel and live in to shelter our growing family. The opportunity popped up unexpectedly and I knew there was a lot of financial upside to the house. I just didn’t want to put in the sweat equity again. But thanks to my daughter, I did.
Remodeling was an extremely painful process, but the home is now done. After adding more space on the ground floor, we were able to boost the rental income from $6,700 to $8,000 a month. This remodeling for more passive income has turned out to be a good financial move, especially given the current inflationary environment.
But why is the house a rental when we planned to live in it? Because after a year, what I realized was the downstairs renovation for the house would take way longer than expected. We didn’t want to live through a noisy and dusty remodel with a baby. There was one time we didn’t have heat for 10 days because we had to remove and install a new furnace.
As a result, in 2020 I decided to buy a newly remodeled place with a better floor plan for work-from-home parents. Although it may seem nonsensical to a year later buy another house, I felt strongly about having more finished space for my family given we didn’t know how long we’d be locked down.
Having a family gave me the courage to jump on a property listed on April 14, 2020, only a month into lockdowns. I then spent about two months waiting and negotiating to get a price $175,000 under asking. The key was to build a relationship with the selling agent during the many hours of private showings and let him represent me. At the time, it was a very risky investment.
Based on how real estate has performed since 2019, having kids helped me generate significant real estate equity gains. Without the addition of a second child, we wouldn’t have bought two more properties when we did.
Below is the estimated value of the house purchased in 2019. The estimated value excludes the value of the remodel and the addition of 300 square feet of living space.
Maintaining The Motivation To Create
Finally, between 2020 and 1H2022, my kids are what kept me going writing and editing my new book, Buy This, Not That. The heart of the pandemic was a trying time for so many families. With preschool shutdown we had our hands full with a newborn and a three-year-old.
So often did I want to take a break from my publishing schedule of three times a week on Financial Samurai. I also got tired of recording a podcast a couple of times a month. But I soldiered onward because I wanted to create an archive of information for my kids to read and listen to when they are older.
I didn’t want my kids to see me giving up. Instead, I wanted them to know that even during the most uncertain times, their parents found a way to make things work. Maybe they will bring the book to show-and-tell one day.
As for the financial benefit of creating, it’s hard to quantify. For me, creating is also a form of healing. I find writing good for my mental health. And good mental health is priceless.
The ~400 articles I’ve written since the beginning of 2020 will likely generate passive advertising revenue for a while. And if BTNT hard copies sell well, it could generate a stream of royalty income for years to come. But most of all, I’m just happy to have helped people with their finances or entertained them during this historical period.
Children May Be More Affordable Than You Think
If you’re afraid of having children due to the added financial responsibilities, I wouldn’t worry so much. After food, clothing, bottles, and toys, babies/toddlers can be as cheap as you want to be. You will figure out how to provide for your family because you will do whatever it takes.
Having a kid incentives you to work hard, work smart, and stay in better shape. They provide you with an immense amount of purpose. Before having kids, all I did was make money for myself and partly for my girlfriend. And once I had enough to live a comfortable lifestyle, the motivation to work and make lots of money faded.
I’m pretty sure if I had kids while working in finance, I would have kept on working. Suddenly, I wouldn’t find doing the same old thing for 13 years so meaningless anymore. My chances of getting paid and promoted would have risen given I would have been more collaborative instead of indifferent towards the end. As a result, kids would have made me way more money in my career. Shucks! Should have had them sooner.
It doesn’t really matter what you do for a living. Just knowing that every dollar you make can help support the people you love the most is huge. So if you want to make a lot more money, you might consider having lots of kids!
Just make sure you can handle the energy requirements to raise kids. Kids might not be as expensive as you think. However, kids will drain your energy quickly if you decide to take care of them.
For those of you who don’t have kids, rejoice in your freedom! You are just as lucky as well.
Protect Your Children With Life Insurance
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Readers, have you found that you’ve made more money after having children? What are some other financial benefits of having children?