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.
How Much Money Earned Since Having A Baby
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.
But going back to work after having a baby is not for everyone. My wife has no interest in full-time work despite having her last baby in 2019. As a result, the pressure is on me to financially provide.
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.
Related: Dear Older Parents, Having Kids Late Might Be The Best Choice After All
Protect Your Children With Life Insurance
If you're a parent or soon to be parent, please consider getting life insurance to protect your children should the worst happen to you. It's easier than ever to compare quotes for life insurance. Simply visit our trusted partner Policygenius and get free quotes in minutes with no obligations.
Bust through the myths of life insurance, protect your loved ones, and sleep easier at night. Life insurance is easier than ever to get nowadays. And it's quite straightforward.
Readers, have you found that you've made more money after having children? What are some other financial benefits of having children?
Great article. As a loyal reader, however, I expected you to mention daycare savings to be completely negated by the night doula costs. I suspect most perspective parents have not yet fully budgeted for the wonderful “happiness ROI” of the night doula / nanny / nurse. For the first 60-90 days of a newborn’s life, the cost is perhaps more than a year of day care.
Granted, a two-income family might pay for BOTH, the daycare and the night doula. What makes the night doula decision unique to early retirees is the desire to maximize freedom and quality of life. Absent the doula, the transition from total freedom to 6 feedings per day is especially abrupt!
It would be great to see an article that estimates the cost of a child at certain ages. For example how does a 3 year old compare to a 13 year old
I make 31,000 a year. I pay 750 a month rent. It took me 20 years but I finally saved up 200,000 cash to buy a house. Mortgage is impossible for me – 410 FICO score. When I started saving the average price around here was 90,000. Now the average is 260,000 or more. I can’t even find a move-in ready house outside of a ghetto for less than 210,000. My wife is pregnant and I worry about the future. Any advice?
A lot of truths in this post. We have 2 kids in middle school. They’re not as expensive as people think. 529 plan was the biggest expense. After that, it’s not that bad. A lot of clothes are passed down or from garage sales. Lots of free activities around town for kids. We do camping, hiking, biking. We have no cable, Netflix, Amazon Prime, subscriptions, etc. We utilize the library for books and movies. Kids hang out in the backyard or play with friends from the neighborhood. We do mini road trips, don’t fly much, no exotic vacations, drive used average cars. We’re extremely happy with our lifestyle. Our budget has stayed roughly the same for the past 15 years, with kids. As our income increased, the extra income goes towards investments and paying off debt. No lifestyle inflation. People will make it as expensive as they want to make it. It’s their choice.
Good reminder on funding the 529 plans. I superfunded both plans years ago, so I forgot about this expense!
Good to hear expenses for your family have been roughly the same for the past 15 years too.
I’m the father of two kids. I can say that most of what you say is true – travel by airplane with young kids sucks! Mine are older now and once you can give them iPads and occasional snacks it’s a ton of work! You go out less when they are young, mainly because your tired. But as they get older that reverses and they do eat a ton! Get ready to have multiple cereal boxes on hand.
You can mitigate costs by finding groups that are sharing clothes, toys, gear – kids outgrow things fast so many things are in good shape still and most parents want to pay it forward by sharing. Look for those groups. Elementary school is a great time for parents – lots of friends made during this time, something to look forward to!
Finally, the biggest expenses by far are child care and private preschool/school. Everyone does what’s right for them, no judgement, just know that if you can avoid those you will be way ahead.
Enjoy them while they are little! Before you know it you will have teenagers and that is a whole other thing! :)
Hah! Thanks for confirming my lack of enthusiasm for flying with two young kids. I already dislike flying due to all it entails. Just love those 4-hour flight delays for a two-hour flight whoo hoo! It’s like playing roulette with torture flying in the U.S. sometimes.
I’m going to put my laptop away and play with the kiddos now :) Too bad it’s so foggy and drizzly now. Summers in SF I tell yah.
I have a saying….I don’t recall if I came up with it or picked it up from someone else: “Nothing focuses the mind like having a family depending on you.” Kids are expensive. Approximately 1/3 of my annual take home pay will go to high school and college tuition this year for 3 kids. But here’s the thing, retirement savings for me and my wife is on track. The kids’ college savings is on track. The kids should come through college with no debt and I’m teaching them to save and invest. The point is, if I didn’t have kids, I wouldn’t have worked as hard to achieve the financial goals. I joke with my wife, if I had no wife and no kids, I’d be living in a box on a beach in Mexico.
Hi Sam,
I love your content for your interesting viewpoints. I’m curious to know how you financed your multiple SFH purchases in short time frames without a W2? Are you using no doc loans?
I made a really similar life decision as you, purchasing a fixer, larger house in SF, but realizing that I don’t want to live through the renovation headache, and want to purchase a different one, without immediately selling the one we just bought.
I don’t see how I can purchase a 5th property using a traditional mortgage and lender, but non traditional rates seem killer.
I didn’t finance one of the properties. I paid cash to help me get $150,000 off asking. I have a post about it somewhere. I also had two paid off properties and one with a small mortgage. Hence, getting a loan in 2020 wasn’t a problem.
So that’s the other thing. Don’t be too leveraged up all the time. If you are, you will be tapped out and won’t be able to take advantage of real estate opportunities that may come your way.
For example, there is this great house that I want to buy right now. Unfortunately, or fortunately, I won’t be able to get a large enough loan to buy the house.
We decided not to have kids for a number of reasons. We’re ok with it. I’m happy for parents that want and have kids. We need better citizens in the US, parents are the gateway. Great piece Sam, even if I don’t have kids. I love your never ending optimism. There’s no upside to pessimism. BTW. What do you think about the Fundrise innovation fund and Fundrise iPO ( internet public offering? Looks like they want to get into venture capital with the innovation fund. Do you mind writing a piece on the aforementioned. Do you think the iPO and innovation fund are as good investments as their standard private REIT options? Really curious to hear your views on the matter.
For the IPO, I wrote some thoughts on it before here. Participation is limited by how much you invest on the platform for risk exposure. There will be no liquidity.
I will need to do more due diligence about the innovation fund.
Thank you for taking the time to respond. Very grateful.
So many truths Sam! I used to love traveling everywhere and going to concerts and performances. I didn’t anticipate how much that would change after having kids. Right now I have almost no desire to travel or pay to go out somewhere. There are so many easy, free things to do with kids and the amount of joy they get is equal if not much more than taking them somewhere that costs hundreds or thousands of dollars.
I think I will want to travel some once my kids are in their tweens, but still doubt I will want to travel anywhere near my past frequency. There are always so many birthday parties and school events throughout the year that keep things interesting and busy for now!
Not having children for financial reasons is like staying in your parent’s house forever because it saves money. You’re technically correct, but you’re also not a man yet. With rare exception, having biological children is necessary to be a fully self actualized human. It’s a shame many smart people have been tricked out of it. Yes, it’s tough financially and logistically, but as this article points out, it’s not as expensive as you think. And the things you do have to give up were petty and (ironically) childish anyways.
Hi Bryan, i can agree with the reasoning if money is the only reason not to have kids. I’m thinking that others out there might have additional reasons. And biology isn’t everything. Preferences area million over, and there’s a kid for every pot. Please don’t judge those who choose not to or can’t have children.
By the way, i never feel that Sam is judging in his posts about family and finance. That’s I’ve of many reasons why I keep reading.
I agree. Not everybody can or wants to have kids. Not good to judge others for their personal family decisions.
Huge benefits In not having kids too. Tons more freedom for 18 years! That freedom is extremely valuable, especially if you originally had a lot of it.
Thanks for sharing your thoughts Amanda.
Many people choose not to have children for many reasons. I hope you’re not suggesting such people are subhuman, because that’s where you’re heading with your offensive, outrageous and evidence-free generalization. Following your “logic,” the next step is clearly to round up the non-breeders and put them in camps so they can’t contaminate society with their evil inclinations…
I felt plenty like a man without having kids. I just felt like I gained more purpose once the kids came. Made work more meaningful.
But that’s just me and my state of being at the time.
George Washington had no children of his own. Are you saying he was never a fully self actualized human? He had stepchildren, but none of his own.
If having children made people self actualised, there would be zero abandoned, abused and neglected children.
Spot on for us as well – until this year we saved money in many ways.
However, we have now reached the turning point where our children are over 5 and it’s easier to travel, they do more activities/sports, go to summer camps, etc, and so our budget has ballooned up.
But for the first 5-7 years it wasn’t as bad as it is made out to be.
I think the huge difference for us compared to some others is the lack of daycare needs. Being able to afford to have a stay at home parent is the big win in so many ways.
You pick the most interesting topics, Sam!
2 quick things I wanted to point out –
1) Your parental lifestyle (FIRE/more stay-at-home parenting) enables some of the savings you describe (eating at home, not sending to daycare). For two working parents, this equation is completely the opposite – they *need* to spend more money to buy these services (of course, one hopes the extra income more than compensates for these extra costs!).
In fact, there is post on your own website that talks about the situation for such working spouses (I believe it’s a HCOL city but the children described are young – 3 & 5 y/o)
https://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/
2) Not traveling when the kids are very young is very much a choice. There are tremendous advantages to traveling with children (airline seats are cheaper, at the very young ages bassinet sets are “free”. Hotel rooms are cheaper because the occupancy isn’t counted). Babies especially with their sleep habits don’t “suffer” from jet lag like adults do, and will be happy close to their parents no matter what travel / activities the parents happen to be doing.
Yes, they won’t have long term memories but the parents very much will! And there will be photographs!
Like everything else, there is choice involved and understanding your personal situation and desires (which is the spirit of your excellent post) is very important.
Indeed. Travel is a choice. And I HIGHLY recommend couples who want kids to travel as much as possible to get it out of their system before having kids!
I now get enough joy seeing other people’s travel pics and watching real estate travel shows on streaming. It’s very satisfying, especially when I know we don’t need to pack and prepare.
And yes, the cost of raising children in HCOL areas is high. But parents will find a way to make things work.
It’s incredible how much money you saved. We also believe that children are as expensive as you portray them to be. We still spend the same amount, if not more, on restaurants than we did before our 3-year-old was born. We haven’t skipped restaurants because she is well behaved.
We took her to Europe for two months when she was one, and she behaved admirably. That was the first trip we took after retiring. We traveled to Belarus, Lithuania, and Spain to see family and discover new places.
We haven’t taken any major international trips since because of travel restrictions, and with another on the way, :) the trips will be postponed again soon.
Your idea of waiting until they’re five to take them on big trips so they can remember them sounds fantastic.
Congrats on #2! Glad the trip to Europe with the little one was great.
My wife and I had a blast in Spain. 10 pm tapas and sangria at Baba Reba in Barcelona will always be a top highlight. Is the Sagrada Familia done yet? I don’t know!
The Sagrada Familia isn’t finish, still any years of works (maybe finish in 2026).
Dang! Guess I haven’t missed much then. But 2026 sounds a lot closer now than when I visited in 2016.
Thanks! Oh my time is flying by. He or she will be here by early December!
We enjoyed Barcelona and were bummed that we didn’t get to make it to Valencia. My wife loves it there and swears by their paellas. We had to cut the trip short.
La Sagrada was still been worked on back in September 2019, when we were there. Not sure if it’s done by now.
Timely post! Our first born’s due date is tomorrow
I can’t comment yet on how our kid will influence our attitudes toward work (which is waning, we’re both in our early 30’s, I’m at a FinTech start-up, she’s in Healthcare), but we’ve felt a massive pull to to generate more passive income and improve the quality of our home.
We’ve also been more cognizant of keeping our bodies healthy. Health implications don’t just impact us anymore, so we’ve been keen to eat healthier and change our mindset around how to prioritize our time with respect to working out.
We just wrapped up a 6 month renovation that turned our partially finished basement into a mother-in-law suite / AirBnB. I grossly under estimated the amount of pain it would be to remodel our home while being pregnant, but it sure is satisfying now that it’s done. We are hoping the AirBnB in addition to our rental property (first home/condo purchase turned rental) will give us enough comfort for my wife to quit her job and focus on building more passive income and child care.
Thank you, Sam for all of the great content.
Oh wow! Congrats Chris! Best of luck on a smooth delivery.
Great timing on getting your remodel done before the baby comes. That is HUGE.
I’m pretty sure your motivation to provide will go through the roof. And your priorities about time / work / family will change. It’s evolution!
Your articles often seem so personally timely for me. While I have achieved a comfortable level of financial independence through UK rentals/renovations I have been looking to use the time gained to work on creative projects (as a former magazine editor and writer) and now I am staring down the deadline barrell of the first of these and have not been going full gas. I think looking to my family for motivation is a wonderful perspective and I had not thought of that (for these projects anyway, it very much was for FI). Thank you.