How Much Does Starting a Family Cost? About $1,000,000.00+ For the Average Family
Yes, you read that correctly. In writing a blog post on the question of how much does starting a family cost? We have an answer of around $1,000,000.00 for the average person. The math behind this, is actually fairly simple, and when we are accounting for the time value of money, lost investment appreciation on your finances, and the fact that you are using your time on raising a family, driving kids to soccer practice, etc. rather than using it to say, build a company that could be worth $100,000,000.00 one day, and we have a massive pile of money that you are sacrificing to raise a family. It may very well be worth it, and you are probably better off taking the risk and having a family, in comparison to dying alone with like $50,000,000, than you are going all in on building your own company. With that being said, you very well may be giving up your true potential by doing this, and it may also be true that the time commitment of a family is what you have to sacrifice, at least in your 20’s, 30’s and 40’s, in order to put in enough effort to do something like say, build a company worth 9 or 10 figures. And so, in this blog post, lets look at the money behind starting a family, and how you can have a husband and wife budget that gives you enough of a cushion between you and life when planning to start a family.
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How Much Does Starting a Family Cost? Between $250,000 and $1,000,000 Per Kid
What you will read most commonly online regarding this number if that each kid is going to cost you around $250,000 a pop before college. That number is just cash expenses, factor in market appreciation, healthcare cost, lost capital gains on your income, and the lost time that you are not spending working, that you are instead spending with your family, and you likely have $1,000,000 or more per kid that you are giving up. Could be well worth it, but that’s just the hardcore math figure behind the answer here. Some of the major costs of each kid include the following:
Gas to take the kids to school
Possible private school
Activities (karate lessons, horseback riding)
Increased home cost to support the kids
Increased Healthcare costs (dependents on Insurance, doctors visits, etc.)
More Food Costs
Cost of bedding, cribs, basic care, etc.
The list goes on and on. When you really think about every single nickel and dime that goes into having a kid, the money will shock you. Say it costs an additional $2,000 per month. Throw this money into retirement accounts at an average market return of like 7% annually, and over say 20 years, you have a considerable sum of money. Something like $2,000,000+ that you have missed out on!
How to Budget for Your First Newborn
Considering having your first kid? Let me give you some hard knocks financial advice for how to plan for this:
Get a budget ready to go for all of your household expenses, and figure out what your monthly cost of the kid is going to be. Over estimating is better than under estimating. With two working parents, I would say to budget around $2,000 per month initially per kid.
Before having the kid, make sure you have at least a 12 month emergency fund sitting in easily accessible cash.
Try to move any DRIP plans or any reinvestment models into something that will pay you a dividend so you have additional cash flow in case you need it.
Learn how 401K loans or IRA loans work just as additional emergency funds in order to prepare for the worst.
Get the best Health Insurance and Car Insurance that you can get prior to having your first kid.
Budget for healthcare and hospital expenses from the first day of pregnancy and beyond.
I would recommend trying to get to $100,000 in liquid cash, with dividend stocks, with the ability to pull more out from retirement if absolutely needed, and having something like $100,000 in household income in order to feel comfortable and to be able to maintain having a true American family. And I know these seem like high numbers, but go any lower than this, and you will be riding the struggle bus in no time, set yourself up for success and prepare as much as possible beforehand.
If you have a joint income, remember that this also means day care costs and expenses, Be sure to factor in at least $1,000 per month in expenses off one of the incomes for this as well.
How to Keep Expenses Low With Kids
Things like sending the kids to public school rather than private school, minimizing entertainment expenses, and opting for cheaper recreational activities can really go a long way towards helping you save more money. Remember, if you go this route, you now have mouths to feed, you need to be ruthless in your pursuit of saving money and making money, and every single penny that you and your partner can get your hands on counts. Whether a second job or income source, or the ability to put extra savings away, do all that you can.
How to Invest And Plan for College
The best way to plan and invest for kids college is probably the slow way. Given education inflation and the current tuition and student loan bubble that we are in right now, I would almost venture to say that college may not be as common as it is now in something like 2040 or 2050 when your future kids start going to college. Back on topic though, the slow way of building up 529 plans is best here. What I would recommend doing, if you can, is to put $100 per month in an S and P 500 index fund, from the time the kids are born, until the time the kids go to college. With market appreciation on this money, you should be able to hit something like $100,000 or $150,000 in that 529 plan, and that is tax deferred and tax free growth if you use the money for education expenses only. This is the best way to do this, and aside from something like a Florida Prepaid plan, is probably going to be your best bet.
Final Thoughts On How Much Does Starting A Family Cost?
And that’s how much starting a family is going to cost! For one kid, budget at least an additional $2,000 per month in expenses, not including the increase in housing costs that come with another bedroom, and expect millions of dollars in additional spent money with a family of several kids, should you take this path. For more details and information on all things business and finance, read on or subscribe to our blog for additional details and information!
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