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Kids are pricey. As I mentioned a while back, I’ve easily spent $30,000 per year since my twins were born, just on child care and/or preschool. I estimate that by age 6, the twins will have cost us a cool quarter of a million, easy.
You and some readers might be thinking that this is ridiculous. But no. It’s quite reasonable. Consider. Mrs. R was pregnant with twins and it was recommended that she take some time off during pregnancy. Reasonable. She took 6 months off before the birth and 6 months off after. That’s one year’s salary: $80,000 at the time.
A few months after the twins were born, when it was time for Mrs. R to get ready to go back to work, our options were nanny or daycare. We went with nanny because our work schedules were unpredictable, it provided more focused attention for the boys, and as a bonus they developed Spanish language brain connections. Was this a move for the ultra-rich? Not really. The cost in our expensive east coast area was roughly the same between any respectable daycare and a full-time nanny. Reasonable. The market rate: $30,000 per year. 3 years = $90,000.
Then, 2 years of preschool and camp for 2 kids = $60,000.
$80,000 + $60,000 + $90,000 = $230,000. Boom.
I haven’t even started adding up diapers and beds and food. So as you can see, it’s very reasonable that we spent $250k before Kindergarten.
So let’s take a look at this USDA calculator that claims to show how much it costs to raise a child. On the calculator, I selected 2 kids, 2 parent household, high income (defined as over $107,400) living in the northeast. Here’s what it spit out.
It tells me that it’ll cost $21,610 per year, per kid, or $43,220 total per year. For 18 yrs (Ages 0-17), that’s $388,980 per kid, or $777,960 total.
I did my own worksheet using the same categories. When in doubt, I estimated higher than the national average. I also just started with the total amount for 2 kids, because with twins it’s easier that way. At the end I divided by 2 to get the per kid amount. I also included the year of no salary for Mrs. R. Here’s what I came up with.
$1 Million dollars!
My numbers are higher than the calculator and here’s why.
- I estimate double the national average for food (I already know from the money checks that we spend a lot on food).
- Higher transportation costs for the travel we do.
- A bit less for health because of our good insurance options.
- Double the national average for child care and education. I already mentioned years 0-5. So what’s the deal with $9,333 for free public school?
- Well, we will pay $1,000 per month for extended day so that we can both work (the school day is 9am-330pm, which doesn’t work for us). This will go on at least until middle school. $12k per year.
- Add in $2,000 per year for camp — a very low estimate — and now we’re at $14,000 per year for 12 years. Pro rated over 18 years = $9,333 per year.
- I’m not including any other school costs. So even if they get out of extended day and camp when they’re older, I’m sure there will be expenses. All reasonable.
Even if I’m estimating high by 10%, I’m STILL over $1MM for 2 kids.
Factors could change. If we live overseas again, maybe we won’t pay for housing for a couple years. But we’ll pay more for travel in that case. And I’m not even counting college savings, which we’ve blogged about already. So yeah, $1 Million.
Here’s where there may be groans from our dozen or so readers who might insist I’m crazy. Which means all our readers, ha ha. “Run the numbers again! Don’t travel so much! Have a parent stay home!”
First of all let me attempt to preempt any further groans. I’ve seen the articles on Financial Samurai that say people earn $200k and don’t feel rich, or $500k and are “scraping by”. The comment sections contain a mountain of vitriol about tone deaf privileged people.
I get it, I’m not tone deaf. I grew up working on a farm. So let me be clear: I’m not complaining.
We spend our money according to our priorities, which I’ve laid out in my philosophy of life post. We know some of our choices are expensive and we are not crying about it. We know we’re fortunate. We pay our taxes. We give to other squirrels.
If someone reads up on my background and still wants to groan, ok. I’ll listen. Here’s what I’d say about food and travel and having 2 parents work.
Spending money on our kids is a meaningful, conscious choice, and we try to spend on things that bring our family together — good food and life-enhancing experiences.
Work is also important to us, and it would make no financial sense for one of us to stay home. Mrs. R, for example, will earn more than $2 Million over the 18 years, not counting countless retirement and other benefits that don’t show up in her salary. Same for me. We wouldn’t save money by staying home.
There are other benefits to staying home and I won’t disparage them at all. It’s a personal choice. I’m just making the point that from a financial perspective, it’s not close in our case. For the record, both Mrs. R and I would continue to work even at lower salaries. We enjoy our work more than we enjoy 24/7 child care or housekeeping.
I’d add this, for anyone on a similar career track or in a similar part of the country who might be discouraged by these numbers. We’ve actually seen some interesting work benefits. Mrs. R and I have talked about how having kids helped us be more content and focused at work. We’ve both been promoted (twice in Mrs. R’s case) since having children. It’s possible that without kids we’d be more restless, searching for meaning in other ways, perhaps ditching our careers to teach yoga or open a coffee shop.
Paradoxically, having kids might have been a net financial gain!
So there you have it Penny. What do you think? Understandable? Ridiculous? What say you?