I just read a very interesting article: Kids: Bad investments, big returns where the author looks at the financial impact of having a baby. The letters from readers were also very interesting; apparently, you are not allowed to look at the financial impact of having children, or you are a Bad Person, and should be sterilized immediately (to paraphrase).
I know we’re living in a culture that is elevating kids and childraising as never before, but shouldn’t people actually have some rational thought about finances before having kids? This does not strike me as a bad thing.
Of course people should look at the financial impact that *any * life decision will have, including childbearing. And the estimated costs are, IMHO, a bit on the low side.
The last two paragraphs in the article pretty much sum it all up.
And this list is only the early childhood part. Just as good is when you can relate with your grown-up son or daughter as an adult.
Agreed. And to put the benefits of having children in dollars doesn’t make cents. Mrs. Gnu and I choose not to have children for equally non-rational reasons.
Gary Becker has done a lot of work in analyzing the economics of what seem like non-economic decisions. In the developing world, there is a higher return on kids since they help out with raising money, and they are expected to contribute money to their parents in their parents’ old age.
The thing with economics is, you can always throw in “utility” to balance everything out; the value of all those good feelings can outweigh the actual costs.
I think you should definitely consider the financial impact that a child will have on you and plan accordingly but I don’t think you should let it rule your decision.
We had to make sure we had some money saved up for the period between having the baby and Mum going back to work (about 6 months). With my current salary and living expenses we were about $100 short per week, so it was necessary to have that covered before taking the plunge.
I don’t know about that. Check out their methodology for estimating the cost of housing and transportation for your kids … all they’re doing is checking the amount the household spends on these, and divvying by occupants.
In other words… if you’re paying $300 a week rent and you have a baby and stick her crib in the spare room … suddenly she’s “costing” you $100 a week to house her. Of course, what’s really happened is just that you got used to living with a little less room in the house - there is no actual net difference in the amount of money going out of your bank account each week. And housing costs are the biggest single factor in their analysis.
Of course, they’re explicitly not countint “opportunity cost” in there, which probably dwarfs all the other factors in most cases, and, IMO, this makes the rest of the financial analysis a bit pointless
One of the things I took away from my one course on the federal tax code was that you should have two kids, no more, no less, as that’s where the benefits maximize.
Actually, finances were the controlling factor in our decision to wait to have our first until our mid-30s: we wanted to be sure that my income was high enough, and our costs low enough, so that we could support the three of us on one salary. And we’ve done so - Sophie starts school next year, Laura will do whatever she wants to do with the spare time (she can work, she can volunteer, she can do nothing) and that will be that.
But we didn’t achieve this without running the numbers first. You can’t cheat life.
Those respondents are fools. For middle-class and below, the most expensive decisions you will ever make will be how many kids you have and when you have them. Life decisions are also financial decisions, and the fact that the respondents don’t realize that makes me sad to see yet another generation of financial-illiterates being raised.
Interesting phrase, financial-illiterates. I know exactly what you mean; the people who max out all available credit then apply for more, with no plan for re-payment; the people who let their mortgage run its full term without making any extra payments (even by simply changing from monthly payments to semi-monthly or bi-weekly); the people who get the largest house and mortgage the banks will give them (and much more than they need) and make themselves house poor. Canada is full of financial-illiterates - we absolutely love credit here (my husband and I being no exceptions.)
Sure, having kids isn’t all about the finances, but if people think just really wanting a baby is enough, they are indeed financial-illiterates.
If there comes a time in the future where we decide to consider having children, I’m going to make damn sure we make enough money to give them a nice life. That’s prudent.
A cost-benefit comparison is different. Kids are an “investment” in that you expect them to eventually become something more than crying poop factories. You spend money on kids, you don’t make money. You trade money for something intangible. The OP article throws around plenty of monetary figures, but when it comes to the question of whether or not it’s “worth it,” there are as many answers as there are (potential) parents.
Being fruitful and multiplying is one way (in a sense) to live forever, or at least a very long time. Would you pay $269,000 for immortality? (without the burden of boredom)
I’ll shut up now.
The largest problem with the cost/benefit analysis is that in modern Western Civilization it’s contrasting a utilitarian argument with a moral one. In these instances, the utilitarian side never “wins.”
The utilitarian being that it costs a hell of a lot of money to rear children to adulthood and they usually don’t come close to paying it back vs. the moral argument being that having children enriches you as a human being and provides new productive members of society.
That’s the ultimate apple vs. orange. Sometimes doing “the right thing” costs you money. And even taking that into account it’s still the right thing. Not to say that being a parent is the right decision for everyone- absolutely it’s not. But for those who desire children and will be great parents, the amount of money it will cost really doesn’t enter in.
I’m sure that if you did a cost/benefit analysis for belonging to a church it would look like a horrible idea, too. You pay some large percent of your income to the church and get back, what, some free food at carry-ins every so often. Yet you never read arguments that it’s stupid to belong to an organized religion because you end up losing money on the deal.
I don’t get it. Is there really anyone out there who is not aware of the fact that having children is really, really expensive?
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Long Time First Time:**
Except, of course, that any economist will tell you they generally DO pay it back.
Someone who chooses to have children is exchanging money and time in return for the utility of having children. In this sense, “utility” meaning the economic term; as a parent, I derive utility just from having my daughter around. That’s a tangible benefit. Forget any “moral” argument - who cares? The exchange being made is money and time in return for the enjoyment of having kids.
Asking if children is a good “investment” is like asking if going to the movies is a good investment. You’re not going to get back any financial benefits for spending $20 on a couple of movie tickets; the economic issue is whether you expect to derive more than $20 in utility from the movie, as measured in enjoyment. With children, the question is not whether you expect to get any of that $269,000 back; in all likelihood you will not get a single penny back. The question is whether you’ll derive $269,000 of utility - as measured by the fun and happiness of having kids - from having the child.
In my case, it sounds like a bargain. $269,000 (which to be quite honest is a really, really high guess, but I’ll work with it) is substantially less than a decent four bedroom house around here. I like my kid a lot more than I like my house.
The author doesn’t seem to grasp this:
No, humans ARE economic creatures. Economics is correct, always has been. Humans are quite economically minded when it comes to kids, and they’re willign to pay a lot to have them because they value them a lot. Something is worth what someone will pay to have it.
