Cost of Family

15 Dec 2015 01:54

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The best investment I ever made was the decision my wife and I made to start a family. With three loving children and 17 years of child raising under our belts I am a firm believer you can’t place a dollar on the unconditional love as well as all of joy and sorrow.

However, while I cannot place a dollar value on having a family I can determine the cost. I tallied up all the expenses over the years and discovered that each child on average costs $10,176 annually after taxes. With my oldest about to enter college I’m sure that number will increase but for now it is the basis I have to work with. Since I have three children my annual total costs is a whopping $30,528. From a pre-tax perspective it represents a little over $38,000 of my gross salary.

Another decision my wife and I made that we have no regrets was for her to leave the workforce and take care of our children fulltime after the birth of our third child. That was 14 years ago and she only recently returned to working part-time for minimum wage earlier in 2015. Her attention and caring of our children was without a doubt the biggest contributor as to why our children have been happy and successful to date. Similar to starting a family, it is impossible place a dollar value on her contribution but can determine a cost. To support an adult dependent it costs on average $9,600 annually after taxes or $12,000 before taxes.

Adding it all up; four dependents cost $40,128 annually after taxes and $50,000 before taxes! This sounds expensive (and it is) we still found ways to sock away a little cash to invest and save. It is not easy, there is lots of coupon cutting and the occasional vacation had to be sacrificed but we managed. With only one income there were definitely some tough and financially scary years. Through it all we somehow kept the kids fed, clothed, educated, healthy and happy.

No-one said raising a family was easy and to be successful self-sacrifice is a must. That is why I truly admire fellow bloggers who are raising a family but are working to save and invest for a better future. Its an incredible challenge to overcome.

There are also quite a few successful savers & bloggers with no children who have stories of climbing out of debt and amassing a small fortune or on the road towards financial independence through aggressive saving and investing. While I respect these folks for eliminating debt and turning around their lives I cannot admire them as I do not see it as that difficult. You simply dig deep, cut costs, and save regularly. Not a hard formula.

If I decided to forego a family I’d be looking at an additional $40,000 to invest annually and since my wife would have remained in the workforce that number would probably have been closer to $60,000. If we add up just the contributions over the last 14 years that comes to $840,000! If we assume a 5% annual return then that investment would be worth closer to $1.3 million!

If you are thinking about starting a family but are afraid of the costs don’t worry. An amazing thing happens when you become a parent, you learn self-sacrifice and how to manage real challenges. The education and experience from raising a family is so immense and will continually re-pay you in the future more than money ever will. If you are looking for inspiration here is a list of bloggers who are saving and investing while raising a family:

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