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For Financial Planning, Is It Better to Have Kids Earlier or Later in Life?

Have you ever sat and wondered, "Geez, I wonder how much it actually costs to raise a child?"

On average, it costs parents $233,610 to raise one child1. No matter how you slick it, that is a significant chunk of change for most people that substantially impacts their financial planning! If you and your spouse are wondering about the financial ramifications of having a child earlier or later in life, there are quite a few pros and cons to keep in mind - not just the hard dollar costs, but long-term life concerns as well.

Considerations About Having Children Earlier   

If you want to start a family, but aren’t sure about when, there are several financial reasons to have children earlier in life.

Lessen Your Chance of Getting Caught in the "Sandwich Generation"

The "sandwich generation" refers to people who are “stuck in the middle” between financially caring for their children and aging parents at the same time. This is stressful on an emotional level and it can wreak havoc on your financial planning for retirement. Because you're dealing with so many financial obligations between caring for your children and parents, you have less to put toward your own retirement savings. This could cause problems for your future financial independence and keep you in the workforce longer.

While it’s not a guarantee, having children earlier could help you avoid being part of the sandwich generation. Why? By the time your parents reach an age when they need help, your children are grown and you’ve gotten a decent head start on your savings for retirement. (Again, this is no guarantee and depends on the age of your parents as well). 

Greater Chances of Having Your Parents Help Out

It stands to reason that, the younger you are when you have children, the younger your parents will be as well. With today's millennials facing difficult economic circumstances - rising student loan debt, two recessions, rising healthcare costs, etc. - being able to afford having and caring for a child is no easy feat.

In Pennsylvania, for example, the average cost of infant care is $11,842 per year, or around $987 per month.2 For many families, childcare is simply not an option. Having parents who are on the younger side can be a big advantage. Grandparents who are recently retired but  still relatively healthy and active can be a huge help to new parents, saving thousands in childcare services. Plus, it can often be a win-win for recent retirees. Watching a grandchild can really help fulfill a sense of purpose in those post-work years. Plus, grandparents usually enjoy pitching in to help pay for things their grandkids need, from new clothes to contributing to a college fund.   

Considerations About Having Children Later

Now, here are a few reasons why it may make financial sense for you to have children later in life.

You Have More Time to Build & Establish Your Career

Having a child causes you to shift your priorities, which means making your family a higher and more urgent priority than your career. In a recent survey, the Pew Research Center found that 42 percent of mothers reduced their work hours, while 27 percent quit their job altogether. Furthermore, 28 percent of fathers reduced their hours, with 10 percent quitting their job to care for a child.3  

Starting a family later in life can allow both parents the time they need to focus on building a career, advancing in their desired career path, and excelling on a professional level. This is more and more prevalent with the millennial generation than previous years. Once a child arrives, the shift in focus and priorities is drastic and immediate (and understandably so). While it’s still possible to work a full-time job while raising a child, you may be less able to work late, take on more projects, or pursue job promotions that demand more of your time and energy.

Plus, being more established in your career often comes with significant benefits and perks - more flexibility in your schedule, more vacation time, better parental leave, health insurance for you and your family, etc.

It’s Easier to Hit Your Savings & Financial Goals

Based on that $233,610 average it takes to raise a child, you can expect to spend a little more than $1,000 a month (when broken down monthly from birth until 17 years of age per child.1 So, how likely are you to have money left over that you can put toward important financial goals - like buying a home or second home, saving for retirement, yearly vacations, etc.

By choosing to have children later, you and your partner are giving yourselves a head start in making some significant progress toward bigger financial goals. Once a child comes along, it can be difficult to stay focused on long-term goals (especially retirement) because your immediate financial needs are more urgent.

If you are able to plan when you’d like to have children, it’s important to take some time in weighing the pros and cons of either option. Just like buying a home or starting a business, children are a huge financial undertaking. Talk to your financial advisor and let them know what your concerns may be. That way, you can run through some financial scenarios to figure out what may be best for you and your family financially.

  1. https://www.usda.gov/media/blog/2017/01/13/cost-raising-child
  2. https://www.epi.org/child-care-costs-in-the-united-states/#/PA
  3. https://www.pewresearch.org/fact-tank/2015/10/01/women-more-than-men-adjust-their-careers-for-family-life/

About the author: Financial Advisor Kyle A. Davis is a Chartered Financial Consultant® , Chartered Advisor in Philanthropy® , and president of Integrity Financial Group in Orlando, FL. He is a Florida  native and an advocate for financial literacy and practical money  education. When not assisting clients in planning for retirement, he  creates educational videos on financial wellness on his YouTube Channel -  https://www.youtube.com/user/financialplannerinfl

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

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