Here are some of the realizations I’ve had about finances from being a parent:
1. Yes, kids are expensive but… The personal finance section of any financial publication will be quick to remind you that raising a child can cost upwards of $250,000 from birth through age 18. When you include the obscene cost of daycare or the lost income from a parent who forgoes work to stay home with the kids, this number is probably on the low end for many.
But having kids forces you to prioritize your spending habits. You don’t have nearly as much time to worry about yourself (which is actually kind of liberating) so you don’t get to spend as much money on yourself. You don’t get to go out as much (which is also kind of liberating because the older I get the less I want to go out anymore — 22-year-old me can’t believe I just said that).
Most young people don’t have their financial house in order. Having kids will force you to rectify that situation.
2. A king-sized bed is the key to a happy marriage. No one gave me a heads up that once your kids turn 3 or 4 they start migrating to your bed in the middle of the night. Our 4-year-old has some sharp elbows and a case of the leg shakes when she sleeps so having a king-sized bed has been a lifesaver when this happens.
I’m still not sure how we’ll be able to manage when our twins get a little older but so far the extra room helps. If you have kids and don’t have a king-sized bed, do yourself a favor and buy one. Sleep is harder to come by with little ones so every little bit helps.
3. I struggle with the right balance between providing a nice life for my kids and spoiling them. I should still have a few years to figure this one out but it’s something I truly don’t have an answer for. Maybe there is no right answer but this seems like something that will require plenty of give-and-take over the years. One of the biggest things I hope to impart to my children is a sense of gratitude for what they have.
4. Automating your finances is more important than ever. I’m a huge proponent of putting your finances on autopilot to ensure you pay yourself first and don’t incur any unnecessary fees from late or missed bill payments. Life becomes so much more chaotic with little ones running around that it would be easy to let much of the day-to-day management of your finances slip through the cracks. Automating saving, bill pay, periodic reminders, etc. is a simple yet hugely effective way to stay on top of your finances without having to micromanage.
5. Pay up for experiences but many of the best experiences are cheap or free. Kids can have fun just about anywhere. My daughter loved our trips to Disney and Mackinac Island but she probably gets just as excited when we go to our favorite bakery on the weekends for seventy-five cent donuts or the local park. Experiences don’t have to be expensive to be memorable.
6. Saving money isn’t everything. We had a friend tell us recently they realized they only have 13 or 14 summers remaining with their kids until they go off to college. These types of statements are terrifying to me and have really changed the way I think about saving versus spending. I’ve been a saver since a young age for some reason and have always had a healthy savings rate since I joined the working world. But having kids made me realize this mindset can be taken too far.
I can appreciate the discipline required to save 60%-70% of your income at a young age but the FIRE lifestyle doesn’t interest me as someone with little kids. I used to feel guilty spending too much money on certain things because I could do the simple compounding in my head about how large that money could grow over multiple decades.
Now I’ve learned to let it go. As long as my wife and I are automatically saving in our various buckets everything else is guilt-free, especially when it comes to the kids.
7. Spending on convenience is money well spent. I spend money on services I wouldn’t have dreamed of shelling out for 5-10 years ago. I’m perfectly capable of mowing my lawn but outsourcing the landscaping duties saves me a couple hours on the weekends to spend time with my family. Buying time, even for things I’m physically able to perform, is a great investment.
8. I understand how easy it could be for parents to undersave. It’s basically impossible to ever truly prepare financially for having kids. Most people have a hard enough time taking care of themselves financially.
I’m sure there are parents who sacrifice their own retirement savings to send their kids to college or private school. I’m not saying that’s a wise move (it’s not) but I totally get it. You should put your own oxygen mask on first when it comes to your finances but I understand why many parents sacrifice their own financial well-being to help their children get ahead in life. This has probably had a larger impact on the state of retirement savings in the country than most realize.
9. I have no idea how much college is going to cost for my kids. I like to say that financial planning is a process, not an event because much of what we’re doing in all of this is guessing using probabilities and incorporating new guesses and probabilities as time progresses. Saving for college is no different. No one knows if the insanely high inflation in the cost of college will continue but parents also have no idea what college their kids will go to, how much financial aid they’ll receive, what types of scholarships will be available or if their kid will even go to college in the first place. The only certainty I have from now until they’re 18 is the time horizon and the understanding that there will be a handful of course corrections along the way as new information comes to light.
10. I’m positive my views about money & kids will continue to evolve. Life is not static so neither are your responsibilities, priorities, spending habits, savings goals, or risk profile. I’m sure the finances of having kids will change as they get older and I learn and adapt. I just have to remind myself that life is all about balance — spending vs. saving, enjoying the moment vs. delaying gratification, time spent working vs. time spent with family, and things we need vs. things we want.
These competing ideas are never in equilibrium but that’s the goal.