Conventional wisdom tells us that kids are expensive. Really expensive. The world constantly bombards us with stories about just how much kids can cost — According to the USDA it costs $245,340 to raise the average child to age 18.
The personal finance community generally takes a negative view of huge expenses like this… a gigantic speed-bump on your way to Financial Independence. Nope, kids don’t get a lot of love from the personal finance community.
Remember though, all those gigantic numbers are just an average. I’ve argued in the past that kids really aren’t that expensive, it’s parents that make them expensive. I strongly believe that.
But what if we were to turn this whole equation on it’s head? (Charlie Munger is right — invert, always invert!) Instead of thinking about children as a burden, what if we thought of them as an investment?
What if there were actual benefits to having kids? An investment with real returns, but not necessarily financial ones…
What prompted me along this line of thinking was a recent study published by researchers at the Sweden’s Karolinska Institute. The study found that aging adults with children lived longer than those without…and we’re not just talking months. We’re talking about extra years — 2 years for men and 1.5 years for women.
What’s more, none of this is really new news — previous studies support the findings of Karolinska study: parents generally have a lower risk of death throughout life.
Parents just live longer than non-parents. While the study doesn’t provide any concrete reasons why, they do speculate that elders live longer because of care received from their adult children. That’s a reasonable hypothesis, but I think there’s more to it than that.
This study created a really good conversation at our dinner table — Mrs. Tako and I decided there could actually be hundreds of different factors involved.
If the risk of death is lower throughout life (as other studies have shown), there must logically be other factors besides ‘elder care’ that keep younger parents (like me) from dropping dead.
That’s when the mental shoe dropped for me — those factors are non-financial benefits that aren’t getting measured by monetary studies or longevity studies.
Benefit: A Healthier Lifestyle
I’ve mentioned this in past posts, but my kids have made me lead a healthier lifestyle.
Instead of going out partying on the weekend like sooo many singles do, we stay-in and cook our own food. We drink fewer processed beverages. Heck, I’ve even quit drinking alcohol entirely.
We eat and drink healthier as a result of having kids. Does this contribute to longevity? More than likely!
But what about physical activity? When the weather is nice in the PNW, we try to spend as much time out-of-doors as possible. We go on family hikes into temperate rainforests. We walk to local parks. We go to local beaches. We ride bikes. We try our hand at fishing and clam digging.
Result? A physically active, and peaceful lifestyle.
Simply put, as parents we want our kids to be active and healthy. Ultimately this means we (the parents) have to be more active and healthy as well! It’s a win-win!
Benefit: Child Labor (aka The Helper)
In the old days, child labor used to be a way of life. The vast majority of people lived on farms, and farms required lots of manual labor. Kids were almost a necessity to survive.
These days very few people live on farms; machines now handle most of that labor. But that doesn’t mean kids can’t help around the house. On the contrary, I think it’s more important now than ever that children contribute.
My kids are just starting to get to the age when they can help around the house, so I’m only just started to see these benefits.
Right now, they’ve learned to clean up their toys, and help clean-up dishes after a meal. They actually love helping-out around the house.
Eventually I expect this will translate into mowing the lawn, taking out the trash, vacuuming, helping with the laundry, cooking meals, and doing other odd jobs around the house.
As they get older, these chores make great “first jobs” for kids — they learn about trading labor for money. In return, parents realize the benefits of very cheap labor.
Benefit: Tax Benefits!
It’s tax season right now, and I’d be absolutely remiss if I didn’t mention there are significant tax benefits to having kids too!
In the 2016 tax year, parents get to claim an exemption (really just a deduction) of $4050 per child. On top of that, there’s the child tax credit, which realizes another $1000 per child.
But why stop there? If you have some earned income, you can claim the the child and dependent care tax credit, which can reduce the cost of childcare by 35%!
There’s also flexible spending accounts to considered — Many employers allow you to put pre-tax money into a dependant care flexible spending account.
Mrs. Tako and I put in $5000 of pre-tax money into a flexible spending account annually, and we use it for paying daycare costs. While that’s not a ton of money, every little bit helps.
There’s even more interesting child tax benefits available for those who are willing to get creative. Famous tax guru/blogger GoCurryCracker provides an excellent example — he employs his son for modeling services. Yes, modeling…for his blog. Otherwise known as putting pictures of his kid on the blog. Up to $6300 a year tax free.
Yes, when it comes to tax benefits, kids can be quite lucrative.
It doesn’t take a genius to realize that traveling with kids requires more money. Extra plain tickets, extra hotel rooms, extra meals at restaurants…and so forth. That’s the conventional way of thinking anyway…
But there are other schools of thought — For one, you learn to travel a little differently with a family. Instead of staying at high-priced resorts on our trip to Hawaii, we rented a house with a pool instead.
Renting a house (or part of a house) instead of a hotel room is a huge advantage, and I can’t recommend it enough for traveling families.
We book the places we stay using services like HomeAway or AirBnb (use that affiliate link for a free $40 travel credit!). Most of the time it’s more than competitive with hotels.
Typically we look for a kitchen, fridge, washer & dryer, and a nice play space for the kids — outdoors if possible.
But what about airline seats? Those don’t come cheap, right? Well initially babies (under the age of 2) fly free (not counting taxes). After age 2 is when things get more expensive — there’s no discounts for being small and significantly lighter than most adults.
Fret not dear readers, that extra cost is driving me to learn about travel hacking. While I’m not a travel-hacking expert, given enough spending and sign-up bonuses, it should be possible for an entire family (like mine) to travel for free.
It is possible! Root Of Good (Early-retired dad and travel hacking guru) is traveling with his 3 kids in Europe this summer. I can’t wait to see his final dollar amount for this huge trip.
Ultimately though, I think most families travel less. When children start school, there’s only a few short breaks during the school year when families can really travel.
Not only that, but traveling during those periods is significantly more expensive…because every other family is trying to travel at the same time. Airlines and hotel operators know this, and jack prices up accordingly.
Yes, traveling less is kind of a downer… but traveling less also means you’ll be spending less. That translates into less money consumed and more dollars invested!
Benefit: A Bridge To The Modern World
Have you ever played tech-support monkey for your aging parents? Have you ever had to show them how to work a cell-phone, or buy things cheaper off Amazon?
I know I have. I do this all the time for my elderly parents. It can be frustrating, but I also realize it’s invaluable help for them.
As their child, I spend hours teaching my parents how to exist in the modern world. They didn’t have computers, cell-phones and the internet when they were growing up — the help of a child that’s savvy to such things can be a HUGE benefit to aging parents.
When I’m older, I hope my kids will be around to provide this same kind assistance for me.
Maybe the future will be filled with holographic displays, self-driving cars, home automation robots, and near-instantaneous delivery of goods ordered online. It sounds cool, doesn’t it?
I’ll probably need some help programming my robot’s smart neural networks to wash the dishes.
Benefit: Be A Better Investor
Children can also help our elders invest their money more efficiently — Recently I was watching this CNBC interview of Warren Buffett, and it really emphasized this point for me.
He was talking about his giant Apple investment, and Warren professed to changing his mind about Apple from watching his grandkids — Yes, children taught Warren Buffett what an incredible business Apple was.
But you don’t have to be an incredible investor like Warren Buffett to learn from your kids — Simple stuff, like learning about index funds is incredibly helpful too! Back in the old days, index funds didn’t even exist. Unless your parents are astute investors, they’ve probably never heard of low cost index funds or ETFs. Teach them!
Want to be a better investor in your old age? Listen to your kids and watch what they do with their money.
I can almost guarantee there will be new things to learn about investing in the future.
The Ultimate Benefit: Early Retirement?
For me, having kids brought one of the greatest benefits ever — financial independence and early retirement. Once I had kids, life ceased to be about my selfish needs. Suddenly, I had a really damn good reason to achieve early retirement.
Time with family became more important than the size of my house, or the make of my car. Our savings grew quickly as a result, and we reached financial independence while still in our 30’s.
Yes, I could have spent my remaining years working really hard to achieve big promotions at work. Maybe I’d have a nicer house as a result.
I could have put in those crazy-long work hours for the rest of my life … at least until I finally had a heart attack in my office chair.
To me, that kind of life just sounds really depressing now.
You see, it’s not just the number of years that matter….it’s the quality of life you have in those remaining years that matters more.
I gave up the office life, and chose that better quality of life … and the studies actually say I’ll live longer. That’s awesome!
Yes, it’s a life with a little less spending, but a lot more family time….and other benefits.
Those benefits I don’t hear people talking about often enough because they’re so focused on the financial numbers.
So I say let’s reframe the conversation and stop all this negative talk about children. Instead of thinking of kids as financial burdens, let’s think about kids as investments — Investments in your future and the world’s future.
They might just be the best investments you’ll ever make.
What do you think? Are there benefits to children that I forgot? Tell me about it in the comments!
26 thoughts on “Investing in…Kids?”
I think having children teaches you about Love, Patience, Kindness and forgiveness…on a whole new level. To see someone grow and change from birth is amazing, as humans we screw up…many times. Our children gives us a new perspective on relationships that is invaluable. I wonder if most parents make better friends, teachers, Doctors, bosses etc. I also think children bring a happiness that nothing else can bring. Those wonderful memories are truly unmeasureable. It’s not all good (ESP right now with my 15 year old daughter, teens are crazy) but I would never trade being a mom for the money.
Awesome post! After being up all night with my toddler who wouldn’t sleep, I needed the boost from Mr. Tako! I am reading this post while making coffee. For me life was not complete with a kid. Will I have another? Who knows, but the one I have is definitely making me healthier.
Another benefit- Instead of nights out on the town we go over to friends homes who also have kids. Benefit- Community. Now I am making close friends with his friends parents and we are watching our children grow together. Studies show your social circle is also key to a long and healthy life.
Nice modeling pics!
Great post! I had no idea us parents lived longer. Now if only how much longer you lived was proportional to the amount of kids you had…….
Some other benefits I’ve realized from having Toddler BITA around: I’ve become a more patient person. Negotiating with a small child makes negotiating with a full grown developer a piece of cake. A little kid reawakens your sense of curiousity and adventure. When I watch her exploring the world with gusto, finding all sorts of little things endlessly fascinating, it reminds me to ask more questions and be more appreciative of the little things. We recently oohed and aahed over a banana slug. I haven’t had a slug bring me happiness for about 30 years now. Slug generated happiness is much cheaper to come by than shopping generated happiness.
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Really cool article. You are right that the focus around the personal finance space with regards to kids is usually on cost, which overlooks the many benefits that kids can bring.
I’m really curious about the methodology of the study. I wonder if rather than kids causing us to live longer there is something that causes both. For example, maybe people that are healthier or more financially stable are more likely to have kids and more likely to live longer. Really interesting find, Mr. Tako! And thanks for your optimistic outlook on the benefits of kids!
Yes…I have noticed many times that families are not well represented in this community. Generally because it does cost more.
Thanks for reminding us of what we are receiving while working a little longer for FIRE.
And a question…what part of the PNW do you live? My family and I live in the Gorge. Give me a shout if you want up to meet up and take the kids a hike.
We’re up north of you quite a bit. Closer to the Seattle area.
Your kids ARE SO CUTE, Mr. Tako. 🙂
I really like your perspective on this. People loooove to talk about how expensive kids are, but I think it’s what you make of it. You can go super-crazy and buy loads of stuff or you can let them play with leaves.
I’m definitely more of the play with leaves kind of guy. I practically grew up outside…so I know how optional most of those “expenses” really are.
Cute pics of the kids! I see all those benefits you’ve gone through in my household as well, Mr. Tako. I don’t think I ever heard that parents live longer than non-parents though… bonus!! 🙂
Our vacations have changed somewhat since our daughter came around (she’s 6), but I don’t think they’ve changed in a bad way. We still do awesome trips like cruises, but we’re not drinking until we pass out – we’re actually enjoying the sites together.
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The best way to confirm that you know a subject backwards & forwards is to teach that subject. The preparation & questions can expose holes in your knowledge and prompt you to review the subject thoroughly. If you teach your children about personal finance, I suspect you will discover gaps in your knowledge that you weren’t aware of.
Speaking of investing in kids, can you do a primer post on 529 plans & your thoughts on them? It seems you don’t have any for your children or perhaps you are excluding them from your net worth posts.
Yes, the kids have 529 plans, but I just don’t include them in my net worth (technically that’s their money).
I believe the trustee of the plan can repurpose the money for educational purposes to anyone they want (including themselves). Technically it is not the kids money either.
Regardless I assume you plan on paying for your kids college so money in a 529 is money that would otherwise come from your taxable accounts. My curiosity is how to set one up and who can contribute to one.
How are you getting around the requirement for the dependent care tax credit and FSA to be used to allow you to work? (for those who don’t know both parents must be working during the care you claim) Is the blog or some other self employment enough to cover that portion of day care time? We axed dependent care FSA for this year for fears about how we could show my wife’s working time against the FSA. I will be reevaluating in fy18 as her freelancing gets off the ground and claiming the dependent care credit if we have any weeks where she really gets moving.
We put our son to work today vacuuming the house. There are glimmers of little helpers;)
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Hooboy…get ready for the hordes of people who either can’t have kids or choose not to have kids to freak out from this post…
Coming from a different angle, as someone who doesn’t (yet) have kids, I would say “healthier lifestyle with kids” is subjective. There are parents who live extremely unhealthy lives, as well as non-parents who do. Basically if you were unhealthy before kids, having kids doesn’t really change that. But if you prioritized your health before kids, chances you won’t put that on the back burner after having them either.
As for your point about “Once I had kids, life ceased to be about my selfish needs. Suddenly, I had a really damn good reason to achieve early retirement”, wish you could talk to some of my friends with kids. They use the same reason for NOT achieving early retirement. “Oh, I could, but you know I need to send my kids to private school, send to to piano lessons, etc. All that costs money. I’m being less selfish by continuing to work and providing them a better life”. Meanwhile, all the kids want is to spend more time with them, but they hardly ever do because they’re always at work.
I also don’t believe that people are “less selfish for having kids”. I know parents who are just as selfish before and after kids, and childless couples who ended up starting orphanages to save 22 kids. So whether you have kids or not, you can be selfish or selfless regardless. It’s also pretty insensitive towards people who want to have kids by can’t. So they’re not exactly “selfishly childless” by choice.
I like how you teach your kids the value of helping out around the house and don’t treat them like little emperors. This is one of the most important things a parent can do for society. By raising kids that will contribute instead of spoiled brats.
Love the pictures of your kids. They are SO cute 🙂
Well, I can only speak to my own experience and the benefits I see — I definitely feel like these are the benefits I saw after we had kids.
It’s not all bad news, but I can’t really speak for other parents and how they decide to “parent”. For some, being a parent might be akin to financial enslavement.
But I’m trying to focus on the positive stuff here!
If you ever have kids, I think you might be surprised just how much having those little boogers really changes a person. It’s huge.
Narcissists might be an entirely different story though…
I’m pretty sure we are wealthier because of our kids.
I would not have gone back for more schooling and doubt we would have bought a big multifamily property in a great area near schools either without them. That purchase and the family home we owned before this one, which we rent out now, have added more to our net worth than the capital would have if invested in stocks, and we have no out of pocket costs for shelter on an ongoing basis. I also agree I would not have been as motivated to retire early without them.
That all said, there are studies on happiness that show in the US parents are not as happy as non-parents (unlike the EU where the results are reversed), largely in part to the stress of work and childcare. Strong motivation to retire before having kids if you can!
Yep, working those long hours can stress anyone out!
Whoa, not sure what happened to my earlier comment. Please delete the PO Box number..
Anyway, I said I’m pretty sure our kid made us less wealthy. I still love being a dad, though. It changed me quite a bit.
As for longevity, I think it’s because kids check on their parents more. It’s tough to navigate the modern world when your 70+. Kids help a lot even if they don’t live nearby.
I am planning on getting kids within the next few years while I am on my early retirement journey – and even though I think it will be a significant cost and might set me back a few months/years, I am happy to hear that kids generate good returns as well! 🙂
Yep, they’ve got pretty good returns…just not monetary ones!
Great post and pictures!
We’ve really enjoyed traveling with our kids. Just my experience but kids helped me at work too. I felt I was working for something a little more important than my company’s mission because I also started supporting a family. We were just talking on my blog about paying for college, which I consider an investment in them as well.
Thanks for the post –R
I really liked your post and the points you were making were good. Kids do connect you to the modern world, and make you rethink your priorities in life. Some people in the PF community are against having kids, while others are all for having kids.
In some cultures, children are supposed to pay for their parents retirement ( after all, you footed the bill for the first 18+ years). So children were a de-facto retirement plan. I guess in the highly unlikely scenario that I am low on money in my 70s/80s, but the kids have decent careers, you can always mooch off them ( 6 sigma event protection). Plus, they are a lot of fun to be around ( with lots of responsibilities as well)
After kids, especially the first kid was born, most parents have changed their perspective of life. Parents need to learn how to balance their life. If there are more kids, parents also need to learn how to resolve problems among kids. All of these tactics will help in daily work.
Parents need also learn how to save money and earning more money by investing or hard work.
Parents hope their kids could be achieving FIRE. I started to invest index funds for my kids and started to teach them financial knowledge.
Nice article,and I can say with experience our three kids were very inexpensive. We ate at home. Our house was where the neighborhood kids came to play, since I never really grew up and was a fun dad. Public school is cheap, and university was basically free for all three to obtain their undergraduate degrees, and they paid for their advanced ones themselves. My wife, who retired from teaching to be a stay at home mom taught them to be great students and that brought us free tuition and room and board for all three. I convinced them to major in vocational degrees instead of liberal arts degrees so all got good jobs. And while that all in progress my job provided more than enough to allow us to retire a little early, though I delayed that because work was just too much fun! Anyway, you are right, those average kid costs don’t really apply to people like you, keep up the great work.
I think kids are an investment for the soul, purely non-financial. I can’t deny that having a kid is a deeply ingrained psychology that’s probably the result of thousands of years of evolution. It’s nice knowing that you created someone who you can love unconditionally with your whole heart.
Hey Tako san, I definitely feel that having kids has added to my daily dose of stress. I can’t imagine my life without them anymore of course, but I’ll be the anecdotal data point saying that there is also a cost (non financial) to having kids.
I’ll echo one of the comments above: studies show that parents in the US are less happy, while in Europe it’s the opposite. I’m from France, but my wife is from Japan and we mostly follow her rules/culture when it comes to raising the kids. From my perspective, the Japanese way (which seems very similar to the US way) puts a lot of pressure on the parents. My French friends are always surprised when I tell them about the amount of stress I get from having kids, and from my perspective it’s all from the cultural difference. A lot of the things my friends do with/to their kids would not be considered acceptable from my wife’s perspective (generally: prioritizing yourself over your kids when it comes to pretty much everything)