Kids Are Cheap, Kids Are Expensive

Often you’ll hear people talking about how expensive kids are. You’ll also hear a lot about how they don’t need to be expensive, and they can be so cheap.

Which one is true?

Like many things in life, both are true.

I started thinking about this after I noticed my Twitter friend Matt from Optimize Your Life tweeting this article from Done by Forty, about how his kids are really not “as expensive as you make them”.

Unlike many of my personal finance friends, I’ve been a mother since I was very young. Frankly, I don’t really know what adult life would be like without kids. My oldest son was born in October after I finished college. I was pregnant with him my entire last semester and he was born four months after I turned twenty-three years old.

And really, we didn’t have a lot of money at that time. I only made $35k per year, and after our son was born, my husband worked part time. We made under $50k combined for several years.

Living through this kind of experience gives me a different perspective on the whole “are kids cheap or expensive” debate.

Let’s talk about the different types of kids expenses, and why they’re both “only as expensive as you make them” and “darned expensive” at the same time.

Kids Are Expensive – Direct Costs

Having kids brings a certain level of base additional costs into your life. You need to feed them, shelter them, clothe them and educate them. You’ll not escape a certain level of increase in costs when you have to care for kids, although you have a certain amount of control in terms of how much of an increase there is.

There are two major areas where kids are, unquestionably, very expensive. Daycare and health care.

We have avoided daycare as a family for the most part (stay tuned for a discussion about opportunity costs), but health care is undeniably expensive. I’ve been to the emergency room a few times. One time one of my kids might have eaten Tylenol (luckily he didn’t), one scratched cornea from little ones playing with a wooden spoon, and one cut his finger open on a dropped glass cup.

That’s not to mention all the other medical expenses. Medical insurance is more expensive for the “family” option vs. the employee only or employee plus spouse option. My kids have had to go to the doctor for fevers and various illnesses, which are not free. They’ve also had a number of prescriptions for said illnesses.

And my oldest son suffered from food allergies for years, necessitating regular visits to an allergist in addition to more expensive food options avoiding dairy/eggs/nuts. Plus, of course, the annual epi-pen purchases.

On the daycare front, we avoided it, but most people cannot/do not. The average cost of daycare varies widely depending on your location, state, type of care, age of children, hours per week in care, and the number of children in care.

And the expenses don’t end when they head to public school. There’s summer, all those vacations, plus the school day doesn’t line up with the work day. So although your costs go down, they don’t disappear until your kids can stay home by themselves.

You can avoid daycare costs – but it will actually cost you much, much more money. How so? In that area that’s almost impossible to quantify – opportunity costs.

Kids Are Expensive – Opportunity Costs

Do you remember back when I talked about the ups and downs of almost avoiding childcare? It was there that I mentioned the thing people almost never think about. Opportunity costs.

Avoiding childcare direct costs by having a parent stay at home, work part-time, or working an opposing shift has tremendous opportunity costs. Let’s not forget about the opportunity cost of not going for a higher-paying but demanding position that leaves you less time with your family. And losing the flexibility to just up and find a new job in a new location. Also, losing the ability to take on tremendous risk by leaving a job to start a company/work for a startup/change careers.

These costs are almost impossible to quantify. If you currently earn, say $30k per year and become a stay at home parent for five years, you obviously lose out on $150k in income. But you also lose out on raises or promotions you would have gotten in that time. You’ve lost out on the contacts you might have made, and they could have led to better opportunities.

Looking at my own life with kids, I can see several significant examples of opportunity costs:

• When I finished college, I was six or seven months pregnant. Most of my peers were heading off to new jobs in their industry (I was an accounting major). I, on the other hand, stayed with my $35k per year job so I could have health insurance for the birth and maternity leave.
• When I finished my MBA in 2013, I stayed with my company in my job. Partly because I funded my MBA through tuition reimbursement, and had to stay there a few years after to avoid having to pay it back. But also my husband was still recovering from his near-death experience in 2012, he wasn’t working, and I had a family to support.
• My husbands income has been highly sporadic the past 15 years, with third shift/part time/stay at home parenting. That means he’s in a very different situation on work opportunities that will be availabile to him once the little guy heads to school.

That’s not all the opportunity costs, but those are the big ones. I wouldn’t be surprised if it totaled hundreds of thousands of dollars. And our time as parents is no where near done, with a three year old in the house.

Kids Are Cheap – Optional Costs

The first area where many personal finance folks focus when talking about how “kids are cheap” or “kids are only as expensive as you make them” come from optional costs.

Now, optional costs tend to easily blend into the next arena – grey area costs. But bear with me for a moment while I talk about optional costs.

Your kids need food, shelter, health care, child care, education, and clothing. They need to be safe and feel loved.

But there is a whole host of things they don’t need. They may really want them. You may want your kids to have them. You may decide they’re a priority for your kids, and well worth what you’re spending. But they are not a need.

They don’t need video games, the most expensive cable package, a limousine for the prom, the latest expensive shoes, to join the most expensive sports team, a luxury dollhouse, or to have an expensive smartphone in elementary school.

They may really, really, really want these things. You may feel pressured to give them these things. You may want them to have these things.

And frankly I get plenty of optional things for my kids, so I’m not going to judge what you prioritize.

Kids are bottomless pits of potential optional costs, all the way from an adorable $10 shirt for Halloween that they don’t “need” (but would look so cute!) up to a large playhouse that costs more than an actual house.

This is where people say that kids “are only as expensive as you make them”. It’s up to you and your family to decide where to draw the line on optional costs. You can find happiness as a family for not much above the baseline costs, if you want or need to. You can also find happiness at a much higher level of optional costs.

It’s really up to you. And outside the optional costs, there are…

Kids Are Cheap – Grey Area Costs

To most people, the money equation isn’t as simple as:

• Is this the most basic of food, shelter, clothing, care, safety, education? If yes, Need.
• Else, Want

Most people will agree that a $100k playhouse for the backyard is optional.

But what about college? Or food above the very cheapest rice, beans, and pasta? Or clothing that’s not secondhand? Toys that aren’t gotten at yard sales or thrift stores?

Oftentimes this is about where you draw the line on how far to go in the “need” space. There’s a point at which the item transitions from a need to a want, and that point isn’t clearly defined.

You are responsible for your child’s education – does that need to include college? Buying in “the best” school district? What if you buy in a good school district but it’s not the absolute best – are you a bad parent, failing your kids? Or is it private school? What if it’s not “the best” private school, though?

You need to ensure their safety – does that mean childproofing? Buying the biggest SUV you can to keep them safe in case of an accident? Picking up a carseat, or a better carseat, or the best/most expensive carseat? Getting a house in the absolute lowest crime area of your state in a gated community?

What about shelter, where is the line between living in a car and living in a mansion, where you’ve transitioned from “need” to “want”? Does each kid need their own bedroom? Is a 1,000 square foot home enough for a family? What about 2,000? 3,000?

For food, there’s a place between rice and beans and caviar every day where you went from a need to want. But where, exactly? No one agrees.

Frankly, no one agrees on where the line actually is. That’s where a lot of financial disagreements – and judgement – come into play. Someone will claim something as a need, when the other person clearly sees it as a want. And then the internet arguments go on forever.

People often look around at their peers to determine what they “need” to provide their kids, and their sense of what’s a need vs. want can get distorted if they spend a lot of time at economic extremes.

It’s the grey zone, and the optional zone, where kids don’t need to cost a lot if you don’t want them to (or can’t afford for them to). You’re not obligated to buy them everything they want, get an SUV just because you have kids, move into a larger home, or anything else.

As long as they’re loved, fed, clothed, sheltered, educated, and safe, you’re a good parent.

So What’s The Answer?

Are kids expensive, or are they cheap?

I think the answer is both.

There is a certain floor of additional expenses, some of which are significant. And there can be tremendous opportunity costs. But you can reach a level of optional and grey area cost that works for you, and your financial future, and that level does not need to be a high one.

But I want to know what you think. Where would you draw the line on the optional and grey area costs? Have you experienced opportunity costs? Let me know in the comments.