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  • Writer's pictureKarine Sabourin

Can I afford to have kids?

The decision to have kids is a major one on many fronts. One of the crucial factors to consider that often haunts potential parents is financial readiness. You may know you want kids at some point in your life, but are you financially able to support them at this point in time?


Is your household income high enough?

Should you have a lump sum saved first?

How much does it actually cost to have kids anyway?


Though these there is no one size fits all approach to determining whether or not you can afford to have kids, in this blog post, we'll explore three different ways to evaluate your readiness.

Cost of having kids

Option 1: Total Cost Per Year


To assess whether you can afford children, it's essential to have a clear picture of your household finances. Start by calculating your total annual income and then subtract your household expenses. The resulting amount represents what's left over for you to allocate to child-related costs.


The best breakdown of what it actually costs to have kids in Canada came from MoneySense in 2011. They recently updated it to reflect inflation and the changes in cost of living since then. You can find the article here, but here is the breakdown of the estimated cost of raising a kid in Canada:

  • Food: $2,280

  • Household: $3,580

  • Child care: $5,230 (not including $10/day daycare)

  • Clothing: $1,110

  • Transportation: $2,730

  • Health care: $320

  • Personal care: $330

  • Recreation/School supplies: $1,320


Average annual cost of raising a child: $16,900

Total cost to age 18: $321,020


Obviously, the over a quarter million dollar price tag that comes with your bundle of joy underscores the financial commitment that comes with parenting. However, making a decision based on your financial ability 10-18 years from now can feel too vague and difficult to quantify.


Let's look at evaluating your financial readiness to have children based on a shorter time horizon.


Option 2: First Five Years Rule


Household Income

Most of us can assess what our household income will be for the next five years with decent accuracy. We might be entitled to receiving moderate bumps in pay between now and then, but barring any major career changes, there shouldn't be that much variation in expectations.


Household Expenses

Same goes for household expenses. We should account for some level of inflation, but all things equal, you probably have a rough idea of what your expenses will look like in the next five years.


What's Left Ov


er To Be Allocated to Child-Related Expenses?

The remaining is what you have left over to allocate to child-related expenses. Same idea as option 1, but get a little more specific about the cost of raising them for the next 5 years only.


Ongoing Costs

Remember that ongoing costs can vary based on the choices you make for your family, such as formula or breastfeeding, disposable diapers or cloth diapering, and childcare or being a stay-at-home parent. Calculate the potential costs for each option based on your family's choices to create a realistic starting point for a budget.


Upfront Costs

Lest we forget the upfront costs of bringing a baby into the world. Especially if it's your first and you don't have any of the "things" yet. Make a shopping list of the essentials like a crib, a car seat, a stroller, and a high chair. Price them out and create a budget. This becomes the lump sum you need to afford having a baby on top of covering the ongoing costs once they're here.


Disclaimer: I take no responsibility for the baby fever that results from looking at all the baby-related things.


 

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Option 3: Standard of Living


There's putting food on the table and providing shelter for your kid, and then there's making a conscious decision about what kind of standard of living you want to provide for that kid. The third method of evaluating financial readiness to grow your family is about lifestyle.


Standard of Living for Your Family

Consider what's important to you and your family.


Are you willing to cut costs by using hand-me-downs, opting for public school, or forgoing extracurricular activities?


Or do you want to provide a certain level of education, access to opportunities, and annual family vacations for your children?


Factor those into your budget.


Standard of Living for Yourself

"The Village" in the 21st century


Additionally, consider how your roles within the family may change. Parenthood often brings a shift in responsibilities, and the workload increases significantly, especially if one parent stays at home. You may need to invest in additional help, and it's important to factor in these costs.


In the past, extended family


and community support were integral in raising children. However, modern life has led to changes in this support system. Grandparents, once retired and available for assistance, now often need to work longer or are engaged in their own activities.


Today, services that were traditionally provided by extended family members, neighbors, or community are things you may have to pay for, including house cleaning, meal delivery kits, and babysitters. The question becomes, can you afford to build your own support network?


While the decision to have kids is undoubtedly more than a financial one, understanding the financial considerations is crucial. Parenthood brings immense joy and fulfillment, but it's essential to make informed decisions about your family's financial future. Do some calculations, put real numbers on your concerns, and determine how your financial readiness will impact your children, your family, and your own standard of living. Combine these financial insights with all the other considerations involved in making the monumental decision to have kids.



- the decision to have kids is a major one on many fronts

- you may know you want kids at some point in your life, but are you financially able to support them at this point in time


How do we determine whether we can afford kids?

- we all know kids are expensive

- but how much does it cost to actually raise kids

- can you afford it?

- Three ways of looking at it


Option 1: Total Cost / Year

When determining whether we can afford something

- Household income

- Minus household expenses

= What's left over


The best breakdown of what it actually costs to have kids in Canada came from MoneySense in 2011. They recently updated it to reflect inflation and the changes in cost of living since then. You can find the article here, but here is the breakdown of the estimated cost of raising a kid in Canada:


Food: $2,280

Household: $3,580

Child care: $5,230 (not including $10/day daycare)

Clothing: $1,110

Transportation: $2,730

Health care: $320

Personal care: $330

Recreation/School supplies: $1,320


Average annual cost of raising a child: $16,900

Total cost to age 18: $321,020


Obviously, a quarter of a million dollars is a pretty significant amount.


Option 2: First Five Years Rule

- it can be hard to think about the cost for next 20 years

- so much can change in your financial situation in the next 5 years

- calculating the cost of raising a kid for the next 5 years can feel more realistic


- When thinking about the first five years, there are two things to think about: the upfront cost and the ongoing costs.


The upfront cost is a big one and can give you a good starting point to determine whether or not you're financially ready to have a kid. Do some quick research: how much would it cost you today to purchase a crib, a car seat, a stroller and a high chair. Can you afford these things today? Maybe this is a good starting point to set aside money into a savings account until you can afford it.


The ongoing costs are a little trickier to calculate because there can be large differences in costs based on decisions you make about what's best for your family. The kicker is that sometimes these decisions are made for you when the time comes. These decisions look like

- formula vs. breastfeeding

- disposable diapers vs. cloth diapering

- childcare vs. stay at home


You can calculate the cost of each of these options based on what you think you'd prefer, but it would be good to calculate the cost of all the options because you might find that you can't actually breastfeed and you need to use formula.


Option 3: Standard of Living

- There's always the option to use hand-me-downs, not put your kids in sports, send them to public school, etc. to cut costs.

- An important consideration when you're determining whether you can afford kids is to think about the standard of living you want to give those kids

- What's important to you? A good education? Access to opportunities for extracurriculars? Annual family vacations?


- Not only do you want to think about your children's standard of living or your family's, but your own.

- This one can be hard to wrap your head around until you're actually in the situation

- You might think that in baby's first year or life, you and your partner will split all the tasks that need to be done because your partner is amazing and you've always shared responsibilities, what is this the 1950s?

- It's likely you're both working out of the house now, so it makes sense to split tasks when you get home and on the weekends

- That dynamic changes drastically, right or wrong, when you're the one at home not earning income

- The amount of family/housework that needs to be done goes up significantly when you have a little human

- breastfeeding in and of itself is a full time job in terms of hours worked in a week.


- Enter "the village"

- But here's the thing about your village in the 21st century

- You have to pay for it


- Whereas back in the day, grandparents were retired by the time their children had children and were able to help raise them

- Now grandparents are forced to keep working full-time for much longer to deal with the cost of living

- Even if they aren't working, they're retired and grandparents are hip hop happening, they're doing things and they're travelling

- Even more realistically, they might have multiple grandchildren they're trying to balance helping out with


Here are some "village" related tasks that once upon a time, and in different cultures are support you're provided with when raising a child, they are now things you have to pay for in order to maintain your sanity.


- house cleaning

- meal delivery kits

- babysitters.


Do you want to be able to afford help?


Conclusion: obviously the decision to have kids is more than financial, but financial considerations are something to keep in mind. I've talked to lots of couples that worry about the cost of having kids whether they're first or adding to their family, but it can be such a vague notion. Do some calculations, put some real numbers on the concern and determine how that will impact your children, your family and your own's standard of living. Factor in the results of that assessment with all the other considerations that come into play when making the decision.


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