You are, essentially, correct in most of your assumptions about having kids. I have three.

The severe damage is done when/if you have children before you reach ER. One parent at home meaning the other has to raise and save for not only 1 person but the whole family.
I don’t see big expenses, at least not yet except day care. They are little so they eat little and tend to wear cheap little clothes. They don’t need cars, brand-name clothes, electronic gadgets in order to be happy. They tend to get sick more often than adults though. I’m not sure how much in terms of insurance they’ll cost.

Well… dream on, Jacob.

I do agree that children don’t have to cost a fortune, but living in an RV with children is only possible if they are small. If I were to chose to live in hell I would go live in an RV with my three teens. A house is essential.

I think it’s unethical to hold children back from doing what their peers are doing. By living in an RV they could not bring home their friends. Teens would want to go out (expensive: otherwise they could stay home, make popcorn, have friends over and watch a movie) not to mention they probably would be too ashamed to have friends over, so you would be keeping them from forming normal friendships.

I also think having them participate in sports or other entertainment like scouting is essential. It does not have to be very expensive, but it does all add up.

We live a very frugal lifestyle, rent a small home, have only one car, get most of our stuff second hand, but still we spend 28.000 a year.

I agree completely with the sentiment that children cost as much as you determine.

We have 2 daughters. We became 1st time parents at age 18 (3 months out of high school). While at the time it was very difficult (and unplanned, obviously), it does mean that early retirement is still an option for us. Perhaps not quite as early as others, for us it will be around the age of 40. It could be earlier, but we are very happy with 40.

From the start (even as teenage parents), we determined to not just go along with the rat-race and consciously paved our own route through life. I have been a full-time mother all along and my husband runs his own business from a home office.

A benefit of having an early and difficult start is that we learned very early how to stretch a buck! Our meals have never been elaborate, our homes have never been fancy and we all shop at budget clothing clothing outlets. Our girls have learned the frugal lifestyle and understand, appreciate and practice it.

Our girls are homeschooled. In South Africa there is NO free education and in fact, after home and car, education is the next highest expense for parents in this country. Besides the financial benefits of home-education, we also feel, for various reasons, our girls are receiving a superior education.

Our frugality also allows for them to do some extra-murals. Since they don’t get the opportunity to partake in school based activities, we felt it was important to give them the opportunities of various sports and hobbies. We also take advantage of free community activities such as holiday clubs at the local rec-center and Church-based youth groups, camps etc.

This might put things into perspective a little:
Our daughters aged 12 & 8 both take music lessons, drama and horse riding. Both have full health insurance. These factors combined with the cost of their education, clothing, food etc will cost us in total this year LESS that what my sister has paid in fees for her 2 year old son and 6 month old daughter to attend a half-day daycare programme for the 2009 year (and she got a 10% discount for paying the full years fees upfront rather than on a monthly basis)! She still has to feed, clothe, clean, diaper, medicate, transport etc, etc, etc!!!!!

This is why when I hear the crazy dollar figures attached to the cost of raising a child I always raise my eyebrows! It needn’t cost a fortune but you don’t have to completely deprive the children to do it well either!

Jacob- thanks for relating to the subject of children. I agree with many things you mentioned – my kids are raised frugally. For example, our grocery expenses are $100/person/month. We’re all happy to get hand-me-downs from each other and from relatives. We borrow books from the library, heat only part of the house, etc. I believe my kids get a healthy approach to consumption and to money as part of their education. I do fund some sports and music ativity, and private education, though. I spend around 7k/person/yr. But as some commented, a larger household is more economical per capita than a smaller one.

I disagree with your suggestion to “make them” save. My kids save most of their gift money and their (modest) allowance, but it’s totally their decision. You’d be surprised to see how careful kids are with their own money.

I would like to join everybody who said that you CAN retire early with kids. I am on my way to doing just that. If it only occured to me when I started making money, I estimate that I would be FI at about 40.

“I suspect children cost exactly as much as you are capable of spending.”

Amen.*

*Of course there are certain expenses that are new…such as diapers, formula, etc. I suspect the fact that we aren’t going out on the weekends balances out these items though.

I have but one child so far, but I don’t think he’s materially increased our spending. My wife went down to part-time and we get free day care at her preschool, but other than that I don’t think we’re doing anything special.

I have 2 children, 17 & 13. We have cut corners the entire time. My daughter tells me how unrealistic some of her friends are with money. We gave her a car(10yrs old), keep it in good running order and take care of all upkeep. She has to keep up her grades in order to drive and she has to pay insurance. Really it doesn’t take a lot of money to raise kids, the important thing is time and setting a good example.
But from the sounds of the article, it sounds as if you are thinking about starting a family.
Great Post!!!

I am writing from the perspective of having been brought up in a family that didn’t have a lot of money nor education.

I didn’t get an allowance but was allowed to learn to play the piano, swim, dance. It was a terrible stretch for my parents but they believed in learning skills.

Teaching piano was how I paid for my undergrad and graduate education.

Indeed, I did not want to come across as me never wanting to pay for children’s education or activities. It’s just that very many such offerings are much overpriced compared to the alternatives. In general I’m willing to pay a lot when something is meaningful e.g. if the kid was really good at soccer, I’d put the kid on the travel team, but if he/she was really that good, I probably wouldn’t have to pay for it. I would not pay for something just to build a resume, or to conform or entertain.

@frugalscholar – RE: “For a view of how to do it with kids, see “The Tightwad Gazette.” Amy D had 6.”
Amy did not do ER on a salary with 6 kids. Her documented achievement was saving enough for a down payment on a house. She reached financial independence thanks to the success of the Tightwad gazette.

@Moneyblogga-as an Orange County, CA person I can definitely see that being a problem. We send our kids to private school and live in a teensy 2 bd. apt after selling our house. I have considered the RV’ing thing a few times, but wasn’t sure how it would work with friends over, etc. I know that I would feel weird about sending my kid to an RV park or to an overnight so I figured that would happen with other parents as well. I seriously think that some parents are even weirded out by an apartment. I don’t think it is necessarily the affluence or lack thereof; I think it is the fact / perceived fact that at least in the OC apartments and trailer parks / rv parks are occupied by those in society who have had hard knocks or something wrong with them that they can’t be in a regular ‘house’. Not by someone who is frugal by choice.

I was raised in a very frugal household, because my parents had very specific financial goals. It was hard to live with some times; our house was nowhere near the standards of my schoolmates and included a long drive that few parents were willing to make. As a result, yes I had a very limited social life. Looking back it was worth it, we had animals and gardens, I learned how to drive a tractor while my age was still in the single digits and I learned the value of hard work. I never got an allowance, but I and all my sisters were able to go to a semi-private research school with a super low student/teacher ratio. We never did any of the after school clubs except band because it was free and my parents thought it was important that we all know how to play at least 2 instruments. I earned my own money by selling manure to the orchard down the road and picking when their crops were ripe. It’s true, especially at that age, that I valued my money a whole lot more when I know what I went through to earn it.
For weekend social time we had 4-H. We got to meet other kids from around the county and had tons of leadership opportunities for free/small cost. When the week long 4-H summer camp rolled around my parents let us go if we paid for it ourselves. I felt like such an adult going into the extension office cash in hand to register all by myself. 4-H taught me so much “learn by doing” they said and had books about almost everything, adults to give advice on how to do cheap projects and tools to lend. As an adult with a daughter who is still too young to participate I volunteer regularly when home and still get almost as much out of it. I recently sent home pictures, info on plants and animals and recordings of native Arabic speakers to my county extension office because they wanted to know more about what it’s like over here.
Anyway for what its worth, I thought the first 2 years were the most expensive as far as child rearing, was soooo happy to get rid of diapers!

My children did not stop me from “retiring” the first time. They were 13 and 9 at the time. They were in private school at the time. It just took more to accomplish the goal. My children are adults now (37 & 33). The are very successful, debt free except a mortgage and some student debt. My wife and I spent considerable time with them as they grew up and still talk to them several times a week.

I don’t agree with not having an allowance.

Allowance provides a means for them to exercise their own sovereignty and self-determination. They can do anything they want with their money as long as it’s not barred by the State.

It’s not there as payment for services rendered in the household. It’s there for learning how to manage money and experience those decisions directly.

But having no allowance at all gives them little understanding of how to manage their money or what it can do. Please keep in mind that their allowance was $5 a week for 14 years.

It’s hardly anything worth counting to them. Which is perfect. Because when they do check their allowance (autopayments to an account) they learn that have $100’s for that emergency.

That’s a valuable lesson in independence and self-determination that may be worth that $520 a year. Cheaper than cello lessons!

Had I the opportunity to do it over again, I would have set up an investment account for each of them and draw allowance from that for their allowance. Effectively putting them into an ERE before they turn 16. Then they can choose to take their paychecks and put them into their investments, increasing their allowance for life, or spending it on a pair of jeans.

Jacob, can’t agree that children shouldn’t be given an allowance, it sounds too stern for my liking. Perhaps it would be fairer to give them a small allowance and give them the option to top it up with earned income from housework etc. over and above their standard chores (I’m guessing you’d approve of kids having some chores?)

I was raised in a very frugal household (frugal because my parents remarried and we ended up with 5 kids). While my parents did well by us (good education, love), children will usually resent living a life that seems ‘poorer’ than that of their peers.

Might not sound logical to us grown ups, but when were children ever logical?

I think proper retirement planning sometimes goes beyond just yourself and your spouse and overlaps into the family. The decisions you make effect everyone whether the kids are young or much older.

[…] Retirement Extreme with Children and Early Retirement. I don’t have kids yet either, but Jacob makes some good points that children can be fully […]

This all makes good sense for parents of typically developing children.

A medically fragile or severely disabled child can be financially devastating, though. Or not, I suppose – I’ve never tried ER + high need child (and when I say high need, I mean high need, not high want). Kids don’t come with guarantees of good health, though, and while some folks have mentioned health care, not every child with extra needs has the same extra needs and it’s kind of amazing what can be denied by health insurance companies.

Becoming a parent is a difficult transition and the social barriers to ERE can become amplified.

For instance, there is more social pressure to be a homeowner once you have kids, as seen in the comments regarding RV living. There are also real legal requirements to do things like heat your home to a minimum temperature.

Unexpected* children can trigger health and financial emergencies. The only time I have used ’emergency fund’ money was when we had twins.

On the other hand —

Until we had kids my wife felt social pressure to have a full time job. Now, staying home with the kids is viewed as a luxury, and people assume I make a lot of money because my wife does not work.

We have also found it very easy to build a social network with other families willing to share time and stuff. It is hard NOT to get used baby stuff. It is not unusual, when answering the door, to find a giant bag of children’s clothes and a car speeding off.

*in our case we had expected only one baby at a time.

I think an allowance, especially once kids reach their early teens, would be necessary for them to develop normal relationships with their peers. Unlike adults, kids can’t just spend their day building chairs or hunting (unless their name is Ron Swanson).

Once they’re 15 (or 8, if you live outside the First World) they can get a job at McDonalds or the local sawmill, and start earning their own pocket money.

As for living in an RV…if you have more than 1 child, is that really wise? Unless you have a giant RV with multiple rooms, I can’t imagine anyone who’d appreciate sleeping in the same room as their parents at the age of 16.

[…] that kids are as expensive as you make them.  Jacob Lund Fisker has some interesting thoughts here.  In his book, he makes the point that if he can be happy living on $7000 a year, than easily a […]