This post was supposed to come out in time for Mother’s Day… but in an ironic twist, my two-year-old caught COVID at daycare and gave it to me, and it knocked me flat for a week.

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In the grand tradition of mothers (and, really, conscientious parents of all genders), I am often riddled with self-doubt about whether or not I am a good parent. Near-simultaneously, my children manage to be all of these: 

• amazing precious perfect gifts that I can never live up to
• expensive, time-consuming, infuriating hobbies that I can never quit
• the only bastion of hope I have for this broken world
• cracked funhouse mirrors that reflect every insecurity and fear that I have ever had, but distorted and multiplied tenfold
• warm hilarious delights whose quips and hugs and kisses explode my heart (and occasionally my tear ducts) every single day 

In other words, they are my kids. And like most parents, I feel like I can never do enough for them. 

A week of inescapable bed rest (and a nice chat with my therapist) helped remind me that actually, I do quite a lot. While there are days when I feel like I basically just proctor my kids’ screen time in between meals and naps, there’s a lot of invisible investment that goes into creating a safe, nurturing home for a child.  Investments of time, emotion, and yes, money. Now that I’m back on my feet and most of the brain fog has lifted, I want to journey with you through some of the costs of parenthood. (Although there’s enough to say on this topic to fill the pages of a Lord of the Rings-style epic, this post will be a short journey.)

The raising of children should matter to all of us, whether we have children right now or never will. Today’s children will be the future’s bankers, dental hygienists, nurses, plumbers, mechanics, pilots, social workers, firefighters: all the people who will hold your life together, in big ways and small. Future-you may be more vulnerable, and likely in need of more help than you are now. It’s in future-you’s best interests to help your community create future adults who are educated, self-reliant, competent, kind, and ethical.     

To honor the grownups who have made the choice to have, love, and raise children, I want to acknowledge what a tremendous investment that decision can be. And if you are a parent, I’ll underscore a few financial things that are extra important for you to put on your to-do list. (Sorry. I know it’s already really full.)

Raising children, by the numbers

The best data we have seems to come from the USDA’s “Expenditures on Children by Families” report in 2015, which was a pretty different time for America. (The Before Times… I miss them, so much.) The USDA has been tracking this information since 1960, and they break it down across a number of variables. I’ll keep it high-level here for now.

The USDA estimated that it would cost approximately $233,610 to raise a child born in 2015 to age 17, not counting the cost of college. (With projected inflation costs factored in, the number looks more like $284,570.) The USDA estimate accounts for food, shelter, childcare, the expensive years when you add high-risk young drivers to your auto insurance policy, and other necessities, but doesn’t include the cost of college. I’d love to see numbers for the post-pandemic, childcare-scarcity, formula-supply-chain-shortage, inflation-is-a-big-thing-again world, but we don’t have that yet. 

Of course, these numbers are averages; individual families’ financial pictures may vary, and from the comments on the USDA’s post, it’s obvious that not everyone spends this kind of money. There are huge variations across regions, and even between urban and rural areas within the same region. The more kids you have, the less expensive each individual child will be, thanks to hand-me-downs, shared rooms, sibling discounts, and older children who help care for the littles. The wealthier a family is, the more they tend to spend on their kids; a high-earning NYC family might be laughing at how this number doesn’t even cover five years of their nanny’s salary. 

Of note, the USDA data includes healthcare spending. An additional study from JAMA (Journal of the American Medical Association) Pediatrics shows that personal healthcare spending on children keeps going up. Because of tremendous differences in how healthcare is paid for, it’s hard to standardize and not all of it is out-of-pocket. Whether you or your employer is footing the bill, a $200+ billion dollar (and climbing!) annual price tag for minor child health spending in America is nothing to sneeze at. On an individual level, it can also be incredibly difficult to predict whether your child will wind up with a high-cost medical emergency, an ongoing condition requiring expensive medication, or a second round of braces due to a late-teenage growth spurt. (As I note below, parents need big emergency funds.)

The childcare dilemma

A major component of the USDA estimate comes from childcare, which presents a challenging decision for most working families. Annual childcare costs in 2020, reported by the Economic Policy Institute (EPI), suggest a per-child range of $4,784 (for a four-year-old in Mississippi) to $24,243 (for an infant in Washington, D.C.). Another major study (published in May 2019) breaks childcare cost data down by week, in a US Census Bureau survey of 5.1 million working families. This survey found that these families spent an average of $250 per week on childcare (which annualizes to about $13,000, right in the middle of the EPI numbers). 

This $250-per-week number represents about 10% of the national average family income – which is certainly a chunk. But the same number as a share of low-income families’ income rises to a much-scarier 35%. 

For perspective, Fortuna Money recommends you spend no more than 30% of your take-home pay on housing costs (and I have had plenty of people tell me they think that 30% is unrealistically low these days). So if a whopping sixty-five percent of your income goes toward putting a roof over your family’s head and obtaining enough childcare so you can show up to the job that provides said income… that leaves 35% for all the other necessities. Food. Clothing. Utilities. Transportation. It’s hard to square that circle. 

Some responses to this dilemma might be the short-term tradeoff, “just have one parent stay home with the kids until they can go to school! It’s silly to work just to send all your money to daycare!” First of all, that solution offers no help at all for single parents – especially single mothers, who face higher financial hurdles than all other parents. (Single mamas, I see you, and I’m here for you.) 

But if you are lucky enough to have anything resembling a choice between remaining in the workforce and off-ramping to care for your children, you know that it’s not an easy one. 

If you step back from the paid workforce, partially or fully, to stay home with your kids, your finances are affected dramatically by the decision to off-ramp. You don’t just lose the money you could have been earning in the short-term; you stand to lose several multiples of that amount (examples here include how a single $40,000 year of lost wages really translates to a $160K total loss over your lifetime). This is because you lose the foundation that you were building for your next raise. You lose retirement savings and Social Security pay-ins. And that doesn’t even count the loss of financially-valuable intangibles like networking, confidence, and professional currency. 

You also stand to lose some well-being, and that’s not trivial. Many non-earning parents feel very lonely – which makes sense, since only about one in five parents are actually home with their kids full-time. While a lot of the thinkpieces about the care crisis focus on mothers – who, statistically, tend to stay home with kids more often in America than fathers – data on stay-at-home dads suggests that they can face even higher levels of isolation, depression, and negative judgments from people they know.

If you choose to offramp “until the kids go to school” and assume it will be easier to go back to work then, you might be in for an unpleasant awakening. Since my oldest hit grade school, I have learned firsthand that the standard school day does not provide nearly enough hours of free childcare for a full-time working parent to get a whole day in at the office. That’s even before you start accounting for in-year school breaks and teacher workdays, the total of which almost definitely exceeds the amount of paid vacation time that the average worker gets.

And that’s before you even get to summer. 

I’m a first-year initiate to the ritual of patchworking together summer care for a school-ager, and not only did that take a full workday or two of administrative organization, but in many cases, the cost of all these camps needs to be paid in full up front in the spring.

In other words, there’s no easy or cost-effective default to support working families year-round. (Unless you happen to have a loving, competent, emotionally-supportive family member who lives nearby and has generously offered to provide full-time care for you, in which case… luckyyy.) 

This rundown isn’t meant to discourage the decision to be a home-with-kids-full-time parent, or to scare anyone out of having kids. This simply acknowledges that off-ramping for any amount of time, like parenting itself, represents a tremendous sacrifice whose value should be recognized even more deeply than it is.  

What parents need, financially

There’s a “don’t worry, once you have kids, you’ll just figure out how to make it work!” refrain that I heard a lot before I became a parent, about both time and money. While there is some truth to it – your priorities shift, and if you have enough resources, you eventually adjust – there’s no other quarter-million-dollar, 18-year investment that we approach with this kind of cavalier indifference. Student loans come close, but even they come with a plan; it’s a terrible plan, but it’s a plan.

So if you are a parent, you have extra work to do. (As usual.) Financially speaking, there are certain specific, crucial financial decisions that rocket to the top of the to-do list:

Everyone needs a will, but ALL parents of minor children ESPECIALLY need a will. 

• Your will should clearly spell out guardianship details, and should allocate your assets in a wise, planned way that protects your estate for your children. If you and your co-parent both die, it’s already a tragedy. Without a will, your estate will face a protracted, probably traumatic, expensive court battle that decimates your assets and compounds your child(ren)’s grief. If you take only one thing from this post, get your will done. 
• When you choose the family member(s) or friend(s) whom you’d like to appoint as your child’s guardian(s), make sure you have a conversation with them about this so it’s not a surprise. (But rest assured, my favorite estate lawyer tells me that you don’t have to tell anyone that you didn’t choose them for guardianship duties. There is no reason to inflict unnecessary emotional distress on the family members that aren’t chosen.) 
• There are a number of affordable options to set up a will, but even if you decide to invest in the professional expertise of an estate attorney, you just have to do it once. So do it. Immediately. 

All parents of minor children need term life insurance to replace your income and/or your household value. 

• The length of term that we recommend is until your youngest child reaches the age of self-sufficiency (18, 22, whatever feels right to you). Whole-life insurance is too expensive. Term life insurance will get the job done for way less.
• The total amount of insurance that we recommend is 10 times your annual cost-of-replacement. Income-earning parents, you can use your salary. For parents whose sole or primary job is running the household, estimate how much it would cost to hire someone to replace the essential tasks you perform for your household (so, childcare, driving, food procurement and prep, etc.), add that to any money you may earn, and multiply THAT number times 10. 

Parents need an emergency fund that errs on the higher side. Kids come with a much higher risk of the unexpected. You’ll sleep better at night if you can cover it. (And if you’re a parent, I know you need that extra sleep.) 

And after you have worked through the process of putting on your own financial oxygen mask (emergency fund, debt paydown, retirement savings), parents should consider saving for college in a tax-favored plan like an Education Savings Account (ESA, also called Coverdell ESA) and/or 529. ESAs can also be used for educational expenses prior to college, and both accounts offer options to use the money if your child skips college or gets scholarships.

The village needs a makeover

Caveat up front: I am not a policy expert. From a human perspective, I want universal high-quality childcare and education, affordable healthcare (including mental health care!), and for all the world’s children to have a safe home and enough food and a loving, strong support system. I don’t claim to know what the solution is, or whether it should come from the government or private philanthropy or a radical re-envisioning of our society’s structure (because talking with any parent for five minutes is enough to illustrate that insular, isolated, nuclear-family tribalism isn’t working for us). Probably, we need a combination of all of the above.  

Although I don’t have all the answers, I believe that getting your own financial house in order is the first right step. 

Perhaps you have the resources to get your own financial oxygen mask on right now (or maybe it’s already there! Nice work!). With that, you can break the chains of financial overwhelm and crushing debts and keeping-up-with-the-Joneses. You can meet your own family’s needs, and you just might find you have enough left over to invest time, energy, and resources in the rest of your village. You can be a more engaged, educated constituent and advocate for policies that offer meaningful support to families. You can volunteer with nonprofits and schools. You can build your financial generosity practice and move the needle on issues that fight economic inequality in your community.

If you choose to join me in trying to do these things, we may not save the world in one fell swoop. But we might be able to shape a generation of educated, self-reliant, competent, kind, and ethical adults that have a shot at figuring it out. 

If you’d like to build your action plan, reach out. 

P.S. I offer need-based scholarship spots in financial coaching, because we believe that single parents and other people hacking their way through the thorny brambles of systemic inequality deserve the support and empowerment that they need to rewrite their futures. If you think you might qualify, or if you would like to sponsor a scholarship spot, please reach out to hi@fortunamoney.com.

Photos:
Pexels.com: Gustavo Fring, cottonbro, Ketut Subiyanto