The Cost of 4
Parenting: a business that does not scale.
A little more than twelve years ago, I received unsolicited parenting advice from a guy named Jeff. He stated that my only job as a father would be to keep my child alive. That was it. Simply make sure they are placed high enough so the predators can’t reach them.
Now with a little experience under my belt, I can confidently say this advice was incomplete, perhaps idiotic. Raising children responsibly in our contemporary culture demands much more from parents than imprinting survival skills onto our young.
Yes, we do need to keep little hands out of garbage disposals and carefully cut every life-threatening grape in half. But this is only half the battle. We must also police every byte of digital content they consume, remediate their modern diets, exemplify good personal and social hygiene, secure effective education, and break the news about Santa.
All this must be done in perfect coordination with a full-time career or, more commonly, two full-time careers. Gone are the days of the single income households with kids that would disappear at sunup only to reappear at sundown under threat of violence. Mom usually could keep the kids in line by just gesturing to the instrument of torture lurking on top of the refrigerator.
For those old enough to remember, there used to be punishments for not being indoors. Local news stations would even run PSAs at 10PM with the message, “Do you know where your children are?” Times have changed.
And so have the costs.
The costs of raising a child have increased proportionately with their inputs, which differ from CPI components in that they reflect the true pain of inflation. These inputs include, but are not exclusively:
1. Housing
2. Healthcare
3. Food
4. Education
5. Adolescent Childcare
The last category barely existed just three decades ago as dual income households have moved from a choice to a necessity. Viral assembly lines, otherwise known as daycares, are big business in the US generating up to $61B in annual revenue1. If there’s any discretionary income left over after paying the ransom, parents may even remember to love their kids.
As parents of four children, my wife and I receive frequent glances of concern as people wonder if we did it on purpose. That’s not important. What is important is we know firsthand that having four children is almost as irresponsible as it is uneconomical.
Parenting used to scale when you could legally use children for homestead labor. Alas, this fell out of vogue in the early 20th century. Maybe, just maybe, one of them will see us through to the old folks’ home.
Anyway, here’s what it takes to raise a four-child family in middle America.
Housing - $4,292 per month
The cost of a four bedroom, two bath home in the US varies wildly. Ranging from an absurd $1M + in California to a more modest $400K in Ohio. Of course, zip code means everything. Let’s assume you are lucky and land a nice home in a safe area for $500,000 with a 5% down payment, an annual property tax of $5,952, homeowner insurance at $2,700 and mortgage insurance at $3,564 per year. This puts your family housing cost at $4,292 per month given the prevailing interest rate of 7.36% on a 30-year mortgage.
Yes, two of your kids will need to share a room. Sucks to be in the middle. Oh yeah, utilities not included.
Healthcare - $1,800 per month2
Nothing says open wide and say “Aaaah” more than the American healthcare system. Have 4 kids and a spouse needing full coverage? Be prepared to pony up $1,800 per month. “But Ben, my employer pays for all of my coverage!”. Oh, ok. I guess in no way, whatsoever, do employers factor this in as a labor cost. Let’s be real, you pay this regardless of how it shows up on your W-2.
Food - $3,000 per month
See, my wife and I have four kids because it just makes sense to go through a full carton of eggs every day. That way you know you’re eating fresh eggs. Also, the fridge holds two full gallons of milk for a reason. This estimate, taken from an in-real-life source, includes three restaurant meals per week per person, a monthly trip to Costco for $500, and bi-weekly grocery deliveries. Yes, we need groceries twice per week.
Education – $2,500 per month
As of now, this only includes monthly savings into four separate 529 plans. These education accounts can be used for anything from K – 12 private schooling to advanced education expenses. When combined with Ohio’s EdChoice Scholarship and multi-child discounts, private K-12 schooling can be surprisingly affordable. Of course, public schooling can be a good option for most.
Adolescent Childcare - $5,400 per month
At an average cost of $350 per child per week, childcare can be cost prohibitive. With four children, my spouse would need to earn before tax compensation of $85,647 just to break even. The monthly amount here represents a reasonable salary someone could expect to earn with a high-school diploma and some college. This is an opportunity cost and not a current cash outlay, equaling the level of income forfeited by the career sidelined parent.
Adding all but the last category, we can total monthly outlays of $11,592 per month. Granted, this supports two adults on top of four children, but we’re not running a Lost Boys compound here.
The costs of raising a family could be a major driver for why we are seeing a drop in family household formation and a declining birth rate. At the end of the day, economics matter.
The best advice I have for couples wanting to have children is to go for it. Just be prepared to buckle down and push to earn your greatest worth in the marketplace.
I sure wasn’t ready when we started but it seems to be working out. In fact, along with marrying my spouse, it’s the best thing I’ve ever done. You really do not know who you can become until others depend on you. Plus, it’s more an investment than a cost.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through National Wealth Management Group, LLC, a registered investment advisor and separate entity from LPL Financial.
2023 Grand View Research, U.S. Child Care Market Size, Share & Trends Analysis Report By Type.
2024 Healthcare.gov, See Plans & Prices