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Your Taboo Money Perspectives

Once upon a time, we loosely defined “adulting” as getting a job, moving out of your parents’ place, and building your own family - getting married, having children, supporting them.

Today, Kathleen Gerson, a sociologist at NYU says that the “main criterion for adulthood is being able to support yourself… And after you’ve accomplished that, then you have the choice of whether or not to marry, whether or not to have children.”

Aka, becoming an adult means establishing economic independence.

So what about when it comes to having kids? A survey from January this year found that 16% of people are choosing to either delay, or not have children at all due to financial considerations. It’s a figure that increases for younger generations…

When it comes to millennials (late 20s to early 40s), the number increases to 28%. And 42% of Gen Z report financial stress as a reason for not having or delaying having children.

All of this is to say, you’re not alone if you’re wondering how you’re going to afford raising kids when you’re struggling to afford yourself!

Have babies become a financial luxury?

Growing up, we never really considered how much it was costing our parents to raise us. Whether it be the cost of clothing or rent, school fees or dinner on the table every night. Let alone what it would cost to take a family of five on vacation! I guess that’s the beauty of being young, the naivety of it all.

Now entering our late twenties, we’re surrounded by people falling pregnant and our eyes have been opened to the real financial investment that you make if you want to have kids. The majority of the community agreed, with 70% reporting that kids are a financial luxury.

That got us thinking… Statistically, a lot of people have kids. And in the majority of cultures, it is considered “normal” to have children. So if most people have kids, surely by definition, they can’t be a luxury… otherwise 99% of people wouldn’t be conceiving. So when did things change?

On one hand, life has undoubtedly gotten more expensive. The rising costs of healthcare, the cost of childcare, and the general costs of living is making it harder for people to raise families on salaries that haven’t increased with the rise of inflation. (A house used to be 4x the average salary, it’s now 25x!)

On the other hand, kids may be a perceived luxury… Influenced by an overwhelming amount of information and the tendency to compare ourselves too others on social media. Whether this be the desire to buy a premium cot, natural formula, or emulate the family vacations you see on Instagram, there is an abundance of societal pressure that leads us to believe we need to do “more” to give our children a “good life”.

Gerson suggests that “since the Industrial Revolution, children have gone from being an economic asset to an economic responsibility. Even if you are well-employed and in a solid relationship, we have such high and impossible standards for caregiving and child-rearing…”

So maybe it’s our perceived “standards” that are the issue?

It’s consistent with the 25% of you that reported you can make a baby work on any budget… Billions of babies have been raised on varying budgets and parents have made it work.

The key takeaway here is that we should consider what is informing our idea of being a “good parent”, and whether those things (especially when they cost $$) are truly what will make the difference for our child.

How much is it really going to cost to have a baby?

We asked our community, how much you think a baby costs from birth to the age of 17… the answers ranged a lot. The lowest was around the $200k mark, then there was a fair few who sat between the $500k - $1 million mark and the highest we got was $10m… that is one luxurious baby!

To help answer this question, we’ve enlisted the help of Rebecca Pritchard, senior financial planner at Rising Tide, and mother to two-year-old Della and four-year-old Jeffrey.

Understandably, the answer…depends. It depends on which bit you’re talking about: conception, pregnancy and birth, postpartum, parental leave, changes to the cost of living, loss of income, the cost of education or bundling it all up. It also depends on your circumstances, preferences and shall we call it, your style.

Kin Fertility estimates that the cost of giving birth in Australia ranges from $1,500 to $20,000. The big drivers here are a choice between the public and private systems, and if you’re choosing a hospital, birth centre or home birth.

In my experience as a financial planner, factoring in $5,000 - $8,000 for a public hospital birth, and $15,000 - $20,000 for a private or home birth will cover you for most things, including the start-up capital required to bring the baby home to a functioning lifestyle. However, you’ll still need to have a good think about what matters to you, to get bang for your buck and ensure you haven’t overspent on onesies and underspent in areas that you truly value.

But that is just up to the point of birth. Post birth, things get even more costly. We asked for your thoughts on what you’d believe the most expensive part of raising a child would be for which the common answers were healthcare, education, feeding them (!!!), clothing, travel, and our favourite…

Bec emphasises that investing in the wellbeing of the mother is one of the best money decisions a family can make, and will pay handsome dividends in the months and years ahead. This holds true throughout all stages of creating a family, not just through pregnancy and postpartum…

Remember though, money prepping for a family is a moving target. You need to keep fronting up to the conversation with your partner (or looking in the mirror as a solo parent). 

Using your family’s goals to help you make decisions, you can consciously manage your money and resources to make the most of this incredible time, and ensure you’re not on autopilot for decisions. Never again in your life will so many other people’s opinions be foisted onto you as through pregnancy and parenting. Anchoring in your values will help to keep you sane and moving forward.

If you’re planning to have a baby, here’s what Bec suggests you have on your radar from a cost perspective:

• Changes to income if one or both parents work part time

• Impact on superannuation from parental leave and part time work

• Changes to your cost of living with another person living under your roof, and then she shudders childcare

• Updating health insurances before trying to conceive and/or after baby arrives

•  Are your life insurances up-to-date?

• Have you got a Will to reflect your new family?

• What’s your game plan for future education expenses or family goals?

• Would you like to be putting something aside for your child when they get older, and how are you going to do it? cough, invest instead of saving

•  How do you want to talk about money in your family?

And if you want a nerdy breakdown of everything Bec spent through pregnancy, you’re in luck! She documented the lot when welcoming my firstborn and my second. (Thank you, Bec!!!)

Why is it so expensive to be single?

When it comes to solo parenthood, the answer is obvious. Being single is expensive because you are bearing the costs of raising a child on your own. But it seems that even prior to parenthood, the singles tax is a very real part of everyday life…

The two of us were driving home from a podcast recording the other day, with Mads giving a bit of a life update on where she was at with finances.

To set the scene, we are in quite a similar financial situation… We earn the same amount of money, pay similar amounts in rent (our biggest expense right now) and have done similar amounts of travel throughout or twenties. When we were talking about how we’re feeling about money, we realised that one of the biggest drivers of the difference in security versus vulnerability was that Soph is in a relationship, and Mads is single.

Soph explained that her groceries are split, from an account where her partner contributes more, rent is divided up 60/40, and little life expenses are picked up from his account (drinks at a bar or a dinner here and there). When Soph recently found herself feeling a bit stressed about money (after the move to Sydney, which ate up a third of her savings), Soph’s partner said that he could contribute more to things until she felt back on her feet and could make up for it later.

We both reflected that this “fall-back” or added layer of financial support didn’t exist in the same way for Mads without a significant other.

The singles tax isn’t a new concept. Type it into your web browser, and you’ll encounter endless articles on how much more expensive it is be be single…

We asked our community what they’ve found to be the most expensive part of the single life, and the common answers were the general cost of living (rent, bills, meals).

One community member broke it down nicely…

Living alone (some of these can obv be split w friends/housemates but if you are partnered you more likely to be more aligned on spending so you waste less money / compromise less):

• Rent

• Furnishings, appliances, utensils

• Bills

• Health insurance

• Groceries (bulk often unsuitable for 1)

• Cost of dating if you’re dating

• Other time / non-monetary items

All of this is to say that being single is just more expensive on a day-to-day basis. Not to mention the more niche benefits…

As two Melbourne gals living in Syd, the pain is real!

Until next week, for our final newsletter of our taboo money conversation series! Get ready for a new episode with the incredible Lucy Wark tomorrow, on the cost of starting a business.

Mads and Soph x