May 25, 2021
Is it possible to achieve financial independence when you have kids?
Depending on who you ask, answers vary from “of course it is, what are you talking about?” to “you must be joking – do you know how much kids cost!?”
I’ve always been in the first camp. But given I’ve got no kids of my own, I can’t exactly preach with authority on the topic.
But this article is something special. A reader named Steve reached out and offered to share some excellent advice on how he’s working towards financial independence with a family.
As it turns out, it’s all the tips and strategies I would use myself, and this reader’s thinking is very much in line with my own.
So let’s start with some info about our helpful reader and his situation. Then we’ll get into his best advice for balancing a happy family life and saving for FI. (There’s a summary at the bottom if you’re short on time… or lazy!)
Our family lives in Brisbane. We are in our early 30s and have two children under 5.
My partner owns a modest investment property that is negatively geared. We also have a PPOR mortgage together.
We spent 5-6 years working full-time, each on less than median wages, before our first child was born.
Since becoming parents, we have both changed working patterns more than once. My partner was home full-time initially, doing a little bit of work from home to keep her brain running.
Later, we both shifted to working part-time, and now our roles have reversed.
We currently earn the equivalent of a little more than one median full-time income and spend around $50K per year ($35K per year excluding the mortgage).
Dave: For curious readers, the median full-time income for employees is $78,000 before tax, according to this ABS report from 2019, under ‘Distribution of earnings for all employees’).
Both of us learned early to be sensible with our money, and we are both fairly minimalist – preferring to spend time with family and friends, rather than buying expensive things or experiences.
We are comfortable with relatively few possessions and making the most of what we have around us.
By the time we heard of FI when our second child was born, we realised this was the path we had already been taking our whole life. It made sense and gave us a goal to actively work towards.
We are not yet financially independent, but we are working considerably less than our peers – a bit of early cashing in on the perks.
Our next goal is to sell my partner’s investment property, pay off our mortgage and downsize (!) to a less affluent suburb, so we can be very close to the school we chose for our kids.
We had always planned to have kids and so we structured our finances around our future in the following way:
Before having kids, we didn’t really know what to expect – would it really be as expensive as everyone told us?
Turns out, for us at least, the answer was a resounding NO.
First, we were told that the cost of birthing a child would be around $10k. We set aside this amount, but it wasn’t necessary. Both children, from pregnancy test to welcome home, cost us a grand total of $400.
This was mostly due to eschewing private health insurance, opting for public care (which was fantastic), and being in the privileged position of having low risk pregnancies.
Second, we were told that raising children is expensive. Childcare, food, toys, activities, clothes – the list was endless.
We have a stay-at-home parent, who cooks from scratch, takes the children to low-cost activities and they love their second-hand, minimalist wardrobe and modest, enduring toy collection.
One thing that has been unexpected for us was our recent decision to send our children to a private school. We had always intended to use the public system, but we discovered that our kids are both atypical and it was important for us to find an environment where they would be well supported.
Even with this, we are on track for our FI goals. Most families aiming for FIRE would not need to do this and could therefore be in an even stronger financial position than we are.
We had always been diligent savers, knowing that it would provide us with a safety net if anything unexpected happened.
Until a few years ago, I loved working full-time and never fancied being a stay at home parent.
This situation changed and we were fortunate enough that I could take a break from work and spend more time with my family. Based on how many shocked reactions I get, I guess that many people wouldn’t consider this to be possible for them.
Being a parent has helped me to appreciate the good financial decisions we have made. I want to take advantage of this while my children are still young.
We’ve been told repeatedly over the years that it’s “not possible to survive off only one income” – even from people who don’t have any children at all!
It’s all a matter of priorities. To us, spending time with family and friends is our top priority.
If you value trinkets and other people’s perception of your wealth more than you value your time, then I don’t think you can ever be truly happy. We are fortunate to have people in our lives who also believe in this.
Having said that, it hasn’t all been smooth sailing. My partner experienced a lot of judgement after our first child was born in the supposedly supportive environment of mothers groups.
If we chose not to buy our child every conceivable toy or sign them up to every activity that can be squeezed into a week, complete with photos to share on social media, the assumption was that we were denying our children of happiness.
We find it helpful to focus on thinking about what we are grateful for and why we have chosen this path. Some examples are…
If you are able to access this blog right now and have the time and space to read it at your leisure, chances are that stars have aligned in your life too.
It is very easy to forget how privileged we are when we spend most of our time with other privileged people.
Rather than thinking “why can’t I afford this?” you could think “how many other people in the world right now would give anything to have what I already have?”
This positive phrasing can help you avoid falling into the trap of thinking you are poor.
I think people get a bit carried away with the saving and investing part of FIRE and forget that the point of it all is to spend time with your loved ones.
Yes, we could reach FI sooner if my partner and I go back to full-time work, but what then?
All of the time and energies devoted to raising children doesn’t just end when the parental leave does.
Once you have children, you need to shift priorities from working to save as much money as possible, to balancing spending your time with them and tucking a little something away.
Now that we know a bit about our reader, let’s see what he has to say about reaching financial independence with a family. Take it away Steve!
A lot of people complain that having children is expensive.
The number one reason I see given is that “the cost of childcare is insane/unbelievable/ unreasonable/unfair etc etc,” It’s as though children are expensive because all children need childcare.
The number one piece of advice I have for anyone striving for FIRE, who is thinking about having kids (or already has them) is to read “Hold On to Your Kids” by Gordon Neufeld.
If your idea of having kids involves outsourcing their raising to a childcare centre, followed by a school (with before- and after-school care), this book will completely change your perspective on parenting.
When you have children, they are the ones you spend every spare moment with. If you have the means to do so, create more spare moments for them. It’s great having one parent stay at home or, even better, both parents working part-time.
But honestly, even if you do send your kids to childcare, the government subsidises up to 85% of the cost. Hell, even if you earn $170,000 per year as a couple, you still only have to pay 50% of the cost. It’s not actually that expensive.
Diligent FIRE-aspirants who have a few years head-start will be in a much better position than the average family to be able to take some time off work.
But a common complaint in the FIRE community is that having a family is a massive opportunity cost due to years of lost income. It seems like, regardless of whether you put your kids into care or stay at home, it’s a lose-lose situation!
Deciding to have a family is a lifestyle choice. Yes, it is a trade-off between time and money. Having a family means you are essentially choosing “time” over “money.”
Sound familiar? It’s exactly the same reason people in the FIRE community want to retire early!
It’s not that much different to saying, “retiring early is a massive opportunity cost – think of how much you could save if you worked another decade!”
It’s all a matter of priorities. If you are serious about having a family, that needs to come first.
When deciding what kind of home to live in, the typical couple approaches this by saying “OK, so we have (or plan to have) X number of kids, so we will need a house with X + 3 bedrooms” (one for each kid, plus one for the parents, plus a study, plus one for… well, you need an extra room in a house, right?).
So you end up in an enormous house with a squillion rooms. And because your kids are in care or school all day, and you are at work, this enormous house sits empty most of the time.
This approach never made sense to us. In our home, both of our kids share a tiny room that fits their beds and a set of drawers with their current clothes and nothing else. They will probably be very comfortable in there for a number of years yet.
Requiring fewer rooms will save you a shitload on housing costs, whether renting or owning. Having a smaller home also means you won’t fill it up with junk and it’s easier to clean, which is another bonus.
Almost everyone, regardless of their stance on private health insurance prior to having children, is convinced that it is absolutely necessary when you start having babies.
This is utter rubbish. Australia has an amazing, free health care system. Unless you are earning enough to pay the Medicare Levy Surcharge (i.e. >$180,000 for a couple), it doesn’t make sense to fork out a few grand every year for insurance.
From memory, the only out of pocket expenses we had with our children was the home pregnancy test, one of the early pregnancy scans, and a few parking fees at the hospital (maybe $200 per kid all up).
That’s literally it. And as it turned out, we were even put in the “private” rooms for the birth of our second child because the public rooms at our hospital were all full!
Meanwhile, our friends who went with private health insurance had to fork out hundreds of dollars (on top of the insurance premiums) for their various appointments and scans, and several hundred dollars just for access to the Pregnancy Assessment Centre, which is free for public pregnancies.
And because they had private health insurance they were unable to access public doctors, meaning they often had to spend longer waiting to see specialists.
Yes, they were able to nominate their obstetrician, but were delivered by a midwife team anyway because their obstetrician was on holiday. They did get 5 days post-delivery in the hospital instead of 1 in the public system – but it cost them 10 grand.
Many parents are worried about their kids getting enough “socialisation.”
This is often the reason given for enrolling them in childcare or various social/sporting groups at a young age. In reality, the most important thing for kids’ development is to nurture their relationships with adults, not other children.
That doesn’t mean that kids shouldn’t have play dates. But do you know that play dates can be totally free?
Yup, you can take them just about anywhere to play with friends – visiting each other’s houses, going for a bike ride, playing in a park, walking in the bush, visiting the library.
Kids are happy to do absolutely anything, so why not pick something that’s free?
If you don’t know any other kids, start taking your family on a stroll around your neighbourhood. You will get to know other local families very soon.
Let me just say that kids don’t need you to spend money on them to buy stuff.
Studies show that kids who have fewer toys engage in more imaginative play and are more willing to use toys in creative ways. They have longer attention spans and fewer meltdowns over lack of access to a particular toy.
Our own experience confirms this. We try to keep the total number of toys/puzzles/books in our house to a minimum, and only have a small selection out at any one time.
Sometimes our kids will play with a single toy for an hour at a time, and are basically able to amuse themselves with anything they come across.
They are also generally willing to keep at something that isn’t instantly easy to use because they are curious about what they can do with it, and carefully pack away one toy before pulling out another. Their toys are precious to them, important to keep orderly and intact.
As an added bonus, whenever we rotate out something they haven’t seen for a while, it’s like they’ve just gotten something new to play with!
Meanwhile, our friends have houses bursting with toys (toys in the kids bedrooms, toys in the bathroom, toys at the table, toys in the yard, toys that need to be taken out everywhere with the kids so they can be entertained… it never ends).
These kids seem to struggle to keep their attention on any one toy for more than a few minutes at a time. They show little genuine appreciation for a gift and little remorse at losing or breaking one.
Just about everything you need when you have kids can be bought second hand (or even gotten for free if you are lucky enough to know someone who had kids a few years before you).
Facebook also has local groups that are set up for neighbours to give things to each other for free. Resist the urge to accumulate too much stuff just because it’s cheap.
Once your kids outgrow things, you can give them away to another family with younger children (or via any of these sources if you don’t personally know any).
We have found it helpful to involve our kids in the donating process, so they can see their old stuff going to a new home for another child to have. They often speak warmly of past things that they were attached to and how they are happy that another child gets to enjoy them now.
If your kids have difficulty letting go of old things they no longer use, you can combine the donating activity with getting them something new (e.g. if their clothes are getting too small, bring out their new clothes when they are donating the old ones).
One of the great things about kids is that they are instantly excited to be anywhere. Everywhere is new.
The upshot of this is that a holiday can be literally anywhere and the kids will have a great time.
I’ve never understood why some parents fly their young kids around the world on (what must surely be) extremely exhausting, action-packed holidays, when they’d have just as much fun (and less stress) going somewhere local.
Since having kids, our holidays have all been awesome local camping trips, although we recently stayed at an eco-lodge in the mountains thanks to a gift from colleagues. Nothing beats getting outdoors with the family for a few days.
Feeding a family will obviously cost more than feeding one or two adults. But eating doesn’t need to be expensive.
We spent more on food when it was just us, because we often ate out at cafes or grabbed fast food on the way home from a long day at work.
We know childless couples who spend more just on take away than our family does on all our food combined.
Focus on cooking and preparing your own food at home and skip all the crap that comes in tiny plastic packaging or gets personally delivered to your door. Yes, this takes time, but costs less money. It’s the time vs money trade-off again.
Veg, fruit, nuts and beans are all super nutritious, filling and cheap. We eat meat, but not every day and in smaller portions compared to when we were younger. If you spare your family all the sweet and salty junk, your kids will love this stuff too.
Here’s a quick summary of Steve’s main points…
Honestly, I have nothing to add. There are so many great reminders in here that raising a small human doesn’t somehow blow up an entire family’s finances forever.
I wholeheartedly agree with Steve’s practical advice and want to thank him for sharing his perspective and experience with us.
Now, you could say none of these are earth-shattering ideas. But that’s actually the point!
Saving, financial independence, and living a good life are all relatively simple things. We just make it harder and more complicated than it needs to be!
Having a great family life while saving and building wealth doesn’t involve incredible sacrifice or extreme hacks. It’s simply choosing to do things in a more thoughtful way, focusing on what really matters, and disregarding what doesn’t – including the opinion of others.
If you’re a parent (or plan to be), I hope this article shows you that even though your circumstances may change, you can definitely (and comfortably) build financial independence and create the life you want!
Do you have any tips for your fellow readers when it comes to reaching Financial Independence with kids? Leave a comment below.
And if you know someone who should read this, please share it with them 🙂