NerdWallet's Smart Money Podcast - The Price of Parenthood: What It Costs to Be a Parent

Episode Date: June 8, 2023

Becoming a parent is unavoidably expensive. But this is a financial decision that’s about a lot more than just money.  To kick off our nerdy deep dive into the price of parenthood, Sean Pyles and Ronita Choudhuri-Wade talk about how much it costs to have a child, including the cost of raising one to adulthood.  To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Think you're ready for kids, like having them? Well, while those little bundles of joy will hopefully bring you a lifetime of love and affection, they don't come without a price tag these days from the moment you decide you want them. Before you dive into the numbers, just think about what really matters to you. How will you feel if the money part of it makes the decision for you? Think about that. I find that a lot of people use money as kind of an excuse to cover up what they might really want deep down. Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Ronita Chothri-Wade.

This episode kicks off our nerdy deep dive into the cost of parenthood. Yes, those wee little tykes will have an extensive impact on your bottom line. In this series, we're going to give you a sense of exactly how much it costs to have a child. Yeah, and we're going to look at some of the options you have when deciding to have kids. From, you know, the old school way to adoption, egg freezing, and in vitro fertilization, or IVF. And Renita, I know that all of those options don't come cheap. No, they certainly do not. Even for a traditional childbirth, you're probably paying a few thousand

dollars in insurance deductibles and other payments. And the other options I mentioned can run into the tens of thousands of dollars, sometimes six figures if you're doing like multiple rounds of IVF. So we're going to take listeners through those options and give them a sense of what might be ahead for them as they choose to have a child. All right. Well, listener, we want to hear from you, too. We'd love to hear your stories around the decision to have a kid, especially around

your finances. Leave us a voicemail or text the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or email a voice memo to podcast at nerdwallet.com. Well, Renita, usually this is the place in the show where I ask our guest host why we're doing a series on a certain topic. And I am going to ask that of you as well. But first, we have another very special guest joining us for this conversation, your husband, Jeremy. Welcome to Smart Money. Hi, great to be here. So Renita, do you want to give us the short answer for why we are doing this series on parenting? Sure. It's really because Jeremy and I are thinking about having a kid.

There's a bit of self-interest in this, definitely. But hey, I mean, clearly the best way to find out about the joys and sorrows and costs of becoming parents is to do a podcast series here on Smart Money. That's exactly what I thought. Well, let's get a little bit of background from the two of you. How about a quick origin story? I want to hear how you guys met, when, where, all of those fun details. We met six years ago in New Delhi, India.

Each of us had kind of gone independently. We didn't know each other before, but we were both working there in the city. And we met, we went on our first date to a Mexican restaurant. Mexican restaurant in New Delhi. I think the only one in Delhi. Did they have curry burritos? It was straight Mexican. They definitely had some great margaritas. I remember we had some margaritas. Awesome. All right. So then eventually you guys started dating. What was the proposal like? Yeah, we got engaged in the summer of 2020,

just a few months into the pandemic. Yeah, we found a resort kind of up in the Himalayas near Rishikesh, where like the Ganges start. And we found a resort that was kind of doing like a quarantine holiday thing. And so they'll come and pick you up if you're, you know, if you have negative COVID tests, and then they'll like take you there. And I had no idea, I had no idea we were getting engaged. I was like, I looked like, you know, just with the pandemic and everything, it was it was a crazy time. But yeah, I had other plans. But how romantic. And this hard time you guys had this wonderful moment of getting engaged in a beautiful location. And you guys got married. And now, of course, you're thinking about starting a

family. Did you guys talk about kids before you got married? And if so, were you on the same page? We definitely talked about it. And we found we were both open to it for sure. The timing of it was definitely a question that we got aligned over time. We did decide that we wanted to get a dog to test it out. We got our puppy Mo, who's a toy fox terrier, smartest little guy ever. But we got him like literally the same month we got married. So we're like, okay, we're gonna try this out. Got it. So you were open to it, but you weren't set on we're going to have kids right when we get married, because a lot of couples that I know are like that.

Taking a step back, I'd love to hear what kinds of thoughts and experiences you had around parenthood growing up. I know for me, I always had the thought I wanted to be a dad from a young age. But as I started my career, it went to the back of my mind for sure. And I moved to higher cost of living cities and that felt even more, you know, in the distance. But that really changed when Runeet and I met. Runeet, what about you? I think my answer is a bit more complicated. You know, I'm of Indian heritage. And so the notion of being a parent felt like it was a requirement.

It was culturally required by the community, by parents, by family. And I think I was not ready to take that on without thinking about it. For a long time, I didn't want to be a parent. And I kind of pushed it away just because I felt a lot of pressure around that's your identity. And then that's kind of compounded with the fact I was also living in New York City for a long time. And it just seems such a no go there. Yeah. And just because the city itself is so expensive, you wouldn't have any spare money to raise a child. Yeah, exactly. It's like I saw what people were going through with getting their kids into school and waiting

lists from like three, four years ahead before and all these kind of things or people moved out. They left the city. And so during that time, especially, I was thinking like, I don't know if this is for me. But as I got older and really that question kind of came up, like, do I want to do this? I want to be like intentional with my choice. And I started being open to it, you know, as I hit my kind of like early 30s. And then, and then I met Jeremy. And he was someone

that I thought I could see doing this with him. And I wouldn't mind my kids to turn out like him. And just like, I mean, they're always going to be right, they're going to be like part, part you part your partner. And so I thought, like, I wouldn't mind having some like rugrats that are kind of like him. Well, now I want to turn to the money stuff. Did the financial obligations of having a child factor into this thought process and the conversations you guys had? And if so, can you walk me through some of those conversations? Yeah, it certainly was a big factor. We both moved across the world during the pandemic. We both changed jobs. And getting financially secure was, I think, a factor that played a large role for us. And that happened more recently where we both felt secure in our new place and new jobs.

So I think that was a big factor. Honestly, it became more and more of a possibility when I felt more financially secure to do it and to take this on. I think Jeremy was confident in our abilities way earlier than I was. Yeah. You wanted to have two solid incomes before you were going to embark on becoming parents. Is that right? Yeah, like solid incomes, health insurance in place, and also like health insurance in place for like, if it takes a bit more. And

what we did do during the pandemic is that we moved to Tulsa, but we did it with the Tulsa remote program. You know, they help you move here and get settled in. And I found, you know, I'm from the East Coast, and I found that the cost of living in Tulsa is so much lower. And it's a kid friendly city, Jeremy's family is nearby. So all of a sudden, these like pieces that were fitting together, I was like, okay, I can see it now where cost of living is lower. We have, you know, lots of public parks. Okay. And so did you guys feel like once you were settled in Tulsa, that this would be the place where you were going to start a family? Or was there anything else that you guys had to work through before you could get to that point? Yeah, that was a question. I had grown up in Oklahoma and moved away intentionally for,

you know, job opportunities, but just seeing more opportunities outside the state. So the idea and the experience of moving back to Oklahoma was a process. And I think these questions really weighed on my mind in terms of policies that the state has in terms of education and the idea of raising kids here, I think took some time, but more recently, I've just really can see that path now and want to actually contribute and make Oklahoma a place where you want to live. Yeah. Okay. So at what point did you two decide that you were maybe ready for parenthood? Ready for parenthood. Okay. Well, we started trying this year. We recognize that, you know,

someone that's like, I now I'm on the other side of 35, right? So how old am I now? 36? Yes, I'm 36. I'm going to be 37. So I'm aware that like, we're on this journey a little late. There are questions on what they consider, quote unquote, like a geriatric pregnancy. Again, not to say that it can't happen, of course. But there are additional complications. And so it may take longer, we might need to consider other avenues. Have you started to look into those options and what they might do for your bottom line? This is why we're doing this podcast, Sean. All right. Well, let's talk a little bit more about how you guys manage your money, and particularly what kind of financial planning you've done in advance of this decision to possibly become parents. So you can lay it out. What does your money life look like?

This was a journey for us. We both had lived independently for most of our adult life and had managed our finances individually. So the idea of jointly thinking about the future and jointly making decisions was a process and we started a joint account and while we still maintain our individual accounts we started a joint account together something that really i think worked for us is starting a monthly meeting where we called it mo money meeting it's called mo money because it's like a play on like the biggie song right my money my problems and um the fact that our dog is named mo and he does not worry about money at all so we all we both aim to get onto Mo's level of financial security. Great.

So what do you guys talk about in that meeting? Yeah, we check in to see where we're at with income, with our bank accounts, our balances, credit scores. But importantly, we think through spending. What do we want to spend on, particularly our joint account and our joint money? And honestly, yeah yeah we started chatting about having a kid and what does that mean for for savings in particular and so where have you come to on that yeah so we also after our our wedding we had a reception and we had some gift

money that came through that so one of the things we did was we decided to put this away in a inflation protected bond, you know, and specifically for, you know, kid expenses. And luckily, we timed that well, when the interest rate was at 9.6. I think it's come down since then. That's pretty sweet. We also looked at our health insurance plans with work. And we got some advice on how to think about costs for pregnancy and childbirth. We switched insurance plans. We then had an HSA. And now we've been putting more money towards the HSA to help cover possible future costs of having a kid.

We took the plan way in advance. I'm totally a planner as well. So I appreciate that. And you know, I'm not your financial advisor, and neither is nerd wallet. But I would say that you guys seem to have been doing pretty well with all of that homework. And I love the Mo Money meeting. So I'd love to hear what you guys are doing now while you wait to see what's going to happen. What is that moment been like? I'm not gonna lie, like, I'm about to be 37. We've been trying now for a couple of months. And it's taking a lot longer than I thought it would. I feel like the sex ed we had

in high school just completely duped me in thinking that like, you just get pregnant immediately, you know. And so that's been a bit of a that's been weird. It's been weird to kind of go through this process, expecting it again, like, okay, it'll happen in, you know, a month and two months and knowing that it's taking a lot longer. And, you know, initially, I did, I bought all the books, right? Because I was thinking, okay, like, how long is this gonna take? And, you know, maybe that was just my own ignorance. And I had to just stop reading them. Because I was thinking, how long is this going to take? And maybe that was just my own ignorance. And I had to just stop reading them because I was like, this isn't helping me right now. One of the things we're also doing is we're really focusing on our health, doing the things that we can do.

We both have aura rings. We're tracking our sleep and our readiness scores each day and trying to eat healthy. And yeah, one thing we're thinking about is what's hard to do once we have a kid. So in terms of planning, we're planning a trip, a vacation next month, and making it a little adventurous. It's in Panama, and we're going to rent a car and drive across the country to a beach. Sounds beautiful. And also like that would be very hard to do with a newborn. Absolutely. But yeah, I mean, overall, it's a big decision. And we're clearly we're trying to think through as much as we can. But this podcast is helping.

Awesome. Well, I definitely approve of that vacation and this podcast series. I'm really excited for it. And Renita and Jeremy, thank you for sharing your story with us. Jeremy, thank you so much for coming on the show. Thank you. It's great. Renita, I really want to thank you again for sharing your personal experience with us. Trying to become a parent can be challenging no matter your circumstances, and it can be a really lonely process too. So I hope your story helps other folks who are on this journey realize they have plenty of company

and that there are resources available to help them navigate this emotionally charged and expensive time. Absolutely. I mean, one thing I've realized is that the more I talk about it with friends or colleagues or family, and what I mean by it is like my hopes, but also my disappointments or my frustrations, which is like, it's like putting my business out there, right? And our business with Jeremy. But like the more that I do that,

the more I realize I'm not alone in this. And going out on the line and saying what's going on has also opened the door for my friends and all and others to be like, yeah, girl, like this is hard. And it might not be as easy as you think. And it's just it's just really reassuring to hear that and just to know that you're not alone out there. Right. So who are we hearing from next? Well, I thought it would be good to hear from someone who deals with financial planning for kids all the time. So we're joined by Julia Colantuno.

She's a certified financial planner and the founder of One Financial Design. She's a parent herself. And as a financial planner, she's seen many parents' financial situations. All right. Julia, so glad you could join us on Smart Money. Thank you so much for having me. So obviously, this is a financial show, and we're going to talk brass tacks and numbers in a moment. But I wonder if you could walk us through some of the more basic questions people might consider

before deciding to have kids. What do you encourage people to think about when they first come to you for advice? Okay, so this is a loaded question. I mean, the decision to even have kids or not is a big one, and a very personal one, obviously. So before we even get into numbers, I really encourage people to sit down and reflect a little bit on what's really important to them and to really be honest with themselves. Just think about what really matters to you and know that everyone's answer to to them and to really be honest with themselves. Just think about what really matters to you and know that everyone's answer to this is going to be completely different. And, you know, there's different fears and different thoughts that come up for everyone

based on your own situation. So going off of that, what are some of the questions people should ask themselves outside of whether they can afford a parenthood? Where money does start to come in is think about why money is important to you. So ask yourself that question. What are the important things to you in life, whether it's having kids or maybe it's a career path that you've chosen or something else that's really important to you? And ask yourself that first. And then if you're in a relationship, it's also really important to you and ask yourself that first. And then if you're in a relationship, it's also really important to talk about it together because you might have different viewpoints of that. And so setting a time to really talk about it, talk about your motivations, what do you want your life to look like? If you do want to have kids, what kind of life do you

want to provide for them? And this can bring up some interesting stories of people's childhoods or what they want for their kids or what they think their kids might need and, you know, have a different opinion from their spouse. And so it can get really interesting. But talking about it is really the important thing here. Right. So one of the things we explore a lot on this show is the psychology of money and especially how, you know, the money culture we grew up with can influence how we think today. And I'm saying this, too, as, you know, a daughter of immigrants. And, you know, we had a whole my parents raised us with the whole thought process on, you know, about money and saving and what you're supposed to do with it. So how do you think that applies to this question of having kids, the money culture one grew up with? How does that affect the question of having kids?

Yeah, oh my goodness, this can show up in so many different ways. And obviously, it depends on your situation. But you know, the immigrant family that you grew up in could have a totally different point of view than another. A big one I see a lot is in the American culture, like people thinking they have to have a big house or, you know, move out to the suburbs and buy a huge house with a yard and lots of bedrooms for their kids, especially if you're already living in the city and have a certain lifestyle. I see a lot of people thinking they need a certain or they need their life to look a certain way before having kids. And it's just not true. I

mean, if you kind of look outside your little circle a little bit, you'll see people who do it in all different kinds of ways. You know, I think people, yeah, based on people, how they grew up, they can have these notions in their head of the kind of life they want to give their kids. But the life they give their kids could be totally different from the life they had and just as good or even better. So. All right. Well, to get to brass tacks, as I mentioned earlier in the show, my husband and I were talking with Sean about our own decision to have children and the role money played in that decision. And I have to say that it is expensive. In fact, the Brookings Institution looked at figures the USDA put out in 2015, reworked them for inflation, and found it costs around $300,000 to raise a child in the U.S. until the age 17. Honestly, you hear that figure and wonder how

anyone moves forward with this decision at all. Yeah, that's a striking number because when you think about your other expenses and how much they cost in a year, this study is saying to raise kids is way up there with some of your most expensive items. So you have like what we might describe as eras in the cost of parenthood too, right? So, you know, how that money works out over those 17 years, if not longer. Should we start at the very beginning with the expense of pregnancy and childbirth? And if you're fortunate, insurance will cover most of this, right? Yeah, insurance will cover most of it. I found a figure that said that on average, after insurance, most parents pay between $2,000 and $3,000 out of their own pocket to have one child. And so that's just something to think about in terms of how, you know, what it actually

costs for the childbirth and the OBGYN visits and what have you. So there's that kind of hurdle to get over. And then, of course, you go into all the phases of parenthood and there's more money to be spent as well. And what if you don't have insurance? Yeah, then it can be very expensive. I know there's also options in terms of like home births, I think, are on rise, maybe because of this as well. But it definitely, you know, pays to have health insurance. Okay, so then you have the baby. And those first couple of years are filled with everything from diapers to clothes to food. Is there anything I'm missing? And what am I missing in those first

couple of years? Yeah. So you have the baby and your life completely changes. Besides the things that you might expect, there's also things you might not expect, like how your physical energy changes and the things that we can't really measure that go into that. But in that first phase, when your kids are babies and toddlers, the biggest expense really is childcare. And beyond just maternity or paternity leave, you then have to think about, are both parents going back to work? Is one of them going to stay at home part-time or full-time? Are you going to need to send your kids to a daycare? Or are you

going to hire a nanny? And that decision really is a very, very expensive one. I would say second to college costs. That's the most expensive decision or, you know, the one that has the biggest effect on finances. I've had friends where, you know, they've considered staying home instead of going back to work because the amount of like the amount of money for daycare is going to equal the salary one would bring home. Okay, so what would be the next stage of expense that kicks in? Say we're going into pre-K and kindergarten. And I suppose that depends on whether you're using the public school system or private. Yeah, that's a huge difference. If your kids are going to public school all of a sudden your kind of world opens up in

the sense that now you've got a portion of the day where your kids are going to be physically taken care of and it's free if they're in public school so that now means that maybe the parent who was staying home before now goes back to work and earns an income or the daycare costs that you had that you won't have anymore that that's a huge expense that now drops off of your budget so when your kids get to be that age of like five six they're going into school your budget typically has a lot more wiggle room in there now yeah and you know we don't need to go through each grade level but once we start hitting elementary school you know and before a kid gets to high school, what sort of costs are we looking at? Like piano lessons, soccer uniforms, snacks.

Exactly. Yeah, you got it. All that stuff. And that's really dependent on the family and what kind of things you want to provide for your kids. Some families might need after-school care, which is an expense, depending on how many activities and sports and things you want them to be in that can play a role here. Also, summer camps is a big one that I see differs from family to family. If a parent has a flexible job or if they're a teacher where they can take the summer off, typically those families are able to save on some of those summer camp costs maybe if they choose to do things like stay more at home or go to the beach and things like

that with their kids during the summer rather than have them in expensive camps for every week of the summer. So that can play a big difference too. Okay, so we're getting to high school. Yeah, what are we looking at for costs then? What should people be aware of to expect during those high school years and quite transformative years? Yeah, So some things that change here are, number one, is the kids can be more independent. So physically, you don't need to be there all the time. If you work a full-time job and they get home from school off the bus, if they're 13, 14, okay, now they can just kind of stay at home for a couple hours by themselves and it's not a concern. So that, again, gives you kind of more opportunity to work full-time maybe if a parent was working

part-time before and things like that. So that can have an impact on their finances. But then teenagers do get a little bit expensive too. So if you're buying them a car or they're getting on your car insurance now, they're wanting an allowance to go out with their friends and spend on going out to eat or out for ice cream, things like that. It can kind of get expensive. But again, it depends on the family and it depends how you want to structure your family life in that stage. Do you want to make your kid pay for their own car if they're going to have the privilege of driving a car? Will they get a job? Things like that. So it depends on the family. And I mean, the big looming goal is, of course, college, post-secondary education. And some

families will be looking down the line at college costs, right? So maybe starting a 529 plan. And I mean, college doesn't even factor into that $300,000 figure we talked about earlier. I mean, how early do you start planning and setting aside for your kid's college? Yeah, so the earlier the better, of course. And you can start as early as you want, actually, even before you have a kid, if this is something you're thinking about and you want to kind of get ahead of it. It is a huge, big expense. And I hate to see when parents get to the point of where their kids are in high school and now they're starting to talk about it and think about it and realize that they really haven't saved as much as they maybe should have

or would have if they could go back in time. So it does pay off to start saving as early as you can. We know that the impact of compound interest is quite large and you can benefit the most from it when you start saving earlier rather than later. And with a 529 college savings plan, that's just one way that you can start saving for college. Any final words of wisdom for those listeners who are having, you know, a big think about having kids? Again, just before you dive into the numbers, just think about what really matters to you. Like, how will you feel if the money part of it makes the decision for you? Think about that, because I find that a lot of people use money as kind of an excuse to cover up what they might really want deep down. And so it's just digging deep and getting to the root of what you really

want that's important here. Well, Julia Colantuno, thank you so much for joining us today. Thank you so much for having me. This was fun. So, Sean, clearly Jeremy and I have some planning to do on top of all the planning we're already doing and probably even more savings than we've done already. Yeah, I can imagine. And something that I'm thinking about after that conversation is given how expensive everything is nowadays, is whether having a kid is even financially viable for a lot of folks. Or if you do decide to jump in and have a kid, what other financial trade-offs are you making? But you know, of course, having a kid is more a life decision than a financial decision, even if the financial implications are really enormous.

I think that's a really valid question about whether having a kid is even financially viable for a lot of folks. And it came up for Jeremy and I. I mean, if we didn't move somewhere like Tulsa that has a lower cost of living, I'm not 100% sure we would even be having this conversation because I'm not sure I would even be fully comfortable having kids right now. They are expensive. And as parents say, like, you want to give your kids everything, right? But what if you're in a financial situation where you can't give them everything you want to give them? And I feel like that hits especially hard for me. I mean, you know, I'm a daughter of immigrant parents

who like literally started in the US with two suitcases. And so growing up, money played a role in the household, you know, it was almost like another family member, like it was talked about, it was worried about. And it was it played, it just played a large role. And so now as an adult, who's like thinking about having kids, I don't want them to have to worry about money as I did. And if I can do that, I would just love it. Be a huge relief. Yeah. And, you know, it can be really helpful to keep in mind as well that there are always going to be some financial challenges and compromises, no matter the family circumstances that you're in. But by upping your financial education and focusing on how you can set your family up for success, you would really be giving your kiddo a huge head start.

All right. Well, Renita, can you tell us what's up in episode two of this series? Well, next episode, we're going to talk about adoption. It's an incredibly complex process with a slew of options. And with most of them, you're going to have to spend a lot to bring a child into your home. But it's worth it. It's not a small number, definitely. But it's all relative though, right? Like $40,000 is not a small chunk of change in any way, shape or form. It's also about the average cost of a new car. You know, so it's also not an exponential expense that people don't usually deal with. For now, that's all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com.

Also visit nerdwallet.com slash podcast for more info on this episode. And remember to follow, rate, and review us wherever you're getting this podcast. This episode was produced by Tess Vigeland and Renita Chaudhry-Wade. I helped with editing. Kim Lowe helped with fact-checking. Kaylee Monaghan mixed our audio. And a big thank you to the folks on the NerdWallet copy desk for all their help. And here's our brief disclaimer.

We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.