Wednesday, November 28, 2007

The Potential Cost of Having Children

Stumbling on Happiness by Daniel Gilbert deserves partial credit for pointing me in the overall “happiness” direction—tips, tricks, etc. An interesting argument he discusses centers on a study that examined couples before and after having children. Simply put, he says, couples overestimate their happiness at the thought of having kids, and begin a steady downward decline in overall happiness once having them, and their overall happiness level doesn’t increase again until after the kids leave home. Obviously this isn’t true for all couples, but in general people overestimate their happiness towards having children—I think people overestimate their future happiness in nearly all areas. A question I had after reading the book: What role does money play in the happiness of couples after having children?

BusinessWeek released some data regarding the potential cost of having kids—which is likely a huge contributing factor to a couples decline in happiness. Although you can’t break down a child into dollars and cents, everything in our world continues to get more expensive, so it's worth examining.

Consider this:

The Agriculture Dept.'s latest survey found that households in the top-third
income bracket (with average pretax income of $118,200) will spend $289,380 by
their child's 18th birthday—or about $17,000 a year (in 2006 dollars).

The article goes on to say:

Indeed, the USDA survey is probably understating the cost of raising kids.
Considering extras like sports equipment, summer camps, private school, Disney
vacations, and a full-time nanny, raising a child through age 17 could cost $1
million or more. Some parents throw extravagant birthday parties and won't
hesitate to buy their kids the latest video games and cell phones and splurge on
Spanish and painting lessons.

The lesson here is not that you shouldn’t have kids—I definitely want kids. However, a couple should be aware of the extra duties that arrive shortly after birth (including expense)—hopefully I’ll get first hand experience. Anyway, the article points out some interesting facts about the cost of education, and the income differences between those with high school diplomas and college graduates.

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