Anthony writes in:

My wife and I have two children, ages 2 and 1. We’d like to have more; we both think that four would be a great number, although there’s no particular logical reason for that number. The problem is the expense. With daycare costs, adding each additional child will cost another $260 a month. If we stopped paying extra on our student loans and cut our savings per month to $145, we could afford the daycare for the third child, but a fourth would require more painful cuts. We already live frugally: buy used clothes, drive used paid-for cars, make almost all of our food at home, etc. I’ve looked into second jobs, but there’s very little IT work in the area, other than what I already do. And with our county having the highest unemployment rate in the state, I suspect even paper-route jobs and that sort of thing would be hard to find.

My job pays decently and is very secure: her job also pays well and is less secure, but still not much in jeopardy. In Michigan, that’s significant. We can’t sell the house without taking a loss, but it is big enough—barely—for two more kids. If we need to upgrade the car to a mini-van, we’ll have enough in our car fund that we can pay cash, so that’s not an issue.

I hate to make children about mere numbers, but purely by the math it seems like more children is unwise. On the other hand, I constantly hear stories from other families about how they it “somehow just worked out.” Any advice or suggestions?

Much like you, my wife and I have two children – ages four and two – and another one due to arrive within the next few months. The issue of escalating child care costs is one that we’ve dealt with many times throughout our child-rearing process and, through it all, we’ve come to some conclusions about that very occurrence.

First of all, the idea that it “just worked out” is a bit misleading. What often happens in that situation is that people go through a period of re-prioritizing after the child (or children) arrives, and it’s often a shift that happens without a lot of conscious thought. You choose to eat at home more because it’s easier to corral children there. You don’t go out as often as you used to because of the cost of babysitting. Over time, these shifts just seem completely ordinary – parents adopt a new normal along the way and often feel like it “just worked out.” Our memories often work to make things seem smoother than they actually were.

At some point if you continue to have children, the cost of child care will likely eventually meet or exceed the net cash benefit of one of your jobs. If you have three preschool-aged children (as we will soon), your weekly costs are immense. If you, at the same time, figure up the true take-home of one of the people in the household – after taxes, commuting costs, vehicle upkeep, wardrobe upkeep, and son on – you’ll often see that working outside the home is a financial net negative. Add on top of that the financial benefits of not working (even less reason to eat out, more organized grocery shopping, etc.) and you create a compelling case for one partner to leave the employment scene for a period of time.

What if you can’t afford to do this because you’ll be burying your career path? At this point, it’s really a values thing – your career is more valuable to you than more progeny. It’s one of those value comparisons where there is no real right or wrong answer – however, because it’s such an emotional one, people often convince themselves that one answer or the other is absolutely right for them and thus absolutely right for everyone. It’s not. You have to decide for yourself what you value.

If you decide that more children are the real priority here, then plan for it. That may involve selling the house and moving elsewhere – even to another part of the country. It may involve selling a vehicle. It may involve leaving a job. If your children are your priority, then sacrifice those life elements that aren’t directly benefiting the children.

If you decide that your continued career trajectory is the priority for you, take precautions to not have another child.

Your situation – much like our own – is basically asking you to choose between the two paths. Choosing one path doesn’t necessarily mean abandoning the other one, but it does mean postponing it to a later point in your life and it may mean that you’re unable to pick it back up again.

It seems to me from the email that you’re having a hard time choosing between the two. Right now is the time to sit down, talk with each other frankly about it, and make a choice. Is it career maintenance as the top priority or is it more children?

Give the decision time. Also, perhaps most importantly of all, give each other respect here. There is no right or wrong way to feel about the question and if you disagree, that’s okay. You both have reasonable perspectives on the issue.

You don’t have to make a decision tomorrow on this, but whichever way you choose, it doesn’t hurt to take a serious look at your spending and find ways to minimize it now. Build an emergency fund. Learn to live on a little less. No matter which path you end up choosing, doing that now will help you with the ramifications of that choice.

Good luck.

My two children are extremely blessed in many ways. Perhaps their greatest blessing is that they’ve surrounded by a family that loves them dearly and truly cares about their future in a deep, fundamental way – and I’m not merely talking about myself. I’m talking about their grandparents, their aunts and uncles, even some of their cousins. They are surrounded by a cadre of people who love them, care for them, and truly want them to have a wonderful life.

Because so many people care so much for these two children, they’re often the recipient of gifts. Yes, their birthdays and Christmases are full of presents, but it even goes beyond that. Their grandparents often buy them spontaneous gifts. Their cousins sometimes literally give them their old toys and clothes. We even do it ourselves, though our influence is often in the form of books for their bookshelves.

This has a challenging side effect – the kids have accumulated an awful lot of stuff. Their toy boxes are overfilled. Their bookshelves are stuffed with books.

Several problems are made evident by this. First, it’s difficult to keep all of this stuff in order, simply because of the clutter problem. Second, it encourages our children to be overstimulated because as soon as they even have an inkling of being less interested in a particular item, they can just bounce onto another one. Third, they’re often much less enthusiastic about the wonderful gifts that their grandparents give them because they already have so many.

The solution is obvious: reduce the toy count. But how do you do this without upsetting the children?

My goals are very straightforward.

First, I want to reduce clutter. Dealing with clutter means more money sunk into stuff and more time spent cleaning it up. That means less money for the things that are important (like a less stressful career, deeply meaningful experiences, and so on) and less time for them as well.

Second, I want my children to enjoy life with less stuff around them. I do not want them to feel that lots of stuff is the norm.

On a smaller note, I want my children to increase their attention span. With a huge number of toys easily at their disposal, it’s very easy for them to just jump from toy to toy. By strongly reducing the availability of such items, the opportunity to jump around is less.

Here’s my solution for this problem.

First, I’m taking an inventory of which toys they like and play with frequently – and which ones they do not. I’ve actually been making a list of the toys that each child plays with over a multi-week period. If toys are on this list, they’re probably going to be kept. Toys that are not on this list are going to be targeted for removal.

Second, I’ll talk about the process with them. I’m going to ask them what their favorite toys are. I’m going to also tell them that I’m going to take some of the toys that they never play with and give them to other boys and girls that don’t have many toys to play with. Believe it or not, this works very well with our children, even the two year old.

Third, I’ll take advantage of a period when they’re visiting grandparents to reorganize and minimize their toys. When they return from their grandparents, I will have removed many of the toys from their sight, minimizing the clutter. What will remain are the toys I’ve identified as their favorite ones. The toybox will be only about half full (if that) instead of overflowing. The bookshelves will be filtered a bit (though I’m not as interested in reducing their book count).

Finally, I’ll keep the excised toys in storage for a short period, then either yard sale many of them or take them to Goodwill. The reason I’ll keep them in (hidden) storage for a short period is so that if I discover that I removed a toy accidentally that the children really value, I can retrieve it.

One thing I won’t do is discourage family members from giving them gifts. I understand that this is done as an expression of love for children that they don’t get to see as often as they’d like. Instead, I simply want to create a situation where these toys and gifts are deeply appreciated.

For a long time, we did some toy rotations so that the children would always have something new to play with. In my eyes, that doesn’t really achieve the goals I listed above. We still have a lot of stuff. It still doesn’t subtly teach patience and attention to the children.

Any thoughts on this plan?

As I’ve mentioned before, we give our children a small allowance each week. Our daughter, who is only two, puts all of her money into a single-slot piggy bank and is allowed to fully spend it as she chooses. Our son gets more money for his allowance (for now), but has a Money Savvy Pig, where he splits his allowance into four equal parts: money to freely spend, money to save for an item he wants, money for an annual charitable gift, and money for investing for the long term.

The idea here, though, is that each of them has a few quarters to spend each week on whatever they would like. Most of the time, they spend it on reasonable kid things – they both have a strong affection for M&Ms, for example, and often buy M&Ms with their quarters.

This week, however, was different. We were dining at a restaurant that had one of those carnival-esque “claw” machines near the exit, where you use a stick to maneuver a claw around, then hit a button to have the claw drop into a pit of stuffed animals or other toys. Almost always, the claw is unable to pick any of the items up, so you simply lose the money you put in there.

We’ve warned our kids about these machines in the past. “If you put your money in there, you’ll just lose it and not get anything for it.” “Those machines are rip-offs.”

However, we are also committed to letting our children make their own choices about their free-spending money. Thus, as we were leaving with our children, they asked if they could use their spending money in the claw machine. After a quick warning about the nature of the machine, we allowed them to, assuming it would teach them a quick, simple lesson about disappointment and how things like this actually work.

Of course, my two year old daughter won a stuffed animal on her first try.

Of course, my four year old son won a stuffed animal on his second try.

Obviously, the lesson learned from this situation is the opposite of what we hoped they would take from it. My son, in fact, has already told us that this is now his favorite restaurant and he can’t wait to go back to get another stuffed animal, implying (of course) that it’s trivial to get a stuffed animal from such a machine.

Where do we go from here? My wife and I talked about it and came up with the following conclusions that we feel are in line with the money lessons we want to teach our kids.

If they wish to try again with their “free spending” money, we won’t stop them. How you choose to spend money – and what you get out of it – is a constant lesson in itself. Putting restrictions on the portion of their allowance that they’re allowed to spend freely (at least at this point) defeats the learning (even if sometimes the learning isn’t perfect).

We’ll still advise them of potential poor spending choices. Of course, just because they’re allowed to freely spend doesn’t mean we don’t offer suggestions to them about what’s a good spending choice and what’s a bad spending choice. We try to avoid drawing conclusions, but we do try to provide information. We focus on saying things like, “If you put your money in this machine and it doesn’t win a toy, that money is simply gone – you’ll get nothing for it.”

We won’t “avoid” such machines in the future. One topic was whether or not we should actively strive to avoid “claw” machines for a while until they forget that they won. Of course, doing so simply delays the inevitable lesson that they’ll have to learn from such machines, so we decided not to avoid such machines.

We will never recompensate them for their lost money in such machines. When they try again and inevitably lose, we will allow them to feel the sting of disappointment and not undo that sting by reimbursing their money, as we’ve observed other parents do in the past. They have the freedom to spend their money as they choose, and they also have the freedom to lose it and to grow from the lessons they learn.

Still, I have to say I was honestly amazed when my two year old daughter moved the claw around jerkily for a few seconds, smashed the button, and was rewarded with a cute little stuffed animal. I honestly believe I could have played the machine for an hour and not won a single thing.

As I discussed yesterday in a pair of articles (this one and this one), I dream of a future where my children and I are completely financially independent from one another. I’m not dependent on them, nor are they dependent on me.

The real question that both articles strive to answer, though, is where should I put my money to ensure the best possible outcome for both me and my children? Retirement savings? College savings? Splitting it up?

In my eyes, the issue really comes down to the job every parent is charged with: raising a functional, critically thinking, independent child. If you are truly able to succeed in this regard throughout their childhood, you’re going to raise a child that doesn’t really need your help at all to succeed in the world.

In other words, if you take the time to really focus on parenting your kids in a way that makes them functionally independent and critically thinking adults, you don’t need to save for their education. They’ll be able to make their own way in the world without your financial support. Thus, you can channel almost all of your long-term savings into retirement savings so that you’re not a burden to them in whatever they wind up doing in life.

How do you do that?

Over the last five years, I’ve read a pile of books on the psychological needs of children and young adults, everything from Mindset and Born to Buy to The Read-Aloud Handbook and Raising Financially Fit Kids. I’ve come up with three basic conclusions.

First of all, praise children on their hard work, not their natural gifts. Focus on when they improve their results, not on when they simply succeed because of their talents.

Second, give them room to explore independently. Don’t hover. Don’t be paranoid about kidnapping. Send them out in the yard to explore things on their own, then when they’re done, ask them about it. The more independent exploration they do, the more resourceful they’ll become.

Finally, put them into challenging situations. Don’t protect them from failure. One of the most valuable childhood lessons is learning how to fail. What do you do next? You pick yourself back up and try again. If you go through childhood without knowing how to do this, adulthood becomes much, much harder.

If you are constantly conscious of these three things, you’re going to naturally mold your children to be self-reliant and independent. Those traits will serve them very well in whatever they choose to do in life, and because of that, you don’t need to hand them their education.

They’ll be able to make it themselves.

A final reason to save for retirement: if you do choose to help, retirement savings are usually flexible enough to allow you to help. You can often take out loans to help with education purposes from a 401(k), and you can take back your Roth contributions whenever you’d like to spend as you wish. If you decide that financial help is really needed, you can provide it with retirement savings.

So fund the 401(k) and the Roth IRA and don’t worry as much about the 529. Instead, focus your parental energies on being a parent that raises an independent and curious child.

Good luck.

I’m a goal-oriented person. With almost everything I do in life, I set a clear goal for what I want to accomplish, then I do the research needed to figure out how to get there, then I work at it tenaciously.

The same is true for parenting. I know quite well it is impossible for me to raise my children to have every possible positive character trait, so I decided long ago to focus on a small handful of them and push my parenting in a direction that encourages those behaviors.

Really, there are three such goals.

I want my children to be self-reliant and feel like they can handle almost anything life throws at them. I want my children to value learning (and talking about things they’ve learned) and make it a normal part of their life.

And perhaps most relevant of all (to The Simple Dollar, anyway), I want my children to not derive their self-worth from the stuff that they own or don’t own, but instead from who they are and what they’ve accomplished.

I have several prongs in my approach to this.

We’re very picky when it comes to the media they consume. We have a DVR and use it to record specific programs, usually nature documentaries or PBS shows. That, along with some films on DVD, is all they’re allowed to watch on television, and we cap that pretty tightly, too. The big reason is that we don’t want them to watch commercials where children seem very happy due to owning a particular toy on a repetitive basis.

We steer our own conversations away from “who owns what.” This actually has a dual benefit. Not only does it keep us from creating the appearance that stuff defines people for the kids, it helps to break that connection in our own minds, too.

Instead, we try to focus on the qualities of various people. I usually make it a point to identify – and usually try to point out – a good quality about a person when that person comes up in a family conversation. “Your friend is really energetic! I bet he’s really good at playing soccer!” and so on.

We focus our praise mostly on hard work. What does this have to do with keeping them from being a consumer? It builds their self-worth around their positive character traits instead of leaving them empty and searching for something to feel good about – which can often be their possessions. I don’t praise everything they do, but I strongly praise their effort in a positive direction, especially when that effort is producing a good result (like my son’s ongoing journey towards reading).

We actively work against defining other people by their stuff. This hasn’t been an issue yet for our children, but it has come up a time or two. “I don’t like person X because he has a Batman” is the prime example I can remember from the recent past. I take a lot of time to talk about things like this and tear away the material possession from the personal choice. Here, we brought it down to a sharing issue – it is nice to share, but you shouldn’t expect someone to always share what they have, and it’s a good idea to set a sharing example first.

Do you have any additional ideas on how to keep our kids from focusing their energies on consumerism?

Marjorie writes in with a very interesting question:

I’m a single mom with a four year old daughter. Each weekday, I take my daughter to stay with one of my aunts so that I can work to earn a living and keep food on the table. After Christmas, my mom sat down with my aunt and I and gave us a bunch of information about a few great preschools in the area. My aunt told me later on that she’s supportive, no matter what I choose. So, for me, the real question is whether or not my daughter would get enough benefit from preschool compared to days with my aunt to make the extra costs worthwhile.

I live next door to a single mother and I see time and time again how she is forced into making difficult choices about the devoted time spent with her children. Does she make a nutritious home-cooked meal or does she spend an extra half an hour with her girls? Does she spend some time in the yard with them or does she get some of the never-ending household chores taken care of? This comes in on top of the prerequisite day of work for a single parent, after which they’re exhausted but also often wanting a strong connection with their children. On top of that, there’s the money concerns – a single income household in the modern world is never easy.

When it comes to a choice between preschool and other child care options, I don’t think there’s a simple cut-and-dried answer to this because there are so many factors involved.

The first one – and the most important one – is your child. Is your child outgoing around others her age? Is she intellectually on par with other children her age – meaning is she capable of holding a writing utensil? Can she count to twenty or so? Is she curious about the world around her? If these things are all true, preschool likely doesn’t have a great deal of value for your daughter.

When things get murkier – in my opinion – is when several of those questions have negative answers. This can indicate a lot of things, from something as simple as social anxiety to a learning disorder or simply more focused one-on-one time. If you’re witnessing these issues and you genuinely feel concern about your daughter’s intellectual growth, I would lean more towards preschool. If not, I would lean more towards maintaining the caregiving situation with your aunt.

What about the money, though? Is the extra cost of a good preschool worth it when compared to a normal daycare if your child is socially thriving and developmentally on pace?

In a word – in my opinion – it’s not, unless the difference in cost makes no difference in your life. Here’s why.

If you spend that extra money to send your child to a top preschool, you’re putting an extra financial burden on yourself. This has several effects on your life. You’re more tied to your job than ever before because you can no longer afford to lose it, which means your boss has more power than before and your job is more stresful. You also have less money to spread around in other areas of your life, like an emergency fund or on something as simple as a stop at the ice cream shop with your child. On some level, these things are given up to afford that high-quality preschool – and these things have a negative impact on your child’s home life.

This basic idea is true no matter what you’re looking at in life. When you bump up the financial cost for something of higher quality, you’re paying an additional price beyond the dollars and cents. You pay the personal costs that go along with maintaining that higher level of income. If you can’t see the benefit in doing so, don’t do it.

To me, that’s an exchange not worth making unless there’s a clear and dramatic benefit from the higher-cost preschool. Never forget that early on, you’re the biggest impact and influence on your child, and if sending your child to the higher-cost preschool will put stressful burdens on you to disrupt that in any way, there had better be a big reward. If your child is doing fine, then I don’t see the benefit there.

No matter what you choose, however, do not let others make you feel guilty about it. Simply by asking questions like this and seriously considering the answer, you’re looking at the unique situations, gifts, and opportunities in your life to make the right decision for your daughter. You obviously love her. You obviously want what’s best for her. Never let other people attempt to use guilt or shame or other tactics to guide your choice.

A few years ago, an old friend of mine bought a fantastically expensive home, far larger and with higher quality furnishings than the home I live in now. I went to college with him and noted that after college, he worked at a minimum wage job for a year and had only been working at a solid salary for a little over a year when making this purchase.

“How could he afford it?” I wondered. So I asked him about it. He just grinned and said that he had a big bankroll.

For a long time, I figured that he had either done something illegal or something like that to earn the money. Eventually, though, I learned that his parents bought the house for him.

Today, this old friend of mine doesn’t have time to spend with me. Even though he’s only making about $26,000 a year (at my best estimate), he drives a Lexus and is constantly buying all kinds of different things. He spends most of his time with similar big spenders – and that’s not a group I’m a part of.

What I find most interesting, though, is his assumption that his parents’ lifetime earnings are his to spend however he likes.

For some people, this could be a happy arrangement. As a parent, I can understand the desire to want to make life easier for my children – to make sure they’re content, have social stature, and have the possessions they want and need. I can also understand, on some level, how it would be nice to simply have all of the things that I want without having to be responsible for earning them.

The problem is that the solution isn’t permanent – and when it fails, everyone suffers greatly.

In this situation, the parents are getting older and, at the same time, their financial resources are being slowly drained. Unless they are prodigous accumulators of wealth, there’s going to come a point where it will become difficult to make ends meet – and that point will come when it’s more difficult than before to earn money. When they reach the age that they’ll actually need their savings and investments, they may find that they’ve been whittled away.

On the other hand, when the support of the parents disappears, the child will be stuck without having learned how to live within his means. In fact, the child’s standard of life is so far beyind his/her means that, unless the child is very, very aware and centered, their life will enter a very difficult period, laden with debts and some incredibly difficult lifestyle changes. This disruption will alter almost every element of their life – and many of those elements will involve a serious downgrade.

If you find yourself in a situation like this, the best thing you can do is to begin the process of distinguishing and separating the finances of the parent and the child. It is far better to do it slowly, surely, and together than to do it abruptly, shockingly, and without personal support.

This way, the child will be able to stand on their own two feet financially and the parents will have the resources they need as they reach their later years (and, hopefully, have enough resources to truly enjoy those later years).

A final note: I’ve witnessed again and again that people who choose a $20,000 career believe (or pretend to believe) that they can live like they have an $80,000 career. A $20,000 career is likely to be much more personally and spiritually fulfilling than an $80,000 career – but it’s not financially fulfilling. Life is full of gives and takes – your career choice is just one of them.

Megan writes in:

Congratulations on your third child! My husband and I are expecting our second child in February. I hope you’ll write an article about how to save money when another child comes along.

Your wish is my command, Megan. Here are some of the ways we’re preparing for our third child.

Diapers
As I’ve mentioned before, we cloth diaper our children at home (we occasionally use disposables when traveling or when others are watching our children). Doing this drastically reduces the diapering cost for later children.

To reduce the startup cost, we bought many of our cloth diapers on eBay. Some people might be shocked at this, but the truth is that we’ve never had a bad experience buying them on eBay. Most of the diapers we receive are in really good shape – nearly unused. I think this might be because people tried partial cloth diapering (with just a few) and found that it didn’t work well for them. I’ll say that for us, cloth diapering becomes easier the more we do it. It’s actually easier to have our child wear nothing but cloth for a week than half cloth and half disposable – there’s less clutter, for one, and when you use nothing but cloth, the whole thing becomes utterly routine.

Anyway, after your initial outlay of money, cloth diapering is extremely inexpensive (and really environmentally friendly to boot). The first batch of cloth diapers we purchased are about to be used for the third time, meaning the cost per use of these diapers is already lower than disposables and is about to go substantially lower. We simply won’t have to buy many diapers for this baby.

If you plan on having more than one child, give cloth diapering a shot. It’s not really cost effective for just one, but the savings are huge with the second, third, etc. child.

Clothes
Unless you’re absolutely sure that you’re not having any additional children, don’t throw away, give away, or sell the clothes from your earlier children. Fold them up, put them in a storage tub, and put them somewhere out of the way. Later on, you might make a conscious medical choice to no longer have children, at which point you can sell off the clothes. Otherwise, a big tub or two of infant, toddler, and kid clothes is like a hidden treasure trove.

Again, we have a ton of these things packed away for the next child. Since many of the baby-sized clothes are only worn a few times per child, many of the items look practically new, yet they’ll be on their third use. All the way along, it’s worthwhile to save clothes that can still afford some wear, because many children’s clothes (like t-shirts, jeans, and so on) work well for both genders. (We tend to buy lots of greens and yellows.)

Beds
What about a bed? Our solution is simple – we’re just going to upgrade the bed of the oldest child by looking for youth beds at yard sales and the like. Then, his younger sister will move into his old bed and her younger sibling will take her crib.

Just like clothes, beds work well as “hand me down” type items. That doesn’t mean that the oldest child always gets the new items and the others get the used ones – quite often, his items are used as well.

Toys
We try to consistently buy our children small numbers of very open-ended toys for their birthdays and for Christmases – building blocks and the like. By buying small numbers of items, we don’t clutter up our home (well… not too much). By buying sturdy items, they can take a beating and can easily be passed down. By buying open-ended items – like building blocks and art supplies – we have items that all of the children can use, often together. Our two children now have big art days where we cover the kitchen table or the living room table with paper and allow them to draw to their heart’s content, for example, and it will be easy for the next child to join in.

When Joe draws elaborate landscapes and Katie draws pictures of cars and houses, the youngest child can scribble. When Joe builds castles out of blocks and Katie builds towers, the youngest child can stack them. These are the kinds of toys they can all enjoy – and, to be honest, I quite often enjoy them, too.

Here’s the real key of all of this: if you’re thinking of having future children, keep the stuff you actually used. Put it in some storage boxes and stick it somewhere out of sight, clearly labeled. Similarly, focus your child-related purchases on sturdy things that will last through multiple children – plastic toys that easily break aren’t a good buy, but sturdy blocks are. Doing this alone will save you a lot of cash on future children without reducing their quality of life one bit.