The Financial Implications Of A Second Child

As many of you know, I’m the proud parent of a sixteen month old boy. My wife and I are carefully considering the possibility of adding a second child (and perhaps more) to the family. One major part of this decision is the financial aspect of it: can we really afford another child on our current incomes and buy a house this year (we would simply have to move, as the three of us live in a less than 600 square foot apartment – a fourth child would be almost unmanageable in our space).

Here are the considerations we’ve calculated thus far. We are primarily concerned about the child’s first five years of life, although we do recognize that this is a longer term commitment than that.

Child care: This one is the big one for us. We currently pay $160 a week for our child care. When he becomes two, this price goes down to $130 a week, so we will save $30. However, child #2 would be another $150 a week on top of that $130 (only $150 because you get $10 off a second child). That would move our weekly child care bill from $160 to $280, or $120 more a week. In total, this will add up to about $4,500 a year for us (we will remove them from the daycare for some portions of the year). Ouch.

Large supplies: Most of the large supplies are already taken care of because of the first child. We have no need for a crib, etc. We will have to buy a bed for our oldest child, but a simple, small child bed isn’t particularly expensive. Even better: one set of grandparents is suggesting that they may buy him a “big boy bed” when it comes time. So, the startup costs should be minimal.

Clothes: If we have a boy, he will be wearing almost exclusively hand-me-downs. We’ve saved every stitch of clothing that our first child has worn (except for one extremely fouled article of clothing from The Great Flu Of ’06 that we simply couldn’t get clean). If we have a girl, she will still wear a ton of hand-me-downs, but there will probably be some small purchases of dresses and the like. $5 a week in extra costs, or $260 over a year.

Diapers: A push compared to right now, as our first child should be out of diapers/wipes by the time the second child appears on the scene.

Food: In the short term, children don’t cost too much to feed. We feed our current child on only a few dollars a day, so we estimated a doubling of that. $20 a week in extra costs or so, or $1,040 over a year.

College Savings: I plan on saving the same amount for a second child as I do for the first, so $50 a month more, or $600 a year.

Taxes: Here, we get a number of tax benefits which soften the blow. We estimate that we will at least make $1,500 a year back due to the tax benefits of a second child.

And that’s not even considering health insurance for kids — something that could cost thousands.

Financially, a second child seems to not be as financially painful as the first one, as there are expenses that are shared between the children. I should also add that according to our calculations, with a family of three, we will actually save money after we move into a home once we consider all of the tax benefits and the opportunities for more frugality (our own washer and dryer plus our own deep freezer will add up to some serious savings on a weekly basis).

In short, we feel that we are in better financial shape with one child than we were with none (he was the impetus for our financial changes), and thus a second one seems financially feasible.

Are there any major areas that we are not considering?

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  1. Dave says:

    Heh, I just have to say the fact that you are thinking about financial repercussions of having an additional kid shows you are head of the game. In fact it goes to show why I enjoy reading your work.

    Sorry, anyways back to my original point. It seems to me that many people don’t actually take things like this into consideration when they have kids. While they love each kid they do have, there’s a disconnect of what is responsible or required beyond the first 9 months.

    And your list is through. The only thing that I would think about is “timing”. First of both kids being in college at the same time, if that matters or factors into planning. About 2 years apart means that scrambling for loans or scholarships shouldn’t be that bad. On the other side, how close is their college to retirement? The reason I ask is because a family friend had kids late in his years, and now trying to retire at 65 when his 3rd kid is going into college and finding he has to continue to work.

  2. avlor says:

    Have you considered the health care aspect?
    - cost of plan family with additional child (this went up for us, and we changed how we were insured at the same time because of a job change.)
    - additional trips to the doctor and prescriptions (This was a big one for us. With 2 kids – we seem to catch EVERYTHING that goes around, despite all the efforts I make to try to avoid sicknesses.)

  3. Nathania Johnson says:

    Don’t forget about toys, Christmas, and birthdays. In fact, set a plan now. Don’t let your kids grow up thinking they need a gazillion gifts under the tree on the 25th of December.

    I cannot tell you how many times our kids say they’re bored and refuse to play with their Christmas toys. Why? Because what they want more is to play with each other! And since we have a boy and a girl, it’s hard for them to play with each other when we give them gender-specific toys.

    Plus, they get alot of toys and gifts from their grandparents. We’re cutting way back on the amount of stuff we buy them – and it’s ok b/c every other week or so – some other family member gets them something.

    Oh – BABYSITTING – as they grow older – as long as you’re getting a babysitter for one kid, you might as well have them sit two. Then again, I don’t know if super savvy sitters these days charge extra for more kids?

  4. Tiff says:

    Medical bills. Well-child visits as well as sick-child visits, plus dental and – of course – the unexpected. Our children are three years apart, and the first couple of winters was an unending battle of them passing sundry diseases back and forth. And just in the first few years we’ve had to deal with tubes, tonsils, RSV, a broken toe, etc., etc. These are also things that can cause you to take off work. (Our life got financially trickier but infinitely less stressful when I quit my job to work from home.)

    Thank you for your blog! It’s been extremely helpful to me and my family.

  5. Jennifer says:

    What about prenatal expenses? Copays on office visits if you have them, vitamins, etc. Even if you have great insurance you’ll have some out of pocket expenses from the birth.

    Also what about the drop in income during maternity leave? And you’ll probably want to budget in a few convenience expenses for the first few months. Caring for a newborn plus a jealous toddler is hard work.

    It’s better to assume your first will still be in diapers when your second is born. They train when they’re ready and not always on your schedule. And training diapers are more expensive than regular ones. Better to have a monthly windfall vs an unplanned expense.

    And if you can find a second crib cheap, it’s kinder to let your first move out of his crib when he’s ready vs when you need it for your second. You’ve got lots of time to look and you can always sell it if you don’t need it.

    Being a toddler is really hard. Much harder than living with one. And now you’re talking about turning his life upside-down with a sibling. The fewer unnecessary demands you can make on him, the calmer life will be for everyone.

    Also, you should add some money to your clothing budget. Your wife may not fit into her maternity clothes this time around. Or they could all be for warm weather and this time she’s pregnant when it’s cold. Same goes for your kids clothes. You may have winter clothes in size 6mos, but your second is ready for that size in the summer.

    Nathania has a good point about toys. Try to buy lots of generic, open-ended toys like blocks, toy food, etc. They work for a greater range of ages, both boys and girls like them, and they don’t grow stale as fast as the licensed toys do. Plus they’re cheaper.

  6. Neil Mehta says:

    You may also want to include medical expenses in your analysis. I’m fortunate enough to have good health insurance; yet I was taken aback to discover that my provider (starting in 2006) charges a $250 co-pay for a child’s birth. (For my first two children, it was a standard co-pay.) Aside from that, you can expect to visit the peditrician at least a few times in the first year for immunizations and the like.

    Hand-me-downs did not work out so well for us, living in the Northeast. Unless your kids are 12/24/36 months apart, you may find the need for some seasonal clothing during the first year. After that, hand-me-downs start to work pretty well.

    Good luck, we found that we found it easier to relax after being around the block with the first kid.

  7. Trent says:

    Good point on the medical expenses. We are very lucky to have exceptionally good health insurance coverage at both my employment and that of my wife’s. Medical bills are nearly nonexistent for us.

    As for birthdays/Christmas, we are essentially not buying gifts until they’re older. For now, grandparents are more than adequately taking care of spoiling our son.

  8. Matt says:

    You may want to consider what sort of preschool program (if any) you plan to send your children to. We use the local park program’s preschools and still pay $500+ per child a year. Ditto for any extra-curriculars (sports, music, etc.) Of course, neither of those are absolutely necessary…

  9. Kevin says:

    Don’t forget time off work. I took about 3-4 weeks off to help out after my son was born. Not to mention that I attended all the doctors appointments.
    Also, consider that you’ll have an extra set of extracurricular activities once they are a little older. That can be as much as an extra thousand or two (depending on what, if anything, they do).

  10. We had to buy a bigger home when our second came along. Worth every penny…..I think.

    One other factor with a second child is reduced down time/time off from parenting since they will seldom co-ordinate sleep schedules. If you are holding down a second job, working as a consultant on an hourly basis etc, you may want to think about whether it will have an effect on your income.

  11. karen says:

    TIME – commenters have mentioned maternity leave, time for doctor’s visits and childhood illnesses, but it takes time just to care for a second child. It can impact the time you have available to do things which now save you money. You will spend more time in lots of little ways. It takes more time to corral everyone to leave the house to go somewhere, more time to get everyone to bed, more time at breakfast, more time to clean house. It is time well-spent, but time is like money – if you spend it one place, you don’t have it to spend elsewhere.
    With the first child, one parent can take up the slack around the house while the other takes care of the child. With two kids, sometimes each parent has a child to handle. There’s no one left to take up the slack.
    It’s just something to be mentally prepared for.

  12. Marcy says:

    Hi there! I love reading your blog! I just wanted to add that I would also plan on getting a new car seat/carrier for the 2nd child. Even if you have the infant carrier from your 1st child, there have been technological advances in safety for car carriers and seats in the past years that warrant looking into. Plus, ANY car seat should be retired if it has been in any type of accident,even a fender bender, OR once it is 7 years since date of manufacture (printed on a label on the seat). Otherwise, I concur with your thinking and the other comments so far!

  13. Shadox says:

    Sorry, I don’t buy the concept that having children puts you in a better financial shape. As a father of 3 (4 year old, and twin 16 month olds) I can tell you that the financial strain is considerable.

    Consider medical costs, housing costs, child care etc. If buying your own washer and dryer will save you money – that is a decision that is independant for the having a baby decision. The same goes for moving to a new house.

    In the end, kids will always cost you more money, and while the finances should definitely be planned out in advance, the decision to have another child is primarily an emotional one.

    More kids = more spending.

  14. Trent says:

    Our first child put us in much better financial shape, because it made us realize that we needed to make major financial changes in our own lives. We spend far less now than we did before our first child was born. For example, I used to buy a pile of books and a video game every week… I haven’t bought a video game in more than a year, and I buy maybe one book a month at this point. Why? The child made us rethink things.

  15. Judy in Australia says:

    I had my children fairly close together and as a result of this they have very similar interests and schedules: both at the same school and out of school lessons, like swim school and sports.This saved on petrol and often classes give a reduced price for the second enrollment.
    A second child will ensure that you are so tired that your entertainment expenses are greatly reduced.!!

  16. plonkee says:

    I’d say that you are lucky if your two kids have the same interests. I mean its reasonable that might happen, but equally they may be into completely different things. (Think of all the sets of siblings you know who are different from each other).

    Will you need a bigger car? You’ll have two car seats to fit in the back. That could be serious extra expense.

  17. Alex says:

    I have to second Karen’s comment. In terms of expenses, the move from one child to two is far less than from none to one. But the increase in non-tangible resources used is exponential, not arithmetic. Especially in the beginning, you will probably find that two children eat up your time, drain your energy, and deplete your emotional strength, in ways that the parents of an only child can never imagine. You are lucky to have each other, and to be so far ahead of the game in terms of preparedness, but you will get the wind knocked out of you by this experience – and that will impact all of the other aspects of your lives. (It’s still worth it.)

  18. pluck says:

    you should consider that life is ultimately more trouble than it’s worth, and it would be best if humanity slowly died out from lack of reproduction (of course, nothing could beat a lack of any reproduction – but you’ve already fowled that up).

  19. Jess says:

    “More trouble than its worth”.
    Thats ridiculous. Nothing you have is worth more than it can be put to use for, or possibly savoured by, and without life you cannt do either. That suggests a ridiculous amount of laziness. I’m suprised you can be bothered to breathe.

    As far as whether your finances go up or down with a baby…well, you’ll always have more that you have to spend, but sometimes that makes you cut down on what you want to spend. It all depends on how frivolous you were with money before you had the responsibility.

    And of course, a baby should be dependant on an emotional decision. You may have to put off actually having the baby until your financial situation can support them, but the decision of if should be personal, when should be economical.

    The only thing I can think of that hasn’t come up is to do with what happens when thse two start walking and therefore causing mischief. There’s child-proofing, which will probably cost more for a house than an apartment, as well as decisions on purchases- eg, the magnetic knife strip mentioned in another article. These are just extra costs to factor in, not to much associated with the extra child- unless you count the fact your going to have fun trying to keep track of both of them at the same time.

    I’d put a little aside for red-cordial-on-the-carpet kind of mishaps, too.

  20. John says:

    I agree it’s smart to think about the financial piece but I think you’re over doing it. If you’re talking about having 5 kids, ok, i understand.

    If you want to do something as wonderful as having another child, you should do it. You’ll FIND a way to afford it. Again, I’m saying this because you only have 1 child currently.

    Advice my father gave me a long time ago was that if you wait until you can 100% afford children, you’ll never have them. He was so right.

    We had our two kids when things were really tight and guess what? We made it work. You might have to sacrifice your standard of living to a small degree, but it’s well worth the joy of children.

    John

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