How can the size of my family affect my retirement planning? With government bonuses, which will be wise, a small nuclear family with one child or an extended family with three-four children? What are your inputs in this regard?
With the ambition to retire rich, I think we need to rethink the ideologies that lie deeply embedded in our minds. Due to globalization and more and more people sharing the limited resources, the ease of raising a family is not definitely the same as it was two or three decades ago. While some countries like Canada, Singapore, and Australia still encourage people by giving child benefits or baby bonus to have a child or probably three or four, controversially countries like China discourage having more than a child with strict laws and punishments! My stance is that even if the government gives bonuses for having children, a government can’t take care of all the expenses involved in raising a baby. You have to spend it from your own pocket. Sometimes the baby bonus is a co-savings scheme, i.e., the government contributes the equal amount that you are able to save in the name of a child. To my knowledge, all the benefits given by a government in relation to raising a child are aimed at lower-income families. The lower-income families are already in dire straits and should they go for multiple kids just for the reason that the government gives a baby bonus? So what is the ideal decision? Shouldn’t you have not more than a baby? I would say raising more than a child is against your dream of retiring rich! Why? Let me detail further.
Raising a child involves time and money. Right from childbirth, do you know what is the cost of raising a child to age 18 or the breakdown for every buck spent? Okay, here is the cost breakdown of bringing up a child according to the latest US Department of Agriculture report.
I think this breakup should hold good wherever you are on the earth if you want to raise a child with proper nourishment and education. Only a couple of percentages might vary here and there. If you have a kid, can any government take care of all the aforementioned expenses?
In the US, it costs a two children, husband-wife, lower income family a sum of $169,080, a middle income family $234,900, and a higher income family $389,670 to raise the younger child born in 2011 from infancy through age 17. You may contend that whether it is a single child or two or three, there doesn’t make any difference in housing expenses, but yes it does with every occupant. You have to increase the spending on living space, water, electricity, gas, furnishings, appliances, furniture, fuel, cell/telephone etc., with every additional member. If you are going to bear the costs of the college education, add further $68,524 for a public school and $154,356 for a private college! Multiply these numbers with the number of children that you would like to have beyond the second child and you will get a rough idea on what you will spend 17 years down the lane. Of course the quantum of the aforementioned expenses varies from family to family depending up on the choice, income, and locality where you live. The figure may move upwards if you are lenient. If you are skeptic about the above figures, calculate the costs of raising a child on your own. Of note, the prenatal expenses right from conceiving to childbirth has not been taken into account in this calculation. Add that and the sum goes up by a few thousand dollars again. In fact, time is money too! Each and every kid needs some productive time to be spent on them daily. That has not been taken into account.
The idea of having three or four kids some decades ago was to at least bring up one or two into adulthood even if the parents lose a couple due to some untreatable illnesses. However, life expectancy has incredibly increased these days; thanks to medical advancements, such situations don’t prevail now. While bringing up a child, you are investing money knowingly or unknowingly on a regular basis expecting no returns. While there is nothing wrong in bringing up one child as your heir to carry on the baton of your assets and someone who can take care of you at your old age, by raising more than one child you are willfully taking up the burden, distancing away from your dream of retiring rich. Hence instead of having more children and spending more on them, limit your family to three. Concentrate on earning, saving, and investing to build sufficient retirement corpus.
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