June 2024
From small expenses like school supplies to larger costs like college and sports, everything adds up quickly. In this episode of Couchside Conversations, Modearn™ Advisors Kevin Rex and Patrice Bening discuss ways to prepare for these expenses, mitigate some costs and protect your family’s financial future.
Here are some key takeaways from their discussion:
• Couples should discuss childcare early on and if one of them will stay home with the children, if there are local family members who would be willing to help, and if hiring a nanny makes sense for their situation.
• Sharing resources like clothing and sporting equipment with family and friends can help mitigate some costs. Patrice says relying on her “village” and community was crucial to raising her children, as her friends helped with carpooling, rides, and hand-me-downs.
• Even after your child turns 18, you may still support them financially in certain aspects. Especially in our modern economy, many kids move back in with their parents after college or ask for help when planning their wedding, buying a home, etc.
• They stress the importance of life insurance and estate planning to protect your family’s future in case something happens to you or your partner/co-parent.
• No matter how much you plan, there are always unexpected costs and challenges in raising children. Therefore, it is important to stay flexible, have a substantial savings/emergency account, and keep intentional and honest financial discourse going with your partner.
Watch previous episodes here:
The Problem with Most Financial Advisors
Welcome to Couchside Conversations. This is Modearn by Morton, and I'm joined by my colleague Patrice Bening. I'm Kevin Rex, and we have the exciting task today of talking about managing the costs of having and raising children. Sounds easy right?
Absolutely not.
Yeah.
No, it's, I'm excited. You and I always tend to talk about our kids, and I think it's why we get invited to talk about them here on, social media.
But the first question I have is you are reaching the end of raising your boys. At least at home. They're getting ready to leave for college. And so I'm curious to know what are some of the things, at least financially, that were surprises or maybe you weren't prepared for?
I have to say that early on, even when I got pregnant, both my husband and I are kind of really spontaneous.
So we were not big planners to start with. But one thing or actually a couple of things that came across really quickly is that we definitely did not think about childcare. my parents are not local. Neither were his. Not that that's even not necessarily. Even if your folks are local, doesn't mean you can rely on them for childcare or that you should.
Number two is who is going to stay home, if anybody was going to stay home. And then number three is even planning, like the actual planning of savings for college or savings for any particular activity. And how is that going to impact our personal finances? We did not think of that thoroughly at all.
Yeah. I don't think you can ever plan for what children are going to do to your life, whether it be lifestyle or especially from a financial perspective.
But you and I talked about like the more you can actually have a discussion, maybe it's not you have an exact plan, but if you have a discussion around what do we want to do when we have our kids, you know, does the dad or the mom want to stay home, do both want to work? What is the cost ?
We're fortunate enough we have the best nanny in the world, and she's worth every penny. But, you know, nannies can be anywhere from 20 to $25 for just 1 or 2 kids. And you get up to 30, $35 when you have multiple children that cost alone, you start weighing. Does it make sense for me to go to work every day, pay someone else to raise my children if I'm not really getting ahead that much?
And for some people, yes, their career is their identity and they love that. But for others, maybe it makes sense to stay home but starting to talk through that. Nicole and I both wanted to continue to work, and so we did have that discussion. So we knew we needed to find support. And you brought up parents.
Both our parents are local, but they have other grandkids. They have their own lives. And so we couldn't just assume. So we had that discussion with them. Do you have any interest in watching our kids? So you bring up the point of planning, or at least having the discussion around the things that you can control. Because as we know, there's so many things you can't control and the chaos that you know, entails or pursues after that.
I know we've talked about activities, that's one thing that we were probably completely blindsided by is the cost of extracurriculars. Both my boys, play, they actually just chose one sport. They chose soccer. And I remember when my mother in law would come and visit us and we would share with her that there is a monthly fee to be part of, club soccer because they played competitively.
Then there's the tournaments that we had to attend, the driving we had to do, the amount of money that went into just that part of it. We definitely did not think that through. And of course, when your child excels at things and you've got your coach going, "you should definitely have your child in club soccer" and your ego is so pleased. That part and you can share maybe because I know you've got three kids and all that that goes into it.
We're just heading into that and you know it's the costs are crazy. And I'm actually a big believer letting them just play kind of the intramural sports for as long as possible till they figure out which ones they, they want to focus on. One of the surprises for me, like, I think you plan for kind of playing for at least 529s for college or some of the bigger costs.
But birthday presents, like the number of birthday parties we go to. And I remember as a kid, you put a $10 bill or a $20 bill in a card, and that was good enough, at least in our area. I mean, birthday presents can be 35, $40 per party, 3 or 4 parties per weekend. You don't necessarily plan for that.
And it's those little things that add up. And, you know, we are talking to about, you know, friends coming over or you know, your boys now having girlfriends. It's like, how does that change the financial cost of doing things, going out to eat or, you know, going to an amusement park or a movie?
I think those are conversations that we truly had with the boys at this point, because we had to explain, just because we give them a card that they can use for emergencies. Having lunch with your girlfriend does not constitute as an emergency. But not to mean that they can't once in a while have a nice experience in a treat.
But it's those are the kind of things that tie into, I would say, even the bigger picture. And I know you and I have talked about even the conversations we should have with our children early on about that. But truly figuring out like where your money is, is going to go is something that I, you know, for the at least, for the kids part, it was something that I did not really anticipate having to have to plan for.
So I know you've looked into some of the numbers. Can you share a little bit about raising a child from age zero, from birth, all the way up to 18 till they leave and not even including call it the sports and the birthday presents and the extracurriculars, but just kind of basic needs.
What does it cost to raise a child in today's world?
So on average, I would say, I mean, from what I've read, is that you're looking at between 200 and 350,000, not adjusted for inflation and not even including private school, not including any of the activities that you mentioned, not including tutors or any of the things, medical costs, having to account for teenagers that are now driving or increased premiums of your insurance.
So it can go from that to, we're talking five, six, $700,000 all in.
So as the kids get older and you send them off to college like you think you're done, right financially, it's like, oh, I did it. I did my job. But as we both know, kids come back and they graduate college. They don't know what they want to do.
Even after college, they're in between jobs. There's weddings, down payment on homes. It just feels like once you have a child, you need to be prepared for the rest of your life to take care of them and then grandchildren, right?
I think the costs just take a different type of shape.
But it's interesting that, you know, you say that because I keep making comments to my friends and I go, I can't wait to have my kids off the payroll. And they go, Patrice, you're dreaming if you think the kids are going to be off the payroll. And even I think more of a stark reality out there is that right now, because of, you know, high costs my kids after college, even with the job, cannot afford an apartment.
So over 30% of adult kids are moving in back with their parents just because there's no way for them to sustain, to be able to save money for themselves. So having those particular, that kind of understanding what you're going to have to expect and not thinking that, oh, you know, I have this great, successful, you know, launch for my child.
But the reality out there speaks a different truth. So pivoting back to you, how do you really know that you're ready to have a child to face all these wonderful costs that we just talked about when it comes to kids?
You're never ready. Like, so, you know, trying to wait for that moment to be like, okay, everything's dialed in, everything's lined up.
You can't be able to prepare for what's coming with a child financially, chaos wise, you know, activities. So I just think that, you know, making sure that you've had the discussions that we've talked about from a financial perspective, you don't want to be in debt. You want to make sure you've built up an emergency fund, giving yourself the best opportunity for when things do go sideways, or maybe not as you expect it.
You have a cushion because you're starting from a place of being in a secure spot financially. So I think that's extremely important just to to, you know, cross the T's and dot the I's where you can because everything else is going to just be, you know, taking you along for the ride.
So we talked about actually taking care of the children. But what about protecting the family? Like what are some of the costs that don't even just directly go into the children but are for the family?
So I would say something that I don't think it's maybe more of a dark topic, but really thinking about life insurance and the cost of if something were to happen to, you know, you and your spouse, your partner- what is it you know, for, let's say, if it's going to take half $1 million to take care of your kids, do you have that half a million in place right now to take care of them? So again, really more ancillary things that don't really cross our mind. Also, estate planning and making sure that you have the right people if something were to happen to you and, protecting that side of things. And I think those are things that honestly, even though I worked in the financial services industry, it took me probably until my kids were eight and ten years old to implement, just because it was not something that was like, oh, yeah, I'll do it, I'll do it.
But, you and I both have seen just from our working with clients that some scenarios can happen if you don't have those things in place. Absolutely. It's not even just like not thinking about doing it. But then there's the cost of doing it. Life insurance isn't inexpensive. Putting together an estate plan can be costly.
So again, we're just talking about the financial burden of having children burden. But it's you know, it's still fun to have them, but they cost a lot of money. so any tips or tricks that we can think of top of mind that, you know, as we kind of wrap up here on taking care of kids, making sure that you can reduce the costs or be, you know, mindful in any way.
I would say for me personally, it was figuring out who can help me from my village. I think it's understanding if you can rely on someone to, you know, even if you have a nanny, but that person may just really only do certain things for you in your life. But I had a great network of friends that I know they could come take my son from the bus and take him home or pick them up from school or drop them off at my office.
So like all the free help that you can get, and understanding, there's just so much relief because that's probably one of the biggest stressors, is that as the kids get older, it's taking them from point A to point B to point C is really hard. So, and that for me was crucial when I was going through it for sure.
I have vivid memories of you and I'm going through it now. And I was laughing at the time. Now I, I feel bad for laughing, but I remember you being like, all right, you drop them off at the bus, I'm going to swing by the Four Seasons and pick up, you know, our other son, taken to Camarillo, come back, have a client meeting, and it's like we were talking about the cost of, like, financially.
But talk about the cost of just your time and your energy and how that can impact you financially if you don't have a career that's flexible. So that village is huge. And then also from the village, one thing that I've benefited from is I have two older sisters that have children that are ahead of mine, and at first it's like, you don't want to put your brand new baby in like hand-me-down clothes.
You find out quickly that most of those clothes were never worn or they were worn one time. And so being comfortable saying, all right, we have friends where we can exchange clothes or sporting equipments- you play baseball, you use a bat, one season and then they grow out of it to the next season, or cleats or these things that kids, they're growing so quickly.
So I found that by finding, you know, friends or family that you can share, we give them stuff. They give us stuff, you save on, on so much money from having to buy new stuff every single three months or six months. So finding those little tips and tricks are really helpful because even with them, kids are expensive.
And I have two boys, so the first one gave a lot to the second. So I was happy to pass on to friends and I still do actually. So yes, I subscribe to that.
All right. So now we're going to play a fun game called 'this or that.' We both have a couple questions. We're gonna try to catch each other off guard. I'm going to fire first. Public school or private school?
That's a that's a good one, Kev. I think it comes down to family values.
It also comes to, I think, your individual child. I think of schools like restaurants. So you and I can walk into a restaurant and it's a michelin star rated restaurant, and I come out with food poisoning and you come out with the best meal of your life. Schools can be the same. As parents, we don't have to like the school.
Our children have to like the school and their teachers in order to thrive. So identify what works best for your child is number one. And if they find a way to, you know, make it work, then I would say go, go that route. But then again, that also has to do with planning and looking ahead. What kind of costs if we're going to go the private route, what is that going to mean and how is that going to affect our finances?
I like it, great answer. All right. Coming back to you. It's date night with Nicole. Do you call the grandparents or do you hire a babysitter?
The financial advisor in me wants to call the grandparents because we talked about how expensive babysitters are. Love my parents, love my in-laws. They are just not dependable. They're like, yeah, we'll watch the kids.
They're all excited. And then the night of, oh, we got invited to go to a concert and we can't watch him anywhere. So the number of times we've been left, like scrambling, I would just rather pay the money, have the sitter know that they're going to show up and not have to worry about the hey, our plans change kind of call conversation, but love it.
Love the grandparents, but not as dependable as I'd like, so I'll pay for that certainty. So then coming back to you and I know that you've had boys play club sports, but do you like the club sport route or community sports?
I think I got sucked into club sport. I don't think I had a choice, honestly, I was I really got sold and I think I talked about it earlier.
But again I think if you figure out that actually I'll take a step back. in retrospect, I would have loved my boys to play other sports beyond just soccer. I feel like, yeah, we kind of took soccer in our arms and we ran with it. But I think diversity and expose them to different sports initially.
So doing community sports if you can do basketball and then if you do soccer and tackle football or baseball, whatever t ball, I think it's great early on and then pivot to something based on the strength of a child. But word to the wise, club sports are so expensive. Something that really and it only increased just because of the amount of travel, ref fees, tournaments out of state, cross country hotels.
And it's not even like you can't even really make it a true vacation out of it. I know how much you love experiences, and I know that you enjoy a nice meal. But when it comes to going out, do you want to take your kids with you, or do you think you should just stay home and, you know, leave them be like that?
I'll leave them at home. But what happens is you take a family of 5 to Chick-Fil-A, it's $60. I spent $40 on apple juice the other day.
