Can you retire early and have kids? Absolutely!
But, it’s important to understand how starting a family will impact your overall plan. One of the key tenets of FIRE Movement and its importance is not necessarily the monetary/quantitative factors, but the lifestyle aspect (the FI being more important than RE). This means, utilizing time as your most important resource and savings as a means to live your desired lifestyle while balancing your earning and working years with doing the things that bring you internal joy and meaning.
My wife and I have recently embarked on this journey, and welcomed Savannah in early July 2024. It has been a learning experience, and has brought to light some of the joys of going through it that transcend the money aspect.
Recently in our media and from a societal standpoint there has been more pressure on younger individuals to not have kids for a myriad of reasons, or fear of this not being possible due to financial prospects/costs. I aim to cover this in this article from my own perspective and considerations to highlight myths, the unexpected, and the actual costs of starting a family and updating over time.
Real Life Financial Considerations
The life adjustment
The biggest item here is that this will cause an adjustment to your day to day routine. You will need to set boundaries for others and yourself while you develop a rhythm. Note that you will still have time for activities you enjoy, just temporarily less time.
Cash Flow considerations
All couples should understand their current and future cash flow needs. Make a baby budget detailing the specific expenses they need vs wants. Note that our consumeristic society does promote a lot of baby products that aren’t really necessary. Keep a diligent and discerned eye for what you truly need vs want.
Insurance Considerations
Understanding your health plan and how it changes when having a baby is an important part of budgeting for a baby. It will help inform you of what you will pay for doctors visits and childbirth. You would likely be adding your child to your health plan too, and it’s important to ask your benefits coordinator, or your insurer directly on what to expect from a cost standpoint.
Your life insurance needs may change too as you may want to cover schooling for your child or any monthly cash flow related changes may factor in too.
Estate considerations
Updating your estate plan after having a child is key. To be more precise, ensuring that you as parents, should something happen to you, that your child is taken care of by a guardian of your choice, and the financial assets properly pass to them when they reach a certain age. Sometimes, this may involve establishing a trust.
College Planning
Starting a college savings plan can be a great option for a new child given the new flexibility that the plans offer.
A 529 plan is similar to a retirement account from a tax perspective, but qualified educational expenses can be paid tax free from this account. Funds put into a 529 are invested in a variety of mutual funds available to each individual investor and grow tax free.
You can typically utilize a college savings plan in your own state for out of state tuition, but usually (Not always) it is best to contribute to your own state’s plan for a tax deduction.
Even if your child doesn’t end up needing the funds or going to college, after the account has been opened for some time, fund can be withdrawn and moved to a Roth IRA. Additionally, the beneficiary can be changed, say for a parent what to go back to school, or for another relative.
Myths
Having kids is not affordable/could hurt my plans
Using the state of the world, as a crutch
I will not sleep at all for 3+ years
Unexpected positives
Community
Taking this leap has already helped get us more connected to other parents and community education resources, which has helped our well-being.
My own excitement to becoming a father
Seeing your child develop and do awesome things before your eyes is certainly worth any short term financial pressures and is immeasurably wonderful.
Lastly, the decision is always up to the couple, regardless of any and all material factors. It is not right or wrong to decide whether or not to start a family and that decision should always be respected.
Starting a family and raising children is one of the most rewarding life experiences one can have, and can certainly warrant adjusting your own goals if you wish to pursue a family. While my wife and I are currently going through this journey we have gained quite a bit of knowledge and experience and will continue to do so. I plan to continue to write on my own experience from the life planning and the financial side for those following the FIRE path and wanting to have kids.
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