Get your free Financial Independence Roadmap here.

FIRE versus small children

Having children in a big city can be tough on financial independence progress. Drop an income or spend it on child care, what is the answer?

You are on track for financial independence...

Attaining early retirement isn’t rocket science. The maths of it are easy and well documented. Once the basics are put in place, all that is required is the patience and self-discipline to stay complete the journey.

You followed the well-trodden path. You studied medicine, law, economics, or science/technology/engineering/mathematics at a good university. After graduating you have the pedigree (though not the practical skills) required to earn an income comfortably above the average.

You avoided the common pitfalls, steering clear of credit card debt and personal/car loans.
Maybe you even set your savings rate high early on, locking in what feels normal as a student before you could fall into the “earn it, spend it” consumerism trap. Far easier now than attempting to put that consumerism lifestyle genie back in the bottle later!

Far easier now than attempting to put that consumerism lifestyle genie back in the bottle later!
Your income flowed in.

Your SIPP and ISA buckets gradually started to fill up.

Life was good, an escape from the rat race is tantalisingly within sight. Your retirement travel plans didn’t involve caravans or pensioner coach tours.

... and then you have kids

And then you have kids. Everything changes.

And then you have kids. Everything changes.
And then you have kids. Everything changes.
Outgoings surge.

The weekly nappy and baby formula shop is higher than your entire entertainment budget was. Conversations about globe-trotting and early retirement are replaced by endless commentary about bodily fluids. Strange words like Bugaboo and Tommee-Tippee replace Vanguard and “safe withdrawal rate” from your daily vocabulary.

Sleep is a memory.

Spare time the stuff of myths and legends.

Your sensibly priced flat suddenly feels cramped and overcrowded. You realise part of the reason it was so affordable was its location falls outside the catchment areas of any semi-decent schools within viable commuting distance.

You’re forced to move. Carefully balancing increased outgoings against increased commuting time.

Your savings rate plummets. Babies don’t look after themselves, and not everyone has a benevolent grandparent around the corner willing and able to babysit.

Pay for nursery fees or drop an income?

A brutal trade off ensues, with none of the options taking you closer towards your FIRE goals.

Give up one income to provide full time care yourselves?

Enrol the little one in nursery full time?

Hire a “live out” nanny or au pair?

Maybe some combination of the three.

When none of the options are good ones.
When none of the options are good ones.
The ONS reports the average Londoner earns less than £35,000 before tax.

Which? reports 25 hours a week at an average London nursery costs £7,500… plus another £4,600 for after school care. My personal experience is that in much of London the true costs are easily double these figures.

Which? also puts the cost of a full time “live out” nanny in London at around £25,000.

These newfound expenses are paid out of your after tax income. It is easy to see a whole wage being consumed by child care costs.

Where does this leave our FIRE aspirations? Somewhat curtailed, at least until the baby enters school. If you then trade nursery fees for private tuition that period could extend much longer.

I wish I could provide a magic solution that simultaneously provides for child care in an expensive city and FIRE. The best I could do was investing in child care providers… and wow did that end in tears!

Instead I recommend keeping a watchful eye on your outgoings, save as much you can without jeopardising your sanity as a new parent, and keep following the FIRE principles you adopted long before children.

I suspect there is a reason why many leading FIRE bloggers are either youngchild free, old enough to have fully grown children, or smart enough to live someplace with low living costs.

While you are distracted by dirty nappies and Wiggles reruns, step back and trust your existing FIRE orientated investment portfolio to compound and grow. For many of us kids will represent a significant adjustment to a much higher “new normal” level of outgoings.

So what?

Kids are a rewarding addition to our lives... even if they postpone our early retirement for a while.

2 comments :

theFIREstarter.co.uk said...

"Conversations about globe-trotting and early retirement are replaced by endless commentary about bodily fluids"

Brilliant line Slow Dad! :)

We've managed to continue saving ~40% this year while Mrs T is on maternity leave and while I'm working 75% of full time, but when she goes back part time next year (2 days/week) that might drop a bit. I think 30% is still viable though. We are lucky to have both sets of benevolent Grandparents close by though.

God knows how you'd do it in London and with no family though! (I guess I would just have to get a higher paying and go back full time - yuk!)

Slow Dad said...

Thanks Firestarter. My ten years of parenting wisdom could probably be distilled down to: everything washes off, no matter which orifice it may have escaped from; kids bounce; and dummies are your friend.

Your savings rate is impressive, those nappies and tins of baby formula really pump up a grocery bill! It is great you're able to spend a bit more time helping out at home too, though very sensible to retain work as somewhere to escape to.

Hopefully the grandparents are willing/able babysitters. Families can be complicated though, my own experience was they were very excited about the idea of grandkids, but run a mile at the first sign of "the red face of doom" or a loaded nappy. Your mileage may vary.

I think life with little kids, regardless of location, is about trade offs. Nurseries or nannies are certainly expensive, but probably less than the cost of giving up one full time wage. Once there are multiple kids in the picture the school fees equation doesn't scale too well, so the nanny (providing you find a great one) option really stands out as a viable option.

Some lateral thinking can also go a long way towards making it affordable.

Post a Comment

Disclaimer: I only link to products I use personally. I may receive a small commission for purchases made via links on this site.
Get your free Financial Independence Roadmap here.