People love to tell Katie and me:

This FIRE stuff is easy for you. You don’t have kids.

One of the biggest criticisms of the FIRE movement is that it’s only for people without kids.

Kids are crazy expensive. They are the reason why people will never be able to retire early and those who do will have to crawl back to their ex-bosses, begging for their jobs back.

And the USDA agrees! According to them, it costs more than $300K, outside of saving for college, and adjusted for inflation, to raise a kid to the age of 18.

Here’s a little secret they don’t tell you. Kids get more expensive the more money you make. If you break down the USDA numbers by income, you’ll see that the cost of kids scales with an increase in salary.

This is why the average cost of raising kids is so high—it’s pulled up by those who earn more, because the more you make, the most expensive kids become.

So, did kids suddenly become more expensive? Or did parents make them more expensive?

Before we had our son, we were terrified that having kids would derail our retirement. After all we were living the life—travelling the world, eating out at expensive restaurants, having massages, and getting paid in our sleep by our portfolio.

We weren’t just DINKS (Double Income No Kids)—we were PINKs: Passive Income No Kids. If having a kid is going to cost us $17K USD/year (according to the USDA), by the 4% rule, we would need an extra $425,000 USD in our portfolio to generate enough passive income to cover that cost. Since we never factored this into our FIRE number, we are clearly doomed.

At least that’s what “Big Baby”— what we like to call the Baby Industrial Complex — wants you to think. After all, getting parents to buy a bunch of stuff to prove their love is a multibillion-dollar business. According to Empower, “Big Baby” is worth a whopping $358 Billion dollars!

I’m happy to report that not only did having our son not derail our early retirement, raising him cost us far less than the USDA numbers. During his first 2 years of life, instead of spending the pre-requisite $34,000 USD, we spent just $10,657 USD, almost 70% less than the USDA average.

The reason for this is because we optimized the top 3 categories from the USDA cost of raising kids: Housing, Food, and Education/Childcare.

One of the biggest myths is that you need to buy a house for your family the minute you become parents. Because otherwise, where is the stability come from? The second is that once you have another mouth to feed, food costs skyrocket. And finally childcare costs are astronomical.

By hacking these 3 areas, you can bring down your costs significantly. Let’s tackle these categories, one by one.

Housing

I’m the only parent in my group of friends with kids who chooses to rent. That’s because buying a home is a “adulting” checkbox that everyone must check off.

But the reality is that when buying a home, the maths should trump feelings. Since houses generally appreciate at the rate of inflation while the US stock market has returned on average 11.9%/year over 20 years, financially it makes more sense to rent and invest instead of own.

It’s true that you are subjected to rental increases, but stocks also appreciate in the time of inflation. So, while it’s true that you can’t live inside a stock, you can live inside a rented home paid for by its capital gains and dividends, and come out ahead financially.

Food

In terms of food, yes it definitely costs more when you have mouths to feed, but there are ways to optimize this cost as well. We like to use apps like TooGoodToGo and Flashfood to get discounts on groceries and takeout. Flashfood lets you find food closer to its best before date, pick it up, and freeze it. Not only is it good for your wallet, it’s also good for the environment.

Another way to cut down food costs is to buy an Instapot second hand from Facebook Marketplace, make things in bulk and freeze them. Being a parent means that you have to occasionally spend extra money on convenience like Uber Eats or frozen pizza to save time and your sanity. That’s OK. Your finances and early retirement aren’t derailed by the occasional spurge. It’s the fixed costs and constant convenience spending that kills your wallet. By planning ahead, most of the time, and using apps that help you cut food waste, you can save 30-50% on family food costs.

Childcare

And finally, childcare, the cost that strikes fear into every parent. According to US Census Bureau, childcare costs, on average, $1400/month per child. While childcare isn’t cheap, it’s not a forever cost and shouldn’t be baked into your long-term child costs. If you can make your work remote or flexible, there are ways to reduce this cost using babysitting co-ops, co-working space childminders, and Au pairs.

Since the pandemic, there are more flexible ways of working and childminding than ever before. The math behind whether you should quit your job if daycare swallows your entire salary is also surprising, and broken down in detail in our new book Parent Like a Millionaire (without Being one). Spoiler alert (it’s the opposite of what you think).

So, while childcare isn’t cheap, there are ways to hack that as well. And once you become financially independent, the best thing is that you don’t need fulltime daycare, which yields huge savings.

Final Thoughts

So, no, having a family will not derail your FIRE plans. Kids aren’t cheap, but they aren’t as expensive as society makes them out to be.

Don’t give up on financial independence, just because you have a family or are planning to have one. It might be the best money your family never spent.

And if you’re reading this thinking, “I want FIRE with kids, but I need a plan”… you’re in exactly the right place.

Don’t let the kids be the excuse for not getting your finances in order!

Peace and Pineapples

Katie and Alan