Having kids: Does it pay?

Everyone knows that having kids costs money!  Estimates vary but it's in the region of between $150,000 - $400,000 from birth to 18. When we look at the figures so starkly, having children can seem like a terrifying prospect. How does anyone ever find the money to raise children?  And when faced with such a huge financial burden, why would anyone choose to have children?

However, maybe someday it could pay off financially to have children.  In the article Parenting: It's Payback Time journalist Douglas Fraser looks at some economic research that poses some interesting questions for our assumptions about finance & child-rearing.

'What if the choice of having children were an investment decision? What if you could have offspring, spend a huge sum upfront on rearing, feeding, watering, and educating them, and then, hand them the bill?'

That does seem ridiculous of course.  Untill, as economists Juan Carlos Córdoba of Iowa State University and Marla Ripoll at the University of Pittsburgh argued in their research, that in the early part of the 19th Century, parents were paid the wages of their children.  When child labour was outlawed, then fertility rates went down.

Today we don't make our kids go down the coal mine or up chimmey's to help the household income - so how can having kids pay, asks Fraser.

'So, what about payback time? The researchers say the present value of the lifetime earnings of a low-income child are £460,000. A profit of at least £56,000. For higher income couples, the investment is significantly higher, and so are the returns'

Unfortunately for parents, adult children tend to spend their earnings on themselves and their own children (if they have them).  The researchers suggest that there could be some sort of smoothing where the grown up children hand over some of their earnings to ease the process of old age.

Of course, the above is really one of those theoretical arguments that economists love to have.

At the end of the article, Fraser makes a very important point that I would concur with.

'It's just my hunch, but most parents seem to choose to have children because it seemed like a good idea at the time, or because it was a bit of an accident. Not many consult their financial adviser on parenting as part of a balanced investment portfolio.'

Even clients who come to see me, who are trying to take a very balanced view, do not end up deciding whether to have children or not purely on the finance.   As one woman I interviewed for my book said:

'Money is part of it - but I think at the end of the day, we'd manage - loads of people manage to have kids who live in all sorts of situations and I think if I wanted kids, we'd cope as well - but do we want to?