When It Comes To FIRE, Kids Are Holding You Back
Kids Are Holding You Back?
I have mentioned often that I am Second Generation FI (Boring FI). The unfortunate truth is that I started ahead of the game. I grew up with financially savvy parents who modeled good fiscal behavior. Because of that, I found my chances of reaching financial independence pretty good from the get go. That is not to say that I didn’t have to sacrifice. Getting through medical school and building a private practice were certainly hard work. So it was with great interest, yesterday, that I was discussing with my mother early retirement. Her main premise was that early retirement was never really a consideration. No matter how much money my parents had, there were five children to think of, and college education, and even graduate school. Not to mention other basics like healthcare. Her thoughts really caused my head to swirl. It never dawned on me that when it comes to early retirement, maybe your kids are holding you back.
By The Numbers
I have two children. in today’s economy, it would not be unheard of to spend $50K a year for college tuition, room, and board. Multiply that by four years and two kids, and you end up with $400K. A large some of money, but we have been diligent with our 529’s and could likely swing it. But what if my children decide to go to medical school? That could add another (conservatively) $300K a piece.
Putting the numbers together, that could be an extra million dollars!
Now imagine if you have three, four, or five kids. In my family, I have two siblings and two step siblings. And each and every one of us went to expensive private colleges and graduate school to boot. Maybe your kids are holding you back. They were for my parents. Can you blame them for staying in the workforce?
.
Then Again, Maybe I Won’t
I can hear the early retirement enthusiasts before I even hit the publish button. Of course, there are many caveats to this scenario. Kids certainly don’t have to go to the most expensive colleges or graduate schools.
Many take out loans and get scholarships. Why do the parent’s have to even pay? Debt builds character, right?
While I understand these sentiments, I also have written in support of the ivory tower before. Some of these expensive private universities do provide opportunities and connections that can’t be found elsewhere. Although early retirement can cut down W2 income and thus help students qualify for needs based grants and scholarships, they are not assured. And it certainly feels a little strange being wealthy and taking money earmarked for less fortunate.
Kids are holding you back. Or at least in the case of my parents, they were.
Teach A Man To Fish
There is also the argument that paying so lavishly for your children will spoil them. If you truly want to teach them how to be financially independent, then you have to not give them handouts. Maybe they should pay for college and graduate school by themselves just out of principle. This will not only build character, but the requisite skills necessary to make financially mature decisions.
While I can’t disagree with this line of thinking, I clearly benefited from my parents support through college and medical school. I surely would have made it to financial independence without it, but the road would have been much more painful.
What’s the point of fighting it. Kids are holding you back from early retirement. But aren’t your kids a large part of why you are working so hard to reach financial independence in the first place?
Final Thoughts
It is likely that your kids are holding you back. Education is an expensive luxury that often comes due right smack dab in the sweet spot for early retirement. There are definite ways around it, but the truth still remains. We are a community of careful people who don’t like to leave much to chance.
Underfunding your child’s future is not an option for most of us.
Is it for you?
To some extent everything we do ‘holds back finances’. But making money isn’t the point nor really is retirement. Retirement is a milestone, money is just a measuring stick. Doing what you value and using the options the money gives you to do it are the goals. So if you value kids then they aren’t holding you back from the goal, they are part of the goal.
Very true. You have to spend your money on something!
My kids might hold me back mathematically speaking but personally my parents propelled me 10x-100x further than anything I could have done myself. I think of it like a windup car that you pullback to propel forward.
Here is a post about how 99.9% of my success is based on luck (my parents)
https://www.dadsmakingcents.com/numbers-behind-my-success/
Yep. We are lucky for our parents. We will propel our kids also.
Once again the perversion of RE rears it’s ugly head. You bring them into the world then kick their butts to the curb with $200K of debt mumbling some BS about building character. If you’re going to have them then you need goals. You purchase them a future the same as as you purchase yourself retirement security. My kids are adopted and the day I got then I instituted a plan such that they would graduate debt free with enough money to start a life. Start a life included a car and enough to get an apartment. That was my goal. My goal was not reached by 529 BS. 529’s address about half your cost. My goal was reached through the power of compounding. At their age 2 I bought 120 credits at any state college in FL including fees for $23K. I put $20K in a UGTM account all in stock, mostly S&P 500 and BRK.B With this I could drive into a bridge at a high rate of speed and my kids would have college. If I became disabled my kids would have college. Compounding accounted for 66% of the available money. For $43K I had managed my risk. The $20K grew to $60K which was doled out across 4 years prn. The money was available for summer school abroad and a separate trip to Italy. The money was available for a car upon graduation (I had to kick in an extra $5K for a better car). I did retire in the middle of all of this but my kids needs did not affect my retirement cash flow because I planned and let compounding carry the freight. Too many people are way too enamored with the “tax deferred” aspect of 529’s. They are also not willing to limit their risk because jr. might want to go to Harvard. Screw Harvard. Harvard, a nice piece of ham and some bread will make you a good sandwich. Invest rather in the kid than the school. Both of my kids had access to things that hit their interest and passion like music and photography and enough support to take them as far as they could go. Both kids have photography businesses that make money. One kid is a photographer for a food magazine. One kid has a youtube channel that has over 100K views. She had that by age 16. It cost me a video camera and some encouragement. I figured out the finance she figured out the success. All this mumbo jumbo about coming up the hard way teaching character is stupid talk. It’s like saying the smartest way to learn engineering is with a slide rule. Financial independence in the future is going to revolve around understanding the tools of today not in some nostalgia about yesteryear. If you plan and limit your risk to an adequate education the relationship between kids and retirement has low correlation over the course of a normal working career. (age 65). If you RE it hoses up the risk management.
I agree. RE changes the game. If you plan, as you did, you might work longer but it is worthwhile. You brought the kids into being. You have to invest in the,.
Kids made me work faster and smarter. My parents taught me what NOT to do with finances. But you know what- they did the very best they could and knew how to. I have never faulted them for that. I happily care for them now.
I have trained with kids from private schools and Ivy League universities. Thank goodness their parents could afford it since the rest of us could never tell the difference. Especially in Medicine, it’s really hard to tell.
By the time you get to medical school, everyone is smart.
I guess it depends on one’s perspective. My goal is not to FIRE. It’s to live a fulfilling and meaningful life. Part of that means supporting my kids to the best of my ability and within reason. If I strictly wanted to FIRE, I would not have had kids. I’d share a 500 sq foot studio w/ a roommate and eat ramen and canned tuna. Of course, I’d be terribly unhappy.
I do want to have my kids contribute a portion to their college education to have skin in the game. Hopefully that will curb the entitlement mentality. Good post.
Skin in the game for sure. But I plan not to overwhelm them.
Wouldnt trade it for any amount of money. Money is not the end all be all. The end all be all would involve me being with who I love doing what I love.
My kids will cost me handsomely, but they will more than overcome that in the reward of being a dad.
P.s. we will hopefully cover all of college and, likely, help with graduate school, too. We may or may not pay for it at the end without telling them that we plan to do that, though 🙂
I like the idea of paying for them but not letting them thing it is a for sure thing.
I think without a doubt they do. It starts early too. The amount of money we spend on daycare, after school care, and summer camps even before University take years off reaching FI. Imagine if you invested all that money instead. That being said, I would never trade my daughter for FI!
Me neither. My kids are some of the why behind FI.
We have one kid so I don’t think it’s a big problem. I’m pretty sure we can fund an undergrad degree. If he wants to go to grad school or med school, then we’ll figure something out. He can always get a loan or maybe go abroad. I’m sure it will work out somehow.
My brother has 3 kids and that seems a lot more difficult. Early retirement is probably out of the picture for him.
I’m amazed that my parents supported five of us. That was a definite struggle, but they did it gracefully.
Part of our boring FI life is that we don’t have kids (and no longer expect to). We do occasionally wonder what our net worth and annual spending would look like if we did have kids. I think we would be in a good position to still retire early as we would probably be trading off travel expenses for children expenses.
I’m sure there would be trade offs. But it is doable.