Why You’re Broke – You Have Children

An interesting article at msn on why young families are broke:

In case you haven’t figured it out, the reason you always feel broke is that you are married, with children.

It’s that simple.

Yes, you probably put too much on your Visa bill. And, yes, it’s incriminating that you know the exact price of a Starbucks Grande Mocha. But when push comes to shove, such indulgences are minor compared to the real cause.


For better or worse, we’re clueless about the financial commitment we make when we take our wedding vows.

family hands

The article then goes into the Department of Labor’s “Revised Equivalence Scale” to compare the cost of having children. The conclusion?

If your real family income needs to grow at 4.5 % to 5% a year and inflation is 2.5% to 3.5%, the simple project of marrying and having a family requires income growth of 7% to 8.5% a year. Not for two or three years. Not for five years. It requires that size annual income increases for nearly two decades.

An interesting concept and certainly why money is tight for young families, but the Visa and Grande Mocha are probably the things that determine whether the family is able to live debt free or end up going into debt. The different between saving $2 a day versus putting $2 a day on your credit card ends up being $4000 in the bank or $6000 in credit card debt after 5 years.

What this shows is that young families need to be even more financially savvy than the average person.

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7 Responses to Why You’re Broke – You Have Children

  1. ~Dawn says:

    I guess this just adds to the confusion of marriage building wealth.

    To break it down:
    single person- poor
    married person- wealthy
    married w/kids- poor
    divorced- poor

    It is logical a DINK (double income no kids) would be wealthier… slow news day maybe?

  2. Michael says:

    Of course kids are expensive. I have three years of experience with this. Not much, I know, but I can project into the future pretty well. I see lots of dollars heading out the door.

    Parental decisions, however, are still the overriding factor. Many parents I see on a daily basis are still kid-like with their money. Add the normal child expenses to this kid-money mentality, and you have the perfect recipe for Still-Broke-And-It’s-Still-Payday syndrome.

  3. Frugal Momma says:

    Kids are expensive there is not doubt about that… been in the kid business 7 years. And I know my expenses are no where someone who has older children. However make priorities on our spending and saving.

  4. J~ says:

    With two kids, I can definitely relate to the extra financial stress that it brings. That being said though, my wife and I have been able to outright eliminate the cost of clothes and toys thus far through hand-me-downs and exchanges with other parents. Unfortunately, that opportunity will likely not hold up long-term but we at least have some time to think of some creative ways to possibly reduce the expenses.

  5. Perky says:

    hmm, with an income that hasn’t gone up in 3 years, and a houshold that grew to now 3 children, I have a budget of LESS….. I think what you feel like spending on your kids means more than just that you have them. I prolly never would have cared to get furgal if it wrn’t for them, so my kids are saving my credit :).

  6. byusteeler says:

    All the rich people I know (and I actually know a couple of billionaires) have children. I think Children are expensive but they motivate us to do better and be more responsible. Of coarse most of the poor people I know have children too. I’m not sure children are a factor at all. I think it is more about ambition, motivation, perserverance and maybe a little luck.

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