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Retiring Early with Kids (Finding Financial Independence with a Family)

Retiring early with kids…ever wondered if it's possible? Real early retirement stories on financial independence with a family.

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If you're reading this article, then chances are good you're looking for an exit strategy from your job.

And you wouldn't be alone – 70% of workers are unhappy with their jobs.

One way out of a dissatisfying job is to find another job, but another way is to exit the workforce completely, years ahead of when the typical American worker would.

Early retirement – heralded by the FIRE community – is a dream for many of us, but what about if you have kids?

Is it even possible to reach early financial independence with a family? Are there any early retirement stories from people with minor kids?

Before we hear from actual people who have retired early, with minors, let's get a refresher on the basic steps you need to take in order to reach extreme early retirement.

Early Retirement Extreme – Keys to Early Retirement

It's exciting to me that extreme early retirement is not some exclusive club that's unattainable for those of us with moderate incomes.

For example, Jacob, who coined the phrase early retirement extreme, was able to save 75% of his income on a $40,000 annual salary and retire at the age of 33.

My husband and I don't have a target date for when we would like to retire.

Rather our lives parallel those who seek to retire early – though to a much less extreme degree – for the sake of financial independence and the ability to make the right choices for our future without money being the prime driver (such as me being able to quit my day job and write/blog full-time).

The principles work whether you want the end result of retiring early or not.

If you are serious about extreme early retirement/financial independence, then you will need to drastically change your life. Here are the 6 keys to retiring extremely early.

Full Disclaimer: In my blogging career I have been called stingy by some people and extravagant by others. Just so you are aware, in the realm of extreme early retirees, our lifestyle is more on the extravagant side of the spectrum.

Key #1: You Need to Redefine the American Dream

Many of you know that I grew up on a family dairy farm in Pennsylvania. If you have seen the increasingly popular and ridiculous show Amish Mafia, then you've seen the backdrop to my childhood.

Life was a lot of work, even with five pairs of calloused hands keeping our farm afloat.

Under the weight of two milkings per day, fences and equipment repair, the planting of crops, the harvesting of them later in the summer heat, and tracking down newborn calves in the back meadow, we all groaned, griped, and whined.

Having a grandfather who loved to bark orders at us did not help the situation, and made us rather resentful.

As I grew older and dug myself out of the manure trenches, I started to understand why my grandfather loved to bark orders from on top of machinery or from his apartment upstairs to us working folks; it was because he had already put in a lifetime of hard labor.

Through his 50s, onwards, he had a limp. And that limp was from doing 40+ years of precisely the type of daily, back-breaking work my family was subjected to.

I didn’t want that for myself.

Working day in and day out from before the sun rises until after it descends and seeing such little money stay in my parents’ pockets made me reassess the seemingly linear relationship between work and money. When you work yourself to the bone and you see little monetary return five, ten, and fifteen years out, you really change your perspective. You start to respect money.

Money to me was never about being a vehicle for getting what I wanted; it was about keeping as much of it as possible to have something to show for all of the work I was doing.

I didn’t want to hand-crank the survival cycle of hard work and low pay for the next 30+ years.

Don’t get me wrong, I was never averse to work, and some weeks am the poster child for a workaholic (you practically have to be to build up your own business).

But I wanted something more.

For all of my childhood and most of my 20s, I was curious about people who did not seem to have to work themselves to the bone for pay.

Not envious, just extremely eager to observe, learn, and implement whatever they were doing. While I dreamed that one day I would be able to sustain myself without having to work to the bone for everything – a pipe dream if my grandfather ever heard of one – deep down I just didn’t know if it was possible.

And then something wonderful happened. I figured out that life didn’t have to be so hard, and that earning decent money did not mean I had to physically exhaust myself. This coincided with the time when Paul and I paid off our non-mortgage consumer and student loan debts, and our cash flow opened up.

Our bottom line grew, and with it our financial independence and security. Suddenly everything seemed possible, including early retirement.

If we want to be able to dream about and potentially live in early retirement, then we need to redefine the American Dream.

Whose American dream is it to be mortgaged or financed?

In whose dream is someone thinking about a scenario where they can rent-to-own?

I would venture to say that no one would associate these financial terms with their American Dreams.

And yet, many of us fund our “American Dreams” with loans that ensure we stay deeply entrenched in the survival cycle.

Under the current mainstream system of “buy now, pay later”, we are literally trading years of our lives in sometimes back-breaking work for trinkets and “luxuries” today.

Trust me, these trinkets and luxuries on loan today will not shine so brilliantly when you are stuck working extra years in a cubicle and/or high-stress job.

So what does the new American Dream look like?

It is paid for as you go, it is simple, and at the core of it are the true gems: financial independence, security, and freedom.

Key #2: You Have to Get Out of Debt

Once you redefine the American Dream, your first important step to getting it is by getting out of all of that debt that you're carrying.

This is because you need to free up as much cash flow as possible (for the next steps).

It's also because you definitely would not want to enter retirement with a mortgage, lease, or other large payment obligation eating away at your modest savings.

When Paul proposed to me in 2009, we sat down and discussed our financial goals together. Our number one goal was to get out of our combined $25,000 of consumer/student loan debt and to never go into debt again (aside from a mortgage).

Roughly 14 months later, we had reached our goal. Paying down that debt increased our cash flow as well as forced us to siphon off a larger amount of money into a pot that was not being spent.

Once out of debt, this chunk of money naturally translated to paying ourselves extra each month in the form of savings and investments.

But, there's another key to get to before you can start seeing radical savings and investment growth. It's finding extra cash flow by whittling down your expenses.

Key #3: Take a Machete to Your Expenses

Aside from increases in your income as your career progresses, the only other source of additional cash flow is sourced from decreasing your expenses.

This is what I specialize in.

However, I don’t specialize in giving up all of your wants, because then life would be no fun. What I do specialize in is living the frugal decadent lifestyle.

  • Frugal Decadent Sacrifices: These are things that we have done to decrease our expenses with very little compromise. For example, we make our own laundry detergent (an $8 batch lasts us for eight months), we periodically shop around for things like homeowner’s insurance, we play the drugstore game (same great brand name products, but at a fraction of the normal cost), we play the grocery game, I do community hot yoga for $5 instead of paying for an expensive yoga membership, etc.
  • Frugal Acts that Take a Bit More Sacrifice: Then there are deeper sacrifices that you will need to make to achieve this lifestyle. It's the sort of thing other people aren't willing to do to get extra savings. One example I have here is of our first Christmas tree in our new home, the Charlie Brown Tree. We saved $30 or so by cutting down a small evergreen tree I didn't want to keep in our new home's backyard anyway, but my husband was not thrilled at all. I also happen to have a fascination with beater cars, so fortunately for me, they're not much of a sacrifice – I've never actually owned a car payment in my life (but it IS nice that I finally progressed to a car with automatic locks and automatic windows)! Other sacrifices we have made include keeping the heat and A/C off for as long as possible in the winter and summer seasons. In Houston, the temperatures really fluctuate, so last winter we kept the heat off until December.

When you think that you need something or want something, write it down on a piece of paper with two columns.

In one column list whatever it is that you want. In the other column list the long-term gains from living the principles of early retirement extreme (I will give you a hint: financial independence, ability to make decisions that are right for you and your family, security, time away from a 9-5 job, etc.).

Then compare the two so that you can see the huge trade-offs you will be making for that purchase.

Can an extra 1,000 square feet in your home add half as much happiness as financial security can? Does purchasing one more comic book get you closer to freedom from the cubicle?

Next up, we look at saving a radical amount of your money. Or at least “radical” compared to the average American.

Key #4: Automate 30-50%+ of Your Annual Income to Savings

The reason why you need to pay down your debts and pare down expenses is so that you can allocate as high of a percentage of your annual income as possible towards savings and low-fee investments.

While the annual national savings rate is under 5%, you will need to allocate 30-50%+ towards savings each year. It may take you a few years to work up to this, especially if you're in debt payoff mode.

As an example, in 2012 Paul and I were able to put 40% of our take-home pay into long-term savings. In 2011, we saved 38%, and in 2010, we saved 29%.

Not only that, but you need to keep these percentages or increase them as your income naturally increases. When you get a raise or cost of living increase, celebrate using a small amount of it and then capture the rest of it to add to the pot. This way you will not allow lifestyle inflation to take away from your ultimate goal.

But you're not going to be able to fully save your way to early retirement extreme. You've also got to look into living a frugal retirement life.

Key #5: Plan for a Frugal and Alternative Retirement

Saving and investing a sizable chunk of money is only part of the equation.

Another part of the equation is to continue living a frugal lifestyle once you are retired.

And then there is the third part of the equation. We discussed how most of us will need to redefine the word “retirement” if we want to retire extremely early. This could mean taking a part-time/hobby/passion career to buffer your savings, living extremely frugally (like for under $7,000 per year), moving to a cheap country with free healthcare, taking in roommates, living on cruise ships, etc.

How you choose to bolster the amount of savings and investments you can accrue by your retirement age is not important.

What IS important is to make it part of your overall plan. Start conducting research on early retirement ideas and ways to live more cheaply.

Key #6: Live the Plan

As you progress down this path you will periodically need to tweak your plan.

The idea is to keep your passion and hunger alive and to keep your ultimate goal at the top of your mind.

If something is not working, figure out what is broken in the system, do some research, and implement new ideas and learning.

These six keys are true for anyone who wants to start down the extreme early retirement path. But is there a seventh key to early retirement – one that says you can't do it if you have kids?

Let's look at retiring early with kids, and whether or not it's even possible.

Retiring Early with Kids – Is it a Pipe Dream?

After reading all that, do you wonder how on earth you could retire early with kids?

I hear you. It's daunting to retire extremely early WITHOUT family…how are you supposed to do it when you have minors dependent on you to live?

I thought it would be best to go right to the source by talking to someone who actually DID retire extremely early (at 38 years old) with a child. And his answers? They might surprise you.

Joe from Retire By 40 says,

“In my opinion, it's still possible to retire early even if you have a dependent or two. It just depends on how you look at it. Let’s say you know someone who quit her career and took a 10 year hiatus. To me, that’s retiring from a career. If and when she comes back to work, then I’d say she is coming out of retirement.”

Joe considers it early retirement if you have a kid and decides to stop working to be a stay-at-home mom/dad. Which is exactly what he did.

Joe says, “I know firsthand that being a stay-at-home dad involves a lot of chores and headaches, but it is still 100 times better than going to a job you hate every day. When you leave a career, it is retirement. Why does it matter if you become a stay-at-home dad or a beach bum afterward?”

How to Retire Early with Kids – Strategies Just for Parents

Strategy #1: Redefine Retirement

I would say the biggest thing you need to do in order to retire extremely early (with OR without kids) is to redefine what you think “retirement” looks like.

Most people within the extreme early retirement world are targeting not only an early age for retirement but also a different kind of retirement than the traditional one.

Retirement, in the traditional sense of the word, is when you resign from your last 9-5 job and take up, well, living.

If you have saved enough money and can withdraw a decent income (from a mixture of savings, social security income, pensions, 401(K)/IRAs, etc.), you can do practically anything that you want to.

That is, once you turn the typical age of 62 years or older.

So what could an extreme early retirement look like?

The extreme part about it is that you will be much younger when it happens. This is partially achieved through a large sum of savings that you have set aside, and partially achieved by redefining the traditional definition of retirement.

Retirement could perhaps be a second act of employment where instead of working a 9-5 job you only marginally enjoy to pay the bills, you are working an enjoyable part-time job, hobby job, or passion job to help buffer your retirement savings.

Instead of living in a relatively expensive area and or country, you research and move to a cheaper area or a cheaper country that offers free healthcare.

Perhaps you change your entire spending habits around like Jacob who saved more than 75% of his income for 5 years and has lived on just $7,000 a year for over a decade now.

Strategy #2: Use Frugality with the Intention of Investing

You need to prepare alternate income streams for when you stop working. You can do this by living way below your means so you can save a lot of money to invest.

Dividend stocks, rental properties, bonds, and other income-oriented investments are good ways to generate some income when you retire.

Strategy #3: Delay Having Children until You're Financially Secure

Children aren’t cheap, and they can take up a significant portion of your paychecks (especially if you don’t make much).

Joe suggests that you delay having children until you’re financially secure and have some significant active and passive income. That way, you can focus on making money early on as a DINK (Dual-Income, No Kids) team, which can continue growing for you when you do have kids.

Strategy #4: Generate Side Income

There are many ways to make some money on the side.

You can freelance, blog, open an online store, photography, tutoring, teaching, and more.

This one is a bit tough to defend because you’re still working part-time and aren’t fully retired.

Many retirees work part time though so I think it’s still a valid way to pass your time while in retirement.

Strategy #5: Have One Parent Continue to Work

It might seem unfair to have one parent work, but many of us enjoy working. Where in the retirement rule book does it say that both members of a couple have to retire at exactly the same time?

I'll let Joe, from Retire by 40, take over here.

“Of course, it is also possible for both parents to retire early, but it requires an even higher level of dedication early on.

I left my stressful computer engineering career behind after 16 years and it’s the best thing I could have done. Now I’m a stay-at-home dad and I make a little money on the side with my online business. I will have a lot more free time when my kid goes off to school full-time. At that point, I could get a job and come out of retirement, but my plan is to stay unemployed (not work for anyone else) and continue to work on my online business. It’s not retirement in the traditional sense, but it works very well for us.

I know many readers disagree with my definition of retirement so let me have it. Stay-at-home parents in particular are very offended when I say I’m retired.”

Strategy #6: Think Creatively about College Costs

The big whammy when you have children is the college cost, so you've got to think creatively about college costs.

Advanced education already costs an arm and a leg. In 15 years, it will be ridiculously expensive and it will be hard to help your children out if you’re retired.

Joe says, “One way is to front-load the college savings when your children are young. You can invest $50,000 in their 529 account as soon as they are born and this should give them a huge head start in paying for college. Going to community colleges for a couple of years is also a good way to cut costs. The kids always could get student loans if you really can’t help them.”

Obviously, saving up $50,000 to put into college savings when your kids are young is easier to do if you delay having children.

Strategy #7: Buy Used Everything

If you are a mama or a papa and have not joined trading/selling/mommy groups in your area yet, then you are leaving some serious money on the table.

Since babies, toddlers, and then children grow out of things so quickly, there is a plethora of things being sold and traded in these spaces. And quite frankly, some of them are brand new.

Like the outfit, someone gave you that your baby grew out of before you could even take the tags off to wash it. Or the jogging stroller you invested money into but then never used, or the gently used bathwater Octopus thermometer.

The sky is the limit for what you can both sell out of your own stash and buy from others.

Let me give you a few examples of how Facebook Groups saved me lots of moolah:

  • Stage 2 Diapers: We mainly cloth diaper. However, we use disposables at night. We were able to snag 256 Huggies diapers in the size we needed for $30. That's a $20 savings from the cheapest bulk buying prices you can get.
  • Crib Mobile: Thanks to my friend Helen, we picked up a brand-new, Amazon rainforest mobile for our little guy's crib for $15 (retails for $30).
  • Free Car Seat: Our car seat (good for up to 22 lbs.) was scored for free off of a Mom Facebook group. After we verified that it had never been in an accident and that it had not expired (yes, car seats expire, something we learned in one of our baby safety classes), we gratefully took the offer.
  • Nursery Glider Chair: I love our glider chair that I scored in practically new condition for just $60 (retails for around $160).
  • Jogging Stroller: I'm so excited to be able to jog again with the little guy in tow. Jogging strollers cost $100+, but I was able to snag one in great condition for just $30. Now that's worth it!

Other items I've had my eye on but did not get for one reason or another include things like a toddler bed and a $5 outdoor tree swing.

Other Benefits of Facebook Sell Groups

Since you'll be joining local groups, you won't use much gas to pick up what you're purchasing. And Facebook does not charge a commission on items sold like eBay, Amazon, and others do. So when you list your own items to sell you keep all of the earnings!

Bonus: some groups are really tight-knit and foster a sense of community; you might just meet a neighbor who becomes a friend, or be able to ask others where to find the best sitters/dentists/mommy yoga class/etc.

How to Find Your Local Buy/Sell Groups

Intrigued? Search for your state or region and the word “sell” or “buy” to find local buy/sell/trade groups in the search bar at the top of Facebook.

FB Search Bar Image

                Hint: Mamas have more to sell than just baby goods. So you might want to join your local group even if you don't have a kiddo to score severely discounted items for yourself!

Those are seven strategies that should give you a lot to think about. But there's one more elephant in the room we have to discuss. And it's such a big and important topic that all parents face – figuring out how to save money while paying for childcare costs – that it's going to get its own section.

Financial Independence with a Family – Paying Childcare Costs

Let's be real. If you're going to retire early, you've got to save money to the extreme. And how can you do that while paying for childcare?

Paying childcare costs while simultaneously saving huge amounts of money – not on the end of your store receipts, but in your actual savings account – can feel a bit like trying to nail a sequence in a Cirque du Soleil event.

We’re not talking about saving 5-7% of someone’s income (though if that’s you, hey, you’re headed in the right direction! Just not necessarily the extreme-early-retirement direction).

We’re talking about saving lifestyle-design amounts, like 30%, 40%, even 50% of someone’s income.

Over the years I’ve gotten emails from several Mama Bears, wondering how the heck they’re supposed to save money while paying for childcare.

Now that I’m a mother myself, I can attest to this feeling. Even though we managed to sneak in an 18% personal savings rate (PSR) in our second year of parenting, it’s not nearly what our savings rate used to be pre-baby (think 29.8%-42%!).

So, I asked a group of Mama Bears what their burning questions were about this topic. They came back with questions like:

:: Do you tend to put greater focus on increasing income, or decreasing expenses?
:: How often does your child use childcare/daycare (how many days per week) and what’s the cost?
:: Do you purposefully choose a lower-cost-of-living area to live?

I posed their questions + a few of my own to a handful of high-savers I found lurking around the interwebs…who also happen to be paying childcare costs.

And then I dug deep into each of their situations, trying to gather any secret sauce for you guys to slurp down.

Let’s take a look at four different respondents who are all high-savers (or low-spenders, with a high percentage of income going towards debt payoff).

High Saver #1: Udo, 1 Son (5 years old), Married

Location: Portland, Oregon
Income Situation: Dual income of between $115,000 and $200,000 (2011-2016)

Joe Udo religiously tracts his income and expenses on his blog, Retire by 40. So, he was able to quickly give me the stats on his situation, which show that he saved between 35% and 55% of their pre-tax income for the last six years.

Work-at-Home-Dad Joe says, “We save about 50% of our income while paying for preschool. It's around $600 per month, so much better than daycare. When he was in daycare, I was working full time so we saved more than 50%. Income was much better with a full-time job.”

His wife’s workplace does not help with childcare costs, and so the only “discount” they get is the Childcare Tax Credit.

A quick rundown of his stats shows that his childcare costs were between just 2.5% and 6.5% of his pre-tax income:

  • 2011 (46% Savings): $200,000 income, with $13,000 in childcare costs
  • 2012 (53% Savings): $240,000 income, with $7,000 in childcare costs
  • 2013 (36% Savings): $90,000 income, with $2,300 in childcare costs
  • 2014 (54% Savings): $170,000 income, with $4,700 in childcare costs
  • 2015 (43% Savings): $115,000 income, with $5,000 in childcare costs
  • 2016 (44% Savings): $115,000 income, with $4,000 in childcare costs

Joe says, “I don’t feel like we gave up a lot of things. We go out much less than when we were childless. We just spent a lot more time at home after we had our kid. I think that’s just because it’s hard to go out when you have a kid. We stopped taking international vacations after our son was born. It’s just more trouble than it’s worth. Last year, we started traveling again and visited Costa Rica. Our son was 4 so he could enjoy the trip as well. Now that our childcare cost is decreasing, I feel like we could splurge on travel again.”

In order to achieve this, Joe tends “to focus on keeping expenses down. Our income is dropping because we are in transition to early retirement. I try to keep expenses down wherever I can. Our housing is the biggest cost. We like where we live and we aren’t ready to relocate to a cheaper location yet.”

But, he admits that their income has a lot to do with it. “We live in Portland. The cost of living is moderate compared to other major West Coast cities, but it is increasing quickly. We have always been relatively frugal and never spent extravagantly. Our income growth outpaced our lifestyle inflation.”

One final thought – a specific question from a reader – is whether or not Joe and his wife need to explain some of their lifestyle and budgeting choices with their kids (for example if his child wants something that the parents aren't willing to pay for, even though the parents could afford it, but it's more a lifestyle choice not to purchase it).

For this one, I think we should check back in with Joe in several years. Joe says, “I haven’t had a lot of problems with this so far. Our kid is still pretty young and we tell him that we need to save some money. We taught him that money comes from working, not from the ATM. We only have one kid and he often receives cash for his birthday and other holidays. He has over $200 in his piggy bank and he wants to buy Lego sets. Recently, we let him purchase an expensive Star Wars Lego and we also told him, no more Lego until Christmas. He needs to learn to pace his purchases.”

Joe says that his child isn’t aware of brand names yet, but that he’s sure it’ll get harder as he ages.

High-Saver #2: Doug Nordman, Married, 1 Daughter

Location: Worldwide, military bases
Income Info: Dual Income, Compensation Package of between $125,000-$150,000

Doug and his wife were high savers while paying childcare costs, in the time period between 1992 and 1997 when they were both working in the military.

Back in 1992-1997, Doug and his wife were spending roughly $500/month at childcare centers on military bases. That was while they were both on active military duty and before their daughter started school, so it was full-time daycare. Which means they were getting quite the deal on childcare, as it represented a mere 4% – 4.8% of their pre-tax compensation package (though remember, they were both serving in our military, so I’m thankful for this help for them!).

Doug says, “One ‘interesting’ lifestyle aspect was that we were either working or parenting, so we had very little free time to find ways to spend money. With our always-on daughter, an hour at the library or the local park for playtime was a major accomplishment. Another essential factor, not easily appreciated at the time, was that the cost of childcare allowed both of us parents to leverage our career skills to higher salaries.

Dual-career parenting is just plain hard. If we were starting a family all over again, one of us would've left active duty for the Reserves or National Guard ‘one weekend a month, two weeks a year’ part-time employment.”

To get a better idea of how this translates to current-day dollars, I spoke with my friend, Amanda, who is currently living the military life while her husband serves. She says the cost of childcare on base depends on a family’s total income. She made a phone call, and as an example, found that for infant care:

“If you make less than $30,000, two weeks is $126 and if you make over $130,868, it’s $314 for 2 weeks.” This is for care from 6:00 am – 5:30 pm, Mon-Fri.

High-Saver #3: Amber Masters, Married, 18-month-old baby

Location: Salt Lake City, Utah
Income Situation: Dual income, $200,000

Amanda’s Note: Before we start with Amber’s story, I just want to point out that it’s about paying a large percentage of income towards debt, not savings. The reason why I still included her story is that her family is living off of just 30% of their income, with a baby. The idea, of course, is that since a large percentage of her income is going towards building their net worth by digging out of debt, then after the debt is paid off, they can switch to putting that large percentage into savings instead because their lifestyle can clearly handle it.

After taxes, 65-70% of Amber’s household income goes toward paying off their $591,000 in student loan debt.

They are accomplishing this while their childcare situation looks like this: 4-5 days per week of childcare, full-time during the day, at $4/hour. This is without any sort of workplace discount or cost replacement.

When I asked how on earth Amber was able to find such cheap daycare, she said, “I almost did not accept the job I had when it was first offered. We crunched numbers a million times. Daycare was way too much for us. Even though we have a solid monthly income (hubby a dentist, me a lawyer) we pay almost $8,000 a month as the minimum payment on our student loans (we have almost $600k in debt). Daycare would have eaten up about half my income. If we had hired a nanny around here (off of care.com for example) the average would be similar to yours – around $15/hour. What's the point of even working if you’re not earning money?? It was crazy. So, I simply started talking around – to friends, family, etc. to see if anyone knew anyone who might be able to watch our little guy. Within a couple of weeks, we had a list of several people willing to do it! We narrowed it down to the lady we trusted the most and she has been WONDERFUL. So, my biggest piece of advice is to shop around!! You can find someone at a price you can afford.”

Amber says she would have had to give up much more if she had stayed home with her baby. But since their debt load is so high, staying home wasn’t really an option for them.

In order to achieve this high percentage rate of debt payoff (that will hopefully translate to savings in the future), Amber says that they’ve done a little of both increasing income and decreasing expenses. But definitely, focusing more on the income-increasing side.

She shares, “We coupon and shop around for various goods and services but that only gets us so far. We drive cheap cars and pay low monthly rent- those are the two biggest and easiest ways to save money. But we do all that while going to school etc. to earn more income! To pay off debt or to make substantial savings (such as for retirement) you need more income.”

And choosing a low-cost-of-living area was definitely in their plan. They’ve sacrificed both being near family as well as living near an ocean – a place they love – in order to knock out that debt. Amber adds, “We budget for small family vacations and use credit card reward points for such things.”

High-Saver #4: Jill (name changed to remain anonymous), 2 kids in daycare (3-year-old, 9.5-month-old)

Location: Suburb of Chicago
Income Situation: Married, Dual Income, $200,000

Jill and her family currently save around 40% of their pre-tax income while paying roughly $637/week for two kids in childcare. This accounts for roughly 17% of their income.

Jill cites her family’s natural savings tendency as part of the reason for this high savings rate. “We're able to maintain a high percentage of savings by setting a good foundation before the kids are born. My husband and I are savers by nature and already had the automatic deposits in place to contribute to our retirement accounts. We have a healthy emergency fund, an affordable mortgage, and no additional consumer debt. My husband started a new job with a huge raise and better benefits before our daughter was born.”

One sacrifice that her family has made for this is for her to forego quitting her day job to pursue her own business. “One thing I haven't been able to do yet is quit my day job and be self-employed. It's a little tough to leave the comfort of a regular paycheck while watching our investments grow. We love our daycare, it's just so darn expensive. And somebody would still need to watch our kids for at least part of the day.”

Two discounts she discussed with me for childcare include a multi-child discount, and saving on taxes by setting aside $5,000 pre-tax each year in her company’s FSA (Flexible Savings Account).

She also adds, “We're definitely more focused on the big things. My husband started a new job with a big raise and better benefits shortly before our daughter was born. We have no debt besides our mortgage. And we saved up to buy our Honda CR-V with cash. I'd say we're more focused on increasing income, but we still keep our expenses in check. Sure, we have cable and occasionally get Starbucks, but we'll also negotiate a lower cable bill. Yes, we still have money in our budget for fun things like fancy dinners for our birthdays or anniversaries. And we splurged to buy a $150 bounce house for our kids. We haven't gone on a vacation with two kids (if you don't count driving to Cleveland for holidays with my family), but we took a trip to Montreal with our daughter and went to New Orleans as a family of three for FinCon14.”

As far as the cost of living, Jill says, “Chicago isn't the cheapest place to live, but we bought a 3-bedroom ranch well within our budget in a good school district with reasonable property taxes. We put 20% down, refinanced once, and pay extra principal each month.”

Finally, Jill adds, “I love Ramit Sethi's definition of a rich life, “spend[ing] extravagantly on the things you love…as long as you cut costs mercilessly on the things you don’t. Sure, saving is important, but if you can afford it and you want it, shouldn’t you be able to splurge to buy it – every once in a while?” Want to travel the world? Go for it! You’ll just have to prioritize your expenses and/or earn more money since consumer debt is never fun.”

You probably noticed something that I did about each of these high-savers: they have 2 or fewer kids, and they make an income substantially higher than most in the United States (according to the Census Bureau ACS Survey, the median household income is $53,889).

Also, in most of these cases, childcare was less than what I would have thought. So, this group of high-savers has certainly figured out how to both optimize income + lower expenses for childcare.

Next up, I share some of our own stats.

Our Personal Savings Rate…BB (Before Baby)

Our personal savings rate has always been more in the range of those other countries.

Looking through the archives of my blog, I found that we saved:

  • 2009: 42.9%
  • 2010: 29.8%
  • 201138%

And even though it seems that I stopped calculating our PSR after these two years (or at least I can’t find it after looking through several years’ worth of articles), I know our percentages stayed about the same for several years thereafter.

Then…we had a baby.

Our Little Bundle of *Non-Savings* Joy

Over the years I’ve been contacted by several upset mothers who just don’t understand how you can save money when raising kids. I certainly understood where they were coming from, as much as one can when they are not in the same position.

Then I experienced it myself. 20 months ago we gave birth to a little boy…and a whole lotta extra bills.

(I kid, but we’re in love with the little guy?).

What I’m not particularly in love with? All the extra costs (not even counting childcare costs) I couldn’t have even dreamt up that came along with the parenting lifestyle…starting with a $ 10,000 out-of-pocket birth bill!

  • Year 1: At the beginning of last year is when all our medical bills rolled in (he had an October birth), so that put us out of the realm of saving more money for the first half of the year.
  • Year 2: This year, thankfully, is back to normal. Or rather the “new” normal. We still manage to spend far more than I’m comfortable with on all sorts of things as a result of parenthood. And our black hole-savings account has been touched for our $3,800 recent new beater car purchase (got my last car to 223,000 miles!). However, we’re on track to fully max out each of our Roth IRAs, and Paul is contributing the max to his 401(k) plan for the year. I calculate this will put us at around an 18% PSR for the year.

So, we can’t be doing too badly, right? (the question mark is me trying to convince myself, as I’ve got a HUGE saver mentality).

Areas Tagged for Improvement in Our Own Lives

Always looking for ways to improve my bottom line (and in my world, that bottom line is our savings account balance), I’ve earmarked the following areas for improvement to bump up our 18% PSR, post-baby:

  • Groceries: Holy smokes, our grocery expenditures went way up after the baby. This is for several reasons. For one, we need more convenience. However, I refuse to buy unhealthy convenience foods…so we’re paying more there. Also, our little guy eats, eats, and eats some more. It’s pretty ridiculous, especially from how I’ve seen other kids his age eat. But it’s not for nothing; he’s as tall as 3-year-olds and has been in the 97th– 99th percentile for height since his second checkup. I’d like to just dissect this area a bit now that I’ve come up for air from having an infant. I’m sure we can shave at least $100/month here.
  • Home + Auto Insurance: Our premiums continue to rise like clockwork. I really want to start shopping around for a new provider (not during hurricane season, however) and see if we can cut some costs here.
  • Husband’s Cell Phone Plan: While I whittled my cell phone plan down to just $39/month (unlimited everything), Paul’s is still around $83/month. We’ll shop around or he can come to the same plan I’m on once his contract is up, which would take the cost down by $44/month.

But seriously, is it actually possible to save close to 50% of your income – the way I’d like to be saving – with a baby or babies (fill in the blank with whatever age your kid(dos) are)?

Let's dig a little deeper into how much it actually costs to raise a baby.

How much does it cost to raise a baby? The Lowdown from Other Parents

  1. Mrs. Money Mustache: What Do Newborn Babies Really Need?: Mrs. Money Mustache offers up an interesting, Zero Dollar Baby Challenge. “[If] you do need to make a few purchases for an upcoming baby, try getting it from friends and from various used sources. And then sell some extra stuff you have lying around your house for the same amount of money. Voila!  Zero dollar baby.” Her main points are that everyone around you will lavish you with wonderful, used items (and so far, this has been the case with us — we’ve been SO blessed with a full maternity clothes wardrobe, a crib, baby clothes, baby carriers like the Moby Wrap, etc. So far I’ve only purchased a maternity bathing suit, a belly band, lots of hangers, and a few nursery decorations!).
  2. How I Raised My Baby for the Cost of a Cup of Coffee Per Day: After disbelieving her brother that a baby could be raised on the cost of a cup of coffee per day, this lady kept a tally of the cost of raising her baby for the first year. The total came to $641, which breaks down to $52.41/month and just $1.75/day. This included everything, like diapers, baby food, clothes, presents, toiletries, official documents, medicine, and even her birthday party expenses. I love her idea — “I would budget $100 per month for the baby and at the end of the month put what is left in a savings account for her. It’s been adding up.”
  3. Our Kid Doesn’t Cost that Much (So Far…): After finding out, from CNN’s estimator, that it would cost a whopping $255,237 over 18 years to raise RB40 Jr., Mr. Retireby40 decided to write a post on what he and the Mrs. have actually spent over the last three years. While his numbers are mighty impressive, it is interesting to note that they did pay for a year’s worth of daycare at $1,250/month (and $100 just to put their names down on a waiting list!) before Mr. RB40 quit his day job to pursue blogging, various income streams, and being a Stay-at-Home-Dad full-time. They now spend $300/month for 2 days/week of preschool. All in all, he estimates they spend $5,000/year or $417/month on their little one.
  4. The Only 21 Things Our Newborn Kids Have Ever Really Needed: Instead of using the checklist places like Babies ‘R Us conveniently give out to their new parents registering for a baby for the first time (it’s quite extensive, I can assure you), check out this guy’s post for items he finds absolutely essential (hint: several of them, money can’t buy!).
  5. Financial Independence and the Cost of Raising a Family: Now that The Military Guide Guy just finished, “emptying our 529 account with the final payment for our daughter’s college room & board”, he thought it would be a great time to talk about how much it cost to raise his child (past tense). “According to the government’s agricultural experts, my spouse and I should have spent at least $300K raising our little bundle of joy. If we’d elected to stay childless and invest that $16,700 per year in the S&P500 between 1992 and 2010, then we’d have a cool $543K in our Fidelity account.” He’s been tracking their spending on their daughter since 1986 (incredible information!), and can confidently say he’s spent just under $156,000 (that includes college expenses).
  6. The Grand Finale (29 Months) of the Baby $$$ Tracker: The Military Guide Guy is not the only one who decided to track every cent spent as part of a cool money experiment. J. Money made it all the way to 29 months. His total cost for baby J. Money up to that point? $28,185.49.
  7. Having Kids Vs. Retiring Early: Darrow explains how he actually reached financial independence sooner because he had a son. Throughout the article, he shares specific costs involved which he also has tracked for 20 years, including $32,000 for “personal” expenses, an estimated $72,000 for the child’s cost of food, and $153,000 in private school costs after having moved to Tennessee where they found the public schools inadequate.
  8. Preparing for Unpaid Maternity Leave: Rebecca writes this post right before her second child is due. “We waited four years to add to our family because our finances couldn’t bear the burden of two children in daycare or one of us staying home – it’s the cold reality of $200,000 in student loans.” She planned on taking a two-month maternity leave (she’s self-employed like me, so can choose), and works through how much they’ll need to save up in order to afford this ($500 per month, plus the $1,550 in one-time expenses).

As you can see, the costs to raise a child vary significantly based on lots of things, such as income, personal preferences, needs of the child, schooling, location within the US, and the child’s age (it’ll be interesting to re-compare years later where RB40 Jr. and J. Money’s little one stack up against the articles where the parents are ‘finished’ parenting).

In Conclusion

Not working in a 9-5 job for 40+ years of your life is truly a revolutionary and sometimes counter-culture idea. If you choose to go down this path, prepare to have your life change dramatically (they don’t call it “extreme” for nothing). Even if you don’t want to follow the path through to its eventual end, living by some of these principles will give you more financial security, more financial freedom, and fewer money headaches. It will also teach you that paychecks aren’t a life-sustaining force, growing and declining just enough so that we can feed ourselves.

On the “extreme early retirement” scale, my husband and I are probably considered moderate to extravagant. We still have vehicles, we have a home, we did more than go to the county courthouse when we got married, and we don’t even have a target age of when we would like to “retire”. That’s right; to us, it’s more about living the principles of ERE and benefiting from it long-term rather than actually retiring at a very young age. But compared to many people’s lives, we are considered extreme.

Remember that what you are attempting to do is extra-ordinary. Most of us would never decide to retire at 35, 40, or even 55 either because we do not believe it is possible, or because we do not wish to pursue this type of lifestyle. You will need to think outside of the box, keep your eye on the prize, as well as maintain an overall frugal existence. Remember, the rewards can be great.

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Amanda L Grossman

Personal Finance Writer and CEO at Frugal Confessions, LLC
Amanda L. Grossman is a writer and Certified Financial Education Instructor, Plutus Foundation Grant Recipient, and founder of Frugal Confessions. Over the last 13 years, her money work has helped people with how to save money and how to manage money. She's been featured in the Wall Street Journal, Kiplinger, Washington Post, U.S. News & World Report, Business Insider, LifeHacker, Real Simple Magazine, Woman's World, Woman's Day, ABC 13 Houston, Keybank, and more. Read more here or on LinkedIn.

Dreamer in Chief

Tuesday 18th of July 2017

We're also in the Salt Lake City area and spend about $10-$11K a year on daycare for our daughter. It's full-time, five days a week. We save money by using the childcare FSA mentioned above and by prepaying the daycare for six months, which saves us 10 percent. We've been in the $150K-ish pre-tax neighborhood in that time. Not only are we paying for daycare, but we're also paying for one son in college. (I wrote about the cost comparison of daycare vs. college on my blog - they're basically the same.)

We got really lucky in that our raises at work coincided with our increased expenses, so we didn't have to dial back our lifestyle a ton to fit in paying for that stuff. It also means we're able to be really smart about where we're going to direct that money once we no longer have to pay for daycare and college (one more year to go!). I'm amazed at Amber's luck with Care.com! We tried Care, but the results were very mixed and ultimately my wife spent more time dealing with flakes than getting people we actually felt comfortable leaving our daughter with. That's when we decided it was time to get her in a professional place.


Thursday 20th of July 2017

That's awesome, Dream in Chief! Thanks so much for sharing your own strategies + income.

Traci McCaskill

Friday 7th of July 2017

I don't mind! This is only for the last year though..as my toddler moved into the potty trained pre-k class prices only dropped about $5 so its been pretty close this these amounts for the last couple years. So my 4 year old was in F/T daycare and it was $212/wk. On weeks he wasn't there (like if was on vacation) you still pay half weeks tuition which we got to use 3 times. My 8 year old was in before/after school care at $85/wk. We were able to move him to after school about halfway through the year so that dropped us to $60/wk. We do three days of F/T daycare for the summer right now and that is $290/wk. SO from Sept 16 - Aug 17 we will have paid a little over $12,000 for childcare. That's the lowest it has ever been..thankfully my husband has started working from home two days a week which has lowered our summer care. Last summer was a little over $4000 because they went full time 5 days a week. Childcare is no joke.


Saturday 8th of July 2017

P.S. CONGRATULATIONS on the potty training!! Our little guy started telling us "uh-oh" and pointing to his diaper when he Number Two's...

I don't think I'm ready!!


Saturday 8th of July 2017

WOW. Thank you for sharing! I have to say, I go back and forth about how I feel about the price of childcare. On the one hand, I'm like, "that's insane! How can people afford to work with that cost?!"

Then on the other hand, and probably especially now that I'm a Mama, I'm like, "that's a steal! Those people are keeping people's number one's alive + thriving!"

As a long-time reader of my blog (thank you, by the way:)), you can probably guess which side wins out more over the other. I'm a money person, after all;).

Traci McCaskill

Wednesday 5th of July 2017

I have been waiting for this!!! So excited to read all about what you have discoverd. Our youngest (only have 2) is starting Kinder in the fall so our full time daycare days are F I N A L L Y over. But there is still summer and after school care we will be dealing with for the next couple years. I can say that getting through F/T daycare and after school elementary care has left us with barely any savings. So hoping to stock pile during this new season in life.

Amanda L Grossman

Thursday 6th of July 2017

Hi Traci! You made me smile:). Good to hear from you, and glad that this series will (hopefully) give you some ideas or show you what could be possible.

Do you mind sharing with us either in this week's post or Monday's post what you were paying for full-time daycare? No worries if you don't want to.

Bill in Houston

Thursday 19th of November 2015

What will our hospital bill for a “normal” delivery look like?

That's a good question. Neither of our deliveries were 100% normal. Back in 2012, Bun got an infection and had rapid breathing, so he spent his first two days in the NICU. This year, Biscuit had to be induced two weeks early because she wasn't growing.

So we had the added costs of a NICU the first time, and the drugs used to induce labor (pitocin and other meds) the second time. Thanks to our insurance and my wife pre-paying her OBGYN, our out of pocket expenses post-hospital expenses were about $1200 this time. I think she paid her OB-GYN a similar amount.

One thing that bothers me about our hospital system (Memorial Hermann) is that they do NOT create a single account for you and have expenses added. Instead you are billed separately by every Tom, Dick, and Harry who stopped by your room to say "Good morning." This makes it hard to keep up sometimes. A long itemized list also makes it easier for you to know how you're being charged, and allows you to contest anything that doesn't look right. I'm convinced Memorial Hermann bills this way to overwhelm you so you'll just throw up your hands and say, "Fine, I'll pay!"

Amanda L Grossman

Thursday 19th of November 2015

YES--I find it very annoying how we are getting bills left and right from all different departments/doctors/at the hospital where we delivered (it wasn't Memorial Hermann either). I would MUCH rather get one bill with an itemized list.

Thanks for sharing your experience! I'm so glad that both of your babies turned out healthy:).


Monday 28th of October 2013

My husband and I have a son in college and still plan to retire early either this June or next June, while he is still at school. We always lived below our means, even when the three of us were under one roof, and our son worked hard to get academic scholarships. He also takes out a student loan when needed. We feel that by him paying back his own loans, which will be minimal, will help him to do two things: manage his money in the real world, and establish credit. Both are good lessons to learn and he is already on his way to his own early retirement by practicing the adage of "pay yourself first".


Tuesday 29th of October 2013

Hello Lori,

Thank you for taking the time to share your story and experience with us. That is wonderful that you will be retiring early! May I ask what age you both are?