What would an extra $50k a year mean for Jay and Wally’s childhoods?

This morning at breakfast we watched out the window as our neighbor’s nine-year-old daughter Ava walked to school.  She was bundled in a coat and scarf, which maybe was a touch warm for the weather, and carried her trumpet at her side.

We see Ava walk by most mornings and Jay often plays with her in the afternoons when she comes outside to kick a soccer ball.  And this morning I was struck by how nice her childhood seems.  She has a ten-minute walk to school.  She plays an instrument, she plays soccer, she’s a Girl Scout (who sold us those Thin Mints I’m always writing about), and her parents are around a lot.  I don’t know her family very well, but in broad strokes she’s got the kind of childhood I’d want for Jay and Wally.

Which got me thinking about how money influences the kind of childhood a kid experiences.

There’s still some uncertainty about what our adult standard of living will look like, but between Caroline’s academic salary and my less predictable freelance income, we should be able to earn at least, say, $100,000 a year.  And my sense is that that would be enough to give Jay and Wally a lifestyle that roughly resembles Ava’s. We could afford to live in our neighborhood, where homes sell for under $275,000, and we’d send our kids to the Ann Arbor public schools, which are perfectly good.

But what if we found a way to earn more than $100,000?  It’s unlikely that we’ll ever be rich by the standard President Obama was pilloried for using—families that make more than $250,000 a year—but if we made it a priority we could probably earn an additional $50,000 a year.  What would that mean in terms of how Jay and Wally grew up?

To answer that question Caroline directed me to a report put out annually by the U.S. Department of Agriculture called Expenditures on Children By Families.  The report analyzes the amount of money that families at different income levels spend on their children.

The analysis is based on husband-wife households with two kids.  It breaks those households into three income groups:

  • Families earning less than $57,600 a year (Average=$36,840)
  • Families earning $57,600-$99,370 a year (Average=$77,500)
  • Families earning more than $99,370 a year (Average=$174, 530)

The amounts of money families spend on their children increase as kids get older, though only by about 15% from age 2 to age 15. If you average over the course of a childhood (defined in the report as ages 0-17), this is how much money families at the three income levels spend on a child each year:

The most striking thing about the chart, to me, is the relative similarity between what low income and middle income families spend compared with what high income families spend.  Put another way, high income families spend a lot more on their kids than other families do.

The following chart, recreated from page 18 of the report, breaks down expenditures on a child into seven categories.  The chart is based on expenditure percentages in a middle income home, which are similar but not identical to the way expenditures break down in lower and high income homes.

One thing that leaps out at me from the chart is housing (which includes mortgage payments, property taxes, rent, maintenance, utilities, and home furnishings like furniture and appliances).  Housing is the biggest contributor to the expense of raising a child.  It also seems to me to be one of the easiest places to save money without impacting the quality of life a child enjoys.

In Ann Arbor, for example, we could buy a house in our current neighborhood for $275,000 a year or we could buy one a mile away in Burns Park for $450,000.  Both neighborhoods are quiet, leafy, and filled largely with two-parent families.  Burns Park has nicer housing stock and is closer to campus.  Living there would put a big pinch on our household budget but it’s hard for me to see how it would really improve Jay and Wally’s childhoods.

This next chart is the one you’ve been waiting for.  It shows where the additional spending on a child goes as families move up the income scale.

High income families spend a lot more on their children over the course of their childhoods—almost double ($377,000) what middle income families spend ($226,920).

When I consider what that extra money gets you, I think in two categories: stuff and non-stuff.

Stuff includes housing, food, transportation, and clothing, which comprise 67 percent of the cost of raising a child.  Earning $150,000 a year versus earning $100,000 a year gets you more stuff, and better quality stuff, but I don’t think it does much to improve the quality of a kid’s childhood.  What does it matter if your parents drive a Honda or a BMW, or whether your backpack costs $40 or $100? Once a certain minimum standard has been reached, each additional dollar spent on more or better stuff doesn’t add a lot.  And that minimum standard can be reached easily with a family income of $100,000 a year.

What about non-stuff?  That includes health care and child care/education, which together comprise 25 percent of the cost of raising a child.

One interesting aspect of the data is that middle and high income families spend similar amounts on their children’s health care ($18,420 and $21,150 respectively from age 0-17).  To me this suggests two things: a) As families move from low to middle income one of the first places they divert their increased income is to health care; and b) There’s only so much you can spend on health care, at least for children who tend to be pretty healthy.

The other non-stuff category is child care/education.  Here’s where you see the single biggest gap between low, middle, and high income families in terms of total dollars spent.  Over the course of a childhood, low income families spend $22,710, middle income families spend $39,420, and high income families spend $84,870.  That’s a pretty staggering difference and it’s pretty obvious what accounts for it: daycare v. nannies when kids are young, and public v. private school when kids are older.

So, when Caroline and I think about how earning an additional $50,000 a year would impact Jay and Wally what we’re really thinking about is the value of private school.  I don’t have any data that tries to quantify the value of private school but I’ll do some digging.  Of course, the added value of private v. public school varies a lot depending on the quality of the public schools where you live.  In Philadelphia, where we lived until last August, the gap between the private and public schools was huge; in Ann Arbor I imagine it’s a lot smaller.

Before I wrap up, a few notes.  First, this discussion only includes expenditures on children through age 17, so it doesn’t include support for college, post-graduate education, and the transition to adulthood, which are obviously huge and consequential expenses.  Second, the expenditure categories don’t capture things like vacations and summer camp, which are both places where I’d expect to see big gaps between middle and high income families.  Third, I framed this post in deliberately simplistic terms in order to highlight top-level differences by income groups. I’d encourage people to read the USDA report and to raise questions in the comments section.

Overall, I’m interested in writing more about the tradeoffs that parents should consider as they think about how to organize family life.  What would we gain by earning an additional $50,000 a year?  What, if anything, would we have to give up to earn that money?  And how do the organization of time and the availability of money affect a family culture and children’s outcomes?

I look forward to thinking about these questions in future posts.

Related posts from Growing Sideways

School quality and housing costs


13 thoughts on “What would an extra $50k a year mean for Jay and Wally’s childhoods?

    • More than welcome. If you don’t mind me asking, in broad strokes what types of decisions are you and your family considering? I’m always eager to hear how other families are thinking about these issues.

      • Broad strokes: career improvement, retirement savings, house repairs, estate planning, after-school care … these are all front-burner items at the moment because we finally got around to meeting with a financial planner. After-school and day care are the two biggest things now for me, because I can’t get my mind around the fact that we pay more each month for our two kids to attend a “nice” center than we pay each month for our mortgage. And we’re doing fine, especially considering where we were four years ago (layoff, health issues; the usual 21st century crap). But … yeah. We think about what an extra few thousand dollars a year would do for us and our kids all the time.

  1. I greatly enjoy your blog, Kevin! My husband and I are wrestling with these issues ourselves now, as we embark on a house hunt. Increased housing costs for the $99K+ folk may — in some localities even if not in Ann Arbor — make more of a difference for kids than you suggest. At least in the Boston area where we are looking, there is at least by reputation a huge difference in the quality of the schools between the city proper and the suburbs, and among various suburbs — and, concomitantly, massive differences in the price of housing. In the dozen or so towns with the best schools by reputation, you would be hard-pressed to find a not-pretty single-family house built in the 50s in the “least nice neighborhood” or even a condo reasonably appropriate for a 4-person family for $275K — even a “fixer-upper”; the land values are simply too high. (In our neighborhood, one of the least fancy streets in Newton and formerly considered a “rough” area, such single-family houses fetch $500K.) I think many families, whether rightly or not, stretch their housing budgets to get into towns with reputedly good public schools. So the increased housing costs may indeed inure to their children’s benefit, at least to some degree. We would love to live in the city, but don’t expect to be able to afford (good) private schools. So we would have to move in a few years or take our chances that our children might end up at schools where, e.g., all of the art and music classes have been cut and the librarian eliminated, and the bathrooms are closed due to drugs and violence, and our kid would walk through a metal detector each morning, and too much class time is spent simply on maintaining order. (One thing we need to figure out is whether the Boston schools really are so bad. We have heard that some of them are fine, but due to the busing system there is no guarantee of getting into any particular school.) But the alternative seems to be stretching our housing budget considerably (and/or focusing our energy on making money, likely at the cost of time together as a family, professional satisfaction, and overall happiness — though I recognize that, as professionals, we are fortunate to be able, most likely, to “choose” to make more money). It is a difficult set of decisions!
    Best wishes to Ann Arbor!

  2. Hi Kevin,

    I occasionally click through FB to your blog, and I’m glad I happened to today. As a new parent and someone at a crossroads career-wise, I’m thinking about these issues right now. Another that comes to mind is the stay-at-home, work-at-home, part-time, full-time choice that tends to impact women more (cue “Mommy Wars”) but is increasingly relevant to men. I’m particularly thinking about the tradeoff in working the higher-status job to make more money, but have less time to spend with my son (even though he’ll be in high-quality daycare), vs. work at a lower status job or work less and have less money overall, but more one-on-one time with my baby in these critical years in his development. Also, I’m thinking about how I don’t want to take a job I’m not passionate/excited about just to pay for childcare or have extra money for some of that other “stuff.”

    At the same time, my husband and I are both committed to sending our son to public schools unless there’s an dire reason not to (the school is completely unsafe, or he has special needs that aren’t being met, for example). So I feel some relief in thinking this is a temporary problem for his early childhood years–even if we go into the “high income” bracket we won’t be spending that amount on education beyond age 5. We’re also not planning to move into a “top” district just to make that work; we’re committed to helping improve our local schools and supplementing his education by working with him at home or enrolling him in enrichment activities.

    Lastly, of course, these are all issues that we have the privilege of grappling with because we’re not in that low income category (and I’m fortunately not a single mom). No wonder there is so much stress associated with poverty–I’m completely stressed out thinking about all of this with relatively low-risk outcomes no matter what I choose!

    Thanks for a timely post–I’ll check back to see what your continued thoughts are : )

    Jill (Freiberg) Grifenhagen

  3. This is a great analysis that touches on lots of thought-provoking issues, even beyond the housing/schools debate. It made me think about both Allison Pugh’s book, Longing and Belonging, and an ongoing debate my husband and I have had about kids and stuff. You note in the post that “Earning $150,000 a year versus earning $100,000 a year gets you more stuff, and better quality stuff, but I don’t think it does much to improve the quality of a kid’s childhood.” This is a philosophy to which I wholeheartedly subscribe (I can’t stand the thought of having brand- or stuff-obsessed kids). My husband, on the other hand, has not-so-fond memories of being teased and even roughed-up as a kid because he didn’t have “the right” backpack or jacket or sneakers. Thus, I wonder if money and stuff might matter in more subtle and especially in more relative ways than quantitative analyses tend to reveal (with these tendencies being reinforced by the high levels of homophily in most neighborhoods and schools and peer groups). According to my husband’s philosophy, at least, the $100 backpack is much more important if all of your friends also have the $100 backpack, than if they have the $40 or even the $20 version, and buying that $100 backpack is a small price to pay for a child’s (mental) health and safety. I would rather teach a child the strength to resist the pressure for more and “better” stuff, but I suspect that’s easier said than done.

  4. Interesting post Kevin— For us, I think it boils down to economics. In terms of child care costs, if my or the wife’s individual income came out to be a break even with day care/nanny costs, we would probably reconsider having both of us work. Both “wife” and I are products of (very good) public schools (well, mine is very good– her’s less so;), so for now we feel like that is a good path for our kids. As a result, since we live in Boston and prefer to live not too far from work, we are aiming to buy a house at some point in the same type of town that MlleO mentions above (i.e. an area largely unaffected by the recent housing bubble/crisis). So we’ll probably going to have to overpay for a house to live in a town with great schools AND have a decent commute into work (the added wrinkle is that the house needs to be w/in walking distance to a Starbucks- per wife’s orders. She hasn’t quite perfected how to make chai at home without the milk exploding all over the stove 😉

    • As your wife’s former classmate (at that “less” good public school), I can tell you that she would never spell “hers” with an apostrophe 😛

  5. I like this post but agree with others that you might be undervaluing the housing component. We live in Chicago in a very mixed income neighborhood which has a sketchy reputation in general, although I feel perfectly comfortable and safe in our particular area. While we’ve chosen to live here and send our child (when she’s old enough) to public schools (neighborhood, lottery, charter – whatever works), I know many, many people in Chicago choose to spend more to be in ‘better’ communities – and I understand why – I just don’t buy-in.
    I’m not sure if there’s been good research isolating the effect of community and/or neighborhood on educational outcomes (some crazy overlapping variables with parent SES, etc), but I guess I’m assuming that for most people, housing isn’t just about buying a place with more space, it is very much about finding a community where you feel safe and comfortable raising your kids. Oh, and if I want Starbucks, I have to drive…

  6. I went to a wealthy, award-winning high school where the kids had (much) nicer cars than the teachers. I got a great education, but never realized how privileged I was economically b/c I seemed poorer than my wealthiest peers. My husband was in a smaller, poorer, and only decent school, where he did not have every AP class under the sun to choose from. He got a perfectly fine education, and went on to a lot of sucess. Except I think he had more of a sense of being in charge of his education, b/c it wasn’t expected for kids to go to college where he was from.
    At my school, not getting into a “name” school was shameful, and I think I put more emphasis on that than I needed. What would I have done if I was the only one that had cared?
    Bottom line, I think a truly poor school can stand in the way of an education, but a truly wealthy, high-acheiving school is not all it is cracked up to be.
    As for our kids, we’re homeschooling them. This frees us from the dependence on a good school district, but also puts more of the cost in our lap. As for the actual education, I hope it ends up empowering our kids to find their own passions and be motivated by that, rather than by what everyone else is doing.

  7. Thank you for coming to our defense, my dear. A few thoughts to pile on to a great topic: the additional 50k is in many ways extra security for a family with two kids, a rainy day cushion that could translate into fewer strains currently and down the road. Granted most of us don’t save every “extra” penny, and it likely means buying more stuff. Surely where you are on the earnings spectrum matters, and it doesn’t follow that the richer you are the less you fight with your spouse or worry or snap at your kids, and, further, maybe it’s not altogether a bad thing for a child to see some sacrificing (recognition of a family budget constraint), but I guess the point I’d (finally!) make is that just because you bump up your earnings doesn’t mean that you need to spend it. Would it necessarily enhance Jay/Wally’s upbringing? No, not if it means time away from them. I also say this, though, knowing how well you and Caroline manage financial and parenting stresses.

    Unrelatedly, another commenter touched on the nuances of relative wealth (or displays of wealth) – I would wholeheartedly agree that it matters a lot to a child, in terms of confidence and fitting in (often the things you have least control over). Having been raised in my grandmother’s home by a single, working, and usually cash-strapped mother in an area where most people had the luxury of not discussing money (but curiously, and luckily for my sake, where displays of wealth were frowned on), I always felt different. That feeling persisted into college, and potentially explains why I fall into the more-is-always better crowd (if you can still see your kids) 🙂

  8. Our income varies between about $100,000 and $150,000 a year, and I have three children, two of them teens, so I think I can speak to this. When we have more money, it goes mainly to more travel, both as a family and for the teens going to study abroad programs. I think the main benefit is that they are exposed to a larger world, and can see the possibility of a bigger pond than the one they grew up in (Portland, Oregon). It remains to be seen whether this will make any difference to their lives in the long run.

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