Is Delaying Parenthood The Right Wealth Hack?

Most young couples struggle with the decision of when to prioritize their career vs. start a family. This decision evaluates how each couple balances their time between their career ambitions and parenthood. While many may pursue both simultaneously, they will likely be faced with a difficult choice: 1) one spouse prioritizes family while the other becomes the “breadwinner” or 2) both spouses work but still cannot afford the skyrocketing costs of raising a family. Both options require compromise. In this blog post, we will discuss recent trends in delaying parenthood, financial and social considerations, and our experience with this decision.

Trends in Delaying Parenthood

Over the last few years, couples are delaying the age when they become parents, creating a paradigm shift in expectations from those of our parents’ generation.

Recently, the National Health Statistics Reports analyzed fertility measures for households between 15-49 from 2015-2019 and compared it to results from 2011-2015. In the chart below, they discovered that there was a 32% increase in couples having their first child over 30+ and a 38% decrease in couples under 20 years old.  Separately, the US Census Bureau found that the average age of women giving birth for their first child is now 30 years old, consistent in major urban cities (e.g., San Francisco, CA: 31.9 and New York, NY: 31.1)

Other significant findings include a high correlation between the level of education and the age of the first child’s birth. For example, for women with a bachelors’ degree or higher, 61% had their first born between the ages of 30-49.  Therefore, the higher the education, the later you have children (see chart below):

These trends remain unsurprising as couples with advanced degrees have greater career aspirations and often want to be “set in their career” before starting a family.

The challenge with postponing parenthood is that couples must contend with declining fertility rates. However, advanced reproductive medicines (e.g., IVF) has provided couples with greater flexibility and choice.

Unexpected Financial Costs for Postponing Parenthood

Most couples that postpone parenthood, do so largely because they want to achieve certain career milestones and feel financially secure.  Their reasons may include maximizing their earning potential, paying off student loans and building up their savings before having to “slow down” from their current career trajectory.

Below, we discuss some financial considerations that might be less obvious when considering postponing parenthood.

Prioritizing Your Career May NOT Result in Financial Security and Could Lead to Infertility Risk

Highly educated couples typically have career goals and want to maximize their total earning potential before deciding to have their first child.  They often plan their career milestones before their fertility status starts to decline.  (Note: This plan assumes excluding the use of assisted reproductive medicines). 

Two scenarios may occur when postponing parenthood:

Scenario 1: Achieve short-term career milestone, but the financial compensation is insufficient to offset childcare costs

This scenario may be common for women that enter the workforce late because of their pursuit of higher education or an advanced degree (e.g., Masters, PhD, MD). The financial compensation tied to the near-term career milestone may be insufficient to cover their actual costs of delivery and childcare. Here is a real-world example that I experienced with one of my former employees:

I once had a former employee who graduated with her PhD and started working at the age of 28. After 2 years of working, she had her first child and had become a manager within my firm.  When she returned from maternity leave, she experienced immense professional and financial pressure. She witnessed several of her previous direct reports get promoted and become the same level as her.  She felt that she had to work extra hard to play “catch up” because of lost time. Additionally, she underestimated the costs of childcare. Her surprise delivery hospital bill for $15,000 and daycare costs of $2,500 per month was a financial gut punch. She requested a promotion shortly after she returned and asked if the company could also reimburse her daycare expenses.  Otherwise, she would need to start looking for another company because her family really needed the money.

Scenario 2: Postpone parenthood longer for more ambitious career and financial goals, but infertility risk becomes an issue

For the second scenario, these career goals are usually much more ambitious requiring a longer time to achieve, but come with uncertainty. For example, women might have milestones like starting their own business or becoming partner at a law firm. The reward is being able to achieve financial security and have the flexibility to spend more time with family as additional career accolades are unlikely to lead to greater happiness.

However, what happens if the financial reward for the longer-term sacrifice is not there?  What happens if they do not get that high-level promotion during their originally planned timeline?  What happens if the compensation is not what they had expected?  What happens if their business fails?  The result is that they may be taking on both financial and infertility risk with this scenario.

What is their next course of action?  Will they postpone longer (e.g., “I’ll give myself another year or two”)? The tricky question is WHEN do they decide they can no longer postpone parenthood for their career?  This is a real struggle for highly ambitious couples given the extent of sacrifices they have already made over a long period of time.  At a certain point, each couple will need to evaluate whether that incremental financial milestone is worth the incremental risk of infertility. 

Postponing May Require Incremental Costs for Egg Freezing and Fertility Planning

With the advances of reproductive medicine, women now have option to freeze their eggs and potentially consider IVF to preserve their fertility over time.  According to FertilityIQ, the estimated cost for a patient freezing their eggs could range from $30K to $40K which includes treatment and storage, assuming $15-20K per cycle and an average of 2.1 cycles.  After the initial year of egg freezing, the cost of storage may range from $500 to $1,500 per year depending on the fertility clinic across the country.

These costs are usually not covered by insurance and patients pay out-of-pocket unless their employer provides coverage for fertility benefits.  Many large fertility clinics may offer 3^rd party financial assistance as well as payment plan options.  While these costs may be expensive, more couples are budgeting these costs for family planning as this gives them more time for their career pursuits.  

Cost of Childcare Not Only Varies by Age and Location, But Grows Faster Than Other Costs

According to World Population Review’s analysis, the average annual cost of childcare across all states for a 4-year-old is ~$10K per year. This cost estimate assumes care for 1 child at a child care center. These costs can also be more expensive for infant and toddlers than care for children of preschool age.  We analyzed how these annual costs might vary by state as a percent of the state’s median household income below:

The most expensive childcare states include DC and many major urban states (e.g., NY, CA, CT, NJ, MI, IL, WA, MA). If you live in DC, the cost of childcare is equivalent to the rent of a 1-bedroom apartment!

Keep in mind that these cost estimates are a percent of median pre-tax gross income. Therefore, this assumes that if you live in NY, you could expect to pay ~16% of your after-tax income towards childcare for a single 4-year-old. However, if you live in NYC where daycare is more expensive and you have a baby younger than 18 months (~$2.6K per month or $31,200 per year), you could pay ~36% of your after-tax income towards childcare!

Additionally, the cost of childcare is not only expensive, but it is the category that has experienced the greatest inflation! According to KKF’s analysis of historical child care prices below, child care costs have outpaced other essentials:

We thought inflation was bad with groceries and housing, but annual childcare costs have consistently grown much faster than these other categories!  Keep in mind that these costs do not even factor in the costs of private school or other educational or extra-curricular expenses that most parents evaluate.

As a result, if you are considering postponing parenthood, you may need to first budget an upfront cost of $40K for fertility costs as well as a recurring cost of $10K-20K per year for childcare expenses.  This is a key reason why parents look to become more established in their careers before starting parenthood.

Social Pressures of Postponing Parenthood

Beyond the financial considerations, several social factors may also impact a couple’s decision on whether to postpone parenthood.  Some of these factors may include:

• Meeting your significant later in life given a greater focus on career / education
• Fear of pregnancy and post-partum depression
• Lack of social support in raising a child (e.g., grandparents are not nearby)
• Feeling content in life without the need to have a child
• Desire to acquire more life experiences (e.g., travel)

Among our friends and peers, the greatest pressure is the pressure from our families. Our parents worry about the effect of aging on infertility. Their perception about the appropriate time to have a child is before the age of 30 years old.  But the world is changing and ~40-50% of educated couples are not having their first child until after 30 years old. This difference in expectations may lead to friction within families and result in greater social pressure on couples.

Our Unintended Decision to Delay Starting a Family

We always wanted to have a family and never originally planned to postpone parenthood.  Between demanding careers, health issues and not meeting each other until 29, my wife and I unintentionally delayed parenthood.

Did delaying having kids accelerate our wealth accumulation? Definitely.

Living in NYC, if we were to have 1 kid immediately after getting married at the age of 30, we would have been at least $200K in post-tax income (or ~$600K pre-tax) less wealthy.  This estimate assumes the average cost to raise a child at $25K per year for 8 years.  Additionally, it was not just the money saved, but the opportunity cost from the incremental income of promotions and the growth of my business. I often think that if we had a kid immediately after marriage, we would not be able to retire by the age of 39.  Instead, I would lose one-third of my time at work each day, potentially translating into an extra 5-7 more years to reach our financial goals.

In hindsight, the biggest benefit of postponing parenthood to reach financial independence is that we can now give our future child the best gift of all—our time.  We do not have to feel guilty about being at work and not spending enough time with our future child. We can raise our child and be physically and mentally present every day. We have the luxury to give them experiences that may significantly accelerate their learning and development without worrying about affordability.   

Was this a gamble had we not achieved our financial goals relative to declining fertility? Some might see it that way. However, with advanced reproductive medicine, we feel that we still have time and can control our own destiny. We know many couples that successfully had kids in their late 30s and early 40s by using IVF and we remain hopeful that we can also be successful according to our own timeline.

Summary and Considerations

As we reflect on this personal decision above, we think it is important to highlight a few considerations:

• Every couple’s relationship priorities are unique and it is important to understand each partner’s timing expectations for parenthood  
• Postponing parenthood as a “wealth hack” may be achievable, but the sacrifice may NOT yield sufficient financial benefits and could put them at risk of infertility
• Postponing also comes with potentially higher costs (e.g., fertility costs, higher childcare costs in the future) depending on how long you postpone

Each couple’s career and family planning journey is highly personal and has always presented difficult choices in their wealth journey. Some couples can have it all, but it’s threading the needle between happiness and timing. We hope you found the insights and our thoughts above helpful as you evaluate your own decision.  Please let us know in the comments below what other factors should be considered when evaluating this decision.