Q&A: How do we decide where to invest in our kids, and where to invest in ourselves?

QUESTION

We have a one year old and a three year old and are feeling the pressure to involve them in all the activities (soccer, swimming, dance, music, language classes), save for their college funds, and insure them for life, all while paying about $4,000 in daycare costs per month.

My husband and I aren't saving adequately for retirement, and we have no permanent life insurance (only employer-offered). Meanwhile, he desperately wants to make a career change, as his current job is physically demanding and we're not sure how long his health will hold up under the circumstances. In my mind, a healthy, happy dad is the best gift we could give our kids, but I know he will feel enormous guilt if he's unable to give them the same opportunities he had growing up.

How do we decide where to invest in our kids, and where to invest in ourselves?

ANSWER

All parents want to give their children the world. There’s nothing I wouldn’t do for my girls, which makes it hard to say no to their precious little faces. But most of us have to prioritize, because our money can only take us so far. Your question poses short and long-term financial considerations that must be unpacked to form the best game plan.

I’m going to start with the least crucial expense mentioned above: activities. Today more than ever, parents are led to believe their kids need exposure to extracurriculars from an earlier and earlier age. Take it from Heather, who has written on this topic, how easily parents can get swept up into the narrative that by not offering your kids multiple extras, you are somehow depriving them of a good life. Let’s debunk that right now. Preschool-aged children don’t need these activities unless you do; meaning, if you use them as supplemental daycare or as a means of meeting new families, then there’s more value. But given the high cost of daycare, which I assume is non-negotiable, you have every right to be critical of expenses incurred before your children are old enough to develop a genuine, informed interest in something. We’re only starting to really understand what our older daughter loves to do, and she’s about to turn 8.

When your kids start to show glimmers of interest in an activity, test the waters before making a major financial commitment. Your city or town might offer a weekend-long sports clinic or one-day art camp over a holiday break. Try those out before you sign your life away, and most importantly, don’t let the other parents get to you. It’s a madhouse out there.

While we’re focusing directly on kids, college is the number one investment my clients want to make for them. There’s little doubt that helping them fund all or a portion of their education is a beautiful gift that will jumpstart their careers. According to a study by the Center on Education and the Workforce, individuals with a bachelor’s degree earn 84% more than those with a high school diploma and 31% more than those with an associate's degree. But in many respects, I’d caution that it’s more complicated to identify appropriate college savings goals now than ever before.

We don’t know what college will look like for our kids. Salary statistics don’t solve variables like the future cost of attendance or what will make graduates competitive in the labor environment ten plus years from now. Already, many are beginning to question the specific return on their investment into certain college programs. I can only imagine that critical lens sharpening in the coming years. Keep this in mind when you place college savings on your priority list.

To me, the most pressing issue here is work. If you or your partner’s job poses a physical health risk, then it might not be suitable or safe for long-term success. The best investment you can make for your kids, especially when they’re young, is your own health and happiness. You’ve heard it before, but you need to put on your own oxygen mask first to enable your best parenting. I would highly prioritize the path towards a more sustainable career. That could involve saving extra cash now in case he needs to accept a lower starting salary elsewhere, or seeking additional training or education to pivot and grow in a new field. Either way, the short-term discomfort and sacrifice have a good chance of paying off, so long as you’re both aligned on the reasons you’re making the change and are able to see the greater good here. Truly, what your kids need more than any music class or dance lesson is to know their parents are happy and healthy. They might not always express that or understand that, but you both do.

And finally, on health. My top priority has always been to make sure that, god forbid anything ever happens to me or Heather, the family will be financially stable. It’s the single greatest thing you can do for your family as a whole. Make sure you have not only adequate life and disability insurance but also your basic estate planning documents (wills, health care proxies, powers of attorney) in place. The rest won’t matter if these protections for your kids aren’t there in a worst-case scenario.

Of course, there’s not one right answer, especially when kids are involved and their own personal needs are so very different. But beyond charting the roadmap for your family’s competing priorities, just remember to keep perspective. You’re doing a great job by thinking about these things at all.

Send us your love and money questions for the next Q&A: [email protected].

OUR PICKS

Doug’s:

• A Professional Pumpkin Carver Spills His Guts - New York Times

• Don’t buy a home as an investment, says CFP: It’s just a ‘roof over your head - CNBC

Heather’s:

• Years After Our Divorce, I Helped My Ex-Husband Die. Here's What I Learned About Love. - HuffPost

• The subprime attention bubble - Hot Takes by Adam Singer

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