$11,400 Is the Combined Income You Need Before Having Your First Child!
Aren’t babies the cutest?
Maybe except when they’re crying…
Having a child generally follows quite closely after a couple’s marriage, unless they planned not to have children.
But with the people around me finding out that they will soon have a new addition to their family, it got me thinking about the finances.
Let’s face it, raising a child in Singapore is not cheap and I personally feel it’s important to achieve a certain income level before I’ll have my first child in the future.
Hang on! Before you guys start chiding me for saying something like this, I get you!
Having a child inadvertently translates into making sacrifices, whether it’s financially or sleeping lesser…
As a parent, you may also agree that your lifestyle changes and lowering of budgets are worth it as the joy of raising a child cannot be measured in a financial sense.
Cheesy but hey, have you played with a happy baby?
But since many of us strive to achieve financial independence, wouldn’t having a child put an abrupt halt to our goals if it was unplanned or unprepared for?
Disclaimer: Your mileage will definitely vary!
TL;DR: You’ll Need a Combined Income of $11,400 Before Having Your First Child
|50-30-20 Salary Allocation Rule||Married Couple|
(Without Factoring in First Child's Expenses)
(After Factoring in First Child's Expenses)
|50% - Combined Expenses||$4,427||plus Average of $1,237.42 per month (for expenses over the first 3 years||equals $5,664.42|
|30% - Combined Investments||$2,656.20||$3,398.65|
|20% - Combined Savings||$1,770.80||$2,265.77|
|Combined Monthly Income||$8,854||$11,328.84|
Bear in mind that the calculations are made based on the idea that you want to maintain your existing lifestyle and financial situation.
Which means you don’t have to cut down on your budget for all the things you enjoy in life or even dip into your savings.
Before we jump into the calculations, I’m writing this article with the following goals in mind:
- Maintain the 50-30-20 salary allocation rule
- Avoid dipping into emergency funds and existing savings
- Maintain current lifestyle standards
- Maintain retirement goals
- Maintain financial contribution to parents
Sounds like Mission Impossible all of a sudden, doesn’t it?
Understanding Your Baseline Household Expenses
Since we are trying to derive the ideal combined income and maintain the 50-30-20 allocation rule, let’s take a look at your baseline household expenses before having a child.
Don’t roll your eyes at me, I know there are just so many variables here.
Household Expenses without Socialising & After Work Activities
To make things easier, we’re going to borrow the previous calculation for a family’s household expenses, without going out apart from heading to and from work.
You’ll notice that there’s a tiny category for child’s expenses as the scenario we took on was for a married couple with a child in primary school staying in a 3-room flat.
Furthermore, the calculations don’t include common expenses associated with going out for your basic social needs.
Now, let’s add on other expenses commonly associated with our social needs.
|Expenses||Amount Per Month|
|Housing Loan Instalment||$1,361|
|Service & Conservancy Charges||$48|
|TV / Entertainment Subscription||$10|
|Home & Personal Care||$100|
|Contribution to Parents||$800|
Household Expenses – Eating Out
Even though it may be cheaper and healthier to cook your own meals, unfortunately, most of us are so caught up with work and we won’t even have time to cook.
Given that the initial calculation has already factored in $500 for groceries, we’ll add on $300 more to the food category for a mixture of meals at hawker centres and restaurants.
Household Expenses – Entertainment
Humans are essentially still social beings, so you’ll definitely be going for a movie or museum visit or other forms of entertainment that requires ka-ching.
Adding on $50 a month should be more than enough to cover the latest blockbusters or exhibition.
Pro-tip: You may be able to keep this category down if you seek out the free things to do in Singapore!
Household Expenses – Clothing
Even if shopping ain’t your favourite activity, I’m sure you’ll still need to purchase clothing and shoes every so often to replace old ones.
Since everyone has different shopping patterns, let’s average it to $100 per month for your apparel and footwear needs.
Household Expenses – Vacation
This expense category is probably the hardest to generalise since we all have different preferences and travelling style.
But suppose you and your spouse spend a total of $3,600 per year for vacations, that should cover you for three short trips or one long trip each year.
Even though vacation expenses are usually one-time or upfront, for an easier calculation, we’ll average it out to $300 per month.
Checkpoint: Combined Income Without Factoring in Child’s Expenses
Now that we have a figure for your expenses of $4,427 for the 50-30-20 salary allocation rule, it brings us to a combined income of $8,854.
Assuming that both of you are drawing the same salary, you and your spouse will be earning $4,427 each.
Coincidentally, it’s quite close to the Median Gross Monthly Income of $4,563 in Singapore!
How Much Should We Factor in for a Child’s Expenses?
So far so good?
Now, we all know that raising a child in Singapore is an expensive affair…
But did you know it takes at least $285,468 to support them until they graduate from university at approximately age 23?
Yea, that’s right!
|Pregnancy & Child Birth||$13,006|
Sure, you don’t have to fork out the whole sum right away since it spans over 20 years.
Average Expenses Over 20+ Years
If you just took a quick average, it’s $11,894.50 per year over the course of 24 years, including your pregnancy.
Yup, that means you’re spending an average of $916.67 more each month.
But simply taking the average over 24 years doesn’t seem like a good representation, right?
I mean, there are major upfront costs during the first few years, such as your pre-natal packages and ultrasounds, the cost of delivery and the ideal nursery to welcome your child.
Average Expenses Over the First 3 Years
Since that’s the case, let’s narrow it down to the expenses for the first three years.
|Expenses||Amount Spent over 40 weeks|
Over a short period of 9-10 months, your expenses related to your pregnancy and childbirth will total up to approximately $13,006.
Some major expenses during this period include your pre-natal package and classes, blood tests, ultrasounds, supplements and the cost of delivery.
|Expenses||Amount Spent over 2 years|
|Stroller & Carrier||$1,130|
|Infant Care & Child Care||$15,600|
After which, you’ll spend approximately $31,541 on anything and everything your infant needs within a span of two years.
A large portion of this figure is attributed to post-natal care, your baby’s feeding needs, and infant care and child care, amongst other necessities.
Your total expenses over the first three years? Approximately $44,547!
Which means it’s an average of $14,849 per year or $1,237.42 per month.
So, How Much Do We Need to Earn to Factor in a Child’s Expenses?
Remember the baseline combined expenses we’ve calculated above?
Combining your existing monthly expenses of $4,427 with the child’s expenses of $1,237.42, your monthly expenses will now total up to $5,664.42.
Bringing back our 50-30-20 salary allocation, you’ll need a combined income of at least $11,328.84 before considering having your first child and be able to maintain the same lifestyle.