Having a child can be a financial mistake, but that’s okay

GOOD financial planning involves saving and investing while minimising expenses. The objective is to build a nice nest egg for peace of mind in one’s retirement years.

Meanwhile, many countries, including Singapore, would like to see the birth rate rise, so the economy has enough young workers and is vibrant.

Amid a fall in the resident total fertility rate per female to a historic low of 0.87 in 2025, Deputy Prime Minister Gan Kim Yong said the country faces an existential challenge. 

However, a financially savvy young adult is probably right to see having children as a costly financial decision, which will set back one’s financial adequacy in retirement.

Direct costs

One, the direct costs for many professionals and executives of raising a child may easily exceed S$500,000. Have two children or more, and this sum could be substantially higher, even if there are economies of scale.

While primary and secondary school fees for locals are low, parents may need to spend a princely sum on enrichment classes. Recurring costs on enrichment activities, pocket money, dining out and so forth could easily be in the region of S$2,000 a month. Add overseas family trips, and the annual expenditure per child may be about S$30,000. 

Certainly, there is room to trim, as some spending on kids is discretionary. Still, with stiff competition for spaces in sought-after courses at institutes of higher learning, and some positive correlation between academic credentials and earnings prospects, parents can hardly be faulted for spending on premium enrichment activities to help their kids.

While cutting overseas holidays is possible, escaping dense Singapore occasionally may do wonders for one’s mental well-being. Moreover, family trips can be precious bonding opportunities.

Realistically, one may need to support a child for possibly over 20 years until he obtains a bachelor’s or master’s degree. And one can easily spend several hundred thousand dollars more should a child pursue further studies overseas. 

Car and home

Two, there can be substantial indirect costs linked to having children.

Perhaps a couple without a car would buy one when the baby arrives. Going out with an infant or toddler can be much more convenient with one’s own car. When children are of school-going age, a family car can be handy to ferry children to school and enrichment activities amid busy schedules.

Buying and maintaining a car in Singapore is costly. The price of a Certificate of Entitlement, which is needed to own and use a car here, came in at S$108,220 for smaller cars in the latest bidding exercise.

In housing, families with children enjoy substantial priority when buying flats from the Housing & Development Board (HDB) at subsidised prices.

Nonetheless, eligible couples without children can generally also easily buy subsidised flats from HDB, including larger units.

As for achieving condo ownership dreams, this can be far costlier for a couple with children than a childless couple; the former may need to buy a three-bedroom unit, whereas the latter could be fine with a two-bedroom unit. 

In a new suburban condo project, a two-bedder unit of around 700 sq ft might cost S$1.5 million, while a three-bedder unit of about 900 sq ft may sell for around S$2 million. A family with two or more children eyeing a four-bedder of about 1,100 sq ft might need to spend S$2.4 million.

Based on a loan-to-value ratio of 75 per cent, buying a S$1.5 million home involves making an equity contribution of S$375,000 and servicing a S$1.125 million loan, while the purchase of a S$2 million home entails higher equity and loan amounts of S$500,000 and S$1.5 million, respectively.

Opportunity costs

Three, while workplaces may be family-friendly, parents with children might nonetheless be confronted with making sacrifices in their careers.

Maybe some couples lack a support network from the extended family, or have a child who requires plenty of their time, or want to be very hands-on in bringing up their child.

When one or more kids arrive, some couples comprising partners who are both in full-time employment may need to make adjustments, with one partner possibly moving into part-time work or even becoming a stay-at-home parent.

Should a professional in his 30s or 40s leave employment for several years or more, a household sees a substantial drop in income for that period of time. Also, the individual could face a tough time in rejoining the profession. 

Indeed, the 30s and 40s are a critical period for many professionals and executives in the climb to reach the top of their careers.

Yet, given the attention required to care for children in their formative years, some professionals and executives with kids may have to forgo opportunities such as an overseas posting or a role that is extremely time-consuming.

In addition, young adults with children to support may find the risks associated with the pursuit of entrepreneurial dreams hard to justify.

AI disruptions

Four, there is undoubtedly tremendous scope for artificial intelligence to raise productivity in workplaces and make lives easier for people. Nevertheless, AI could dent the creation of many entry-level jobs for fresh graduates. It could disrupt numerous white-collar jobs and possibly drive widespread job redundancies among professionals.

In short, many young adults may find it difficult to rely on regular pay cheques to defray the cost of bringing up children.

Sure, as jobs get disrupted, workers can retrain for new roles. However, workers undergoing training may also incur substantial time and financial costs.

My wife and I had our child in our mid-40s. When I turn 60 in a few years, I may still need to support my daughter financially for another five years or more. And I do not expect to receive any financial support from my daughter in my advanced years.

Having a child has affected my retirement financial adequacy. Still, I occasionally wonder if my wife and I should have tried harder to have more than one child.

In the nation’s efforts to boost the birth rate, perhaps even more generous financial incentives will be given to support couples with children. Nonetheless, many couples may still have to make financial sacrifices when they have kids. 

But ultimately, while raising children in Singapore can be costly, there is more to life than dollars and cents. The joys, frustrations and sacrifices associated with having a child can be richly rewarding in unique ways.