@Maya54, Thanks for clarifying. I missed that. Maybe they’re paying for the kids to have a ready group of friends? I do know a bunch of parents here who used a daycare center for that reason even though they said they could afford other options.
How will the kids adjust to a much less spendy lifestyle, since their entry level jobs will likely earn much less than what their parents earn? Or deal with the shock of finding out that the first time they will face a price limit on their choices is college?
@ucbalumnus I don’t know about other people’s kids but it was a real shock to my D1 when she got off the campus dining plan and suddenly has to budget for groceries. I think she had no idea how expensive food really is!
“How will the kids adjust to a much less spendy lifestyle, since their entry level jobs will likely earn much less than what their parents earn? Or deal with the shock of finding out that the first time they will face a price limit on their choices is college?”
Many don’t. Among the more wealthy families I know, 1) family has connections for cushy jobs in higher paying industries and/or 2) family continues to support young adult children by supplementing their incomes.
We live in a very upscale area (thanks to the downmarket in late '90s). I was surprised to find that the ostentatious show of wealth was often smoke and mirrors. Bankruptcy, divorces & suicides broke that facade.
Goes to show you never know what other people are dealing with. Live your best life with the resources you have. As mentioned upthread, media gives an image of what rich looks like. Reality TV isn’t really reality!
Yeah, D was shocked by the price of groceries when she started buying it on a regular basis and wanted a steak but thought the cheapest one looked best for her pocketbook. I told her she would have to chew it a very long while.
We were able to economize when I stayed home with our kids by trimming our budget as much as we could. We ate nearly all meals at home and H packed peanut butter sandwiches for years. The public school lunch was quite reasonable, so we had our kids buy it and eat it daily. We bought annual passes for the zoo, aquarium and museum. We did a lot of free or minimally priced things. We were middle class for the first two decades of our marriage.
We are not and unlikely to ever be top 1% or anywhere near but are somewhere in top 5-20% and feel very fortunate. We are and feel rich, tho we only have one house that we live in.
Having enough assets makes us more comfortable with supporting our loved one who has a chronic health condition which has made it impossible for her to ever hold a full-time job, as well as paying for all needed medical care for her and us.
“Out of curiosity… anyone else here stay home to watch their own kids before K?”
I was a SAHM (still am) all except for when my oldest was 3 months to about 3 years old, and I was part-time for that. I was in grad school when she was born and then taught adjunct after that. I quit because daycare cost more than I made (I didn’t want to work full time and we could afford for me not to). My being home allowed hubby to go much further in his career than he would have otherwise as he regularly travels overseas for 2 weeks at a time about 3-4 times a year.
I was home 3 days a week. We had an Au Pair who loved our deal which was that even though she was supposed to work 40 hours a week in no more than 10 hour shifts she worked 2 11.5 hour shifts during the work week and one 4-5 hour shift every other weekend 3-4 hours with the kids asleep)While this arrangement was technically not permitted it was negotiated by our first au pair ( I was going into work on the late side because it was easier to go on late…many people do…then to get home early). She loved it and was the one to do much of the work in getting our subsequent au pairs. They all jumped at this arrangement,especially as the kids grew older and were in school so that unless they were sick she really only was working less than 2 days during the week for 4-5 hours plus the every other weekend shift.
I stayed home with D1 for her first 15 months before I started nursing school (part time). Stayed home with D2 for 9 months before finishing nursing school. Even when I worked full time, that’s 3 twelve hour shifts, so I was at home with them a lot. After a couple of years on the job, I went to part time (2 days a week), then eventually, “PRN” (just whenever I fee like working).
So even though I’ve worked on and off throughout my kids’ lives, I was home with them a great deal. When I wasn’t home, we had a nanny (but not a live-in) who was young and lots of fun, who loved them, and whom they adored.
“Where does the money go? How is there not a substantial amount free to go to savings every month.”
I’m not 1% but here you go;
Federal & State income taxes
Mortgage
Property taxes
Homeowners insurance
401k contributions
529 college savings plan (x 2)
Health insurance
Dental insurance
Vision insurance
Synagogue annual fees
Jewish educational classes / Hebrew lessons.
Bnai Mitzvah fees/service/reception
Religious Summer camps
Orthodontics (x 2)
Charitable contributions
Food and clothing for family of 4
Gas & electricity
Car payments
Auto insurance
Gas for cars
Earthquake insurance
Water (very, very expensive)
Kids sports (monthly dues)
Lessons for sports
Home maintenance costs
And the occasional entertainment and travel expenses.
I’m sure I have forgotten a lot of expenses but you get the point…
“How will the kids adjust to a much less spendy lifestyle, since their entry level jobs will likely earn much less than what their parents earn? Or deal with the shock of finding out that the first time they will face a price limit on their choices is college?”
My guess…Kids who have parents who value independence over lavish lifestyle will flourish. And it won’t be a shock to the kids–it’ll be a celebration to be on their own… Their independence will be celebrated in many ways especially by their parents.
@gallentjill The money goes because as you add income you increase the spending. Most people move to a big house ( very expensive-mortgage, taxes, upkeep, maintenance, and many other expenses-lawn care and on and on). Then once you are in an expensive area if you have kids the activities change. So a kid in a middle class area plays recreational soccer, well a kid in a high income area, likely plays club soccer ( and might even have private lessons or a summer camp-big$$). Kids in travel clubs travel on planes on weekends to play their sports. Spending on kids activities is a big chunk. So is private schooling if you go that route. Additionally you pay high taxes (when you are in the highest income bracket all sorts of taxes kick in). Plus you have all the rest cited by SoCaldad2002. It pretty much is, high income means you will end up bigger retirement savings, a more expensive house and be able to pay for private schools ( K-College). Beyond that is anyone’s game. So for the top .01% maybe those expenses are fine. But for someone making top 1% the money is going to go.
Growing up, going out for pizza or to McDonalds was a big deal for our familyl! We just spent $200 total on two meals Saturday night and Sunday lunch. That kind of spending quickly adds up. My siblings family spends tens of thousands on games, theater and concerts. I wouldn’t spend money on that, but, they have money and that is their spending habit.
For other people it might be watches, or cars or really anything at all. So to answer you question, a lot of it goes on entertainment, better/more expensive housing, education and travel. Some definitely goes to retirement savings but someone making $400K a year, for example, isn’t saving the bulk for retirement. Most people want to enjoy their life and spending is a form of entertainment. Yes, there are some people who want to impress others. But the people we know are mostly top 10% and very few buy status symbol type things. More spend money on experiences. Their teenage kids go to concerts which cost $200 and the parents travel to exotic places and do amazing things. Only one has a car collection. Many do extreme sports or travel to unusual places. It’s like they are trying to outlive each other rather than outspend each other but they end up doing both.
The strange thing is, most people seem to follow this path once they have money. Most want to travel, spend money on their kids, buy a nice house in a great place and just enjoy their life. I don’t think there is anything wrong with it at all.
I think spending money is the easy part—it’s the saving that challenges most folks.
For me, the best thing to be more mindful was to save every receipt and record every expenditure and review it. Only when you KNOW where funds are spent & amounts can you make informed choices about any adjustments that may be helpful.
Alimony and child support—supporting multiple households can really add up too.
Retirement was our top priority from day one after college graduation, and we saved our way to the top. #376 is us. We were well on our way to early retirement, but a surprise child just as we were turning 40 changed our timeframe. The baby math was such that, most likely, we wouldn’t be in his life as long as our parents have been in ours, and we wanted to prepare him to launch with no education debt and ensure he would not worry about us financially in our old age. We had to reassess our options and rework our retirement plan.
We used licensed daycare those first two years, but I hated the drop off/pickup, and I couldn’t give to my job anywhere near what I had beforehand. We lived in the Boston area, DH worked in NYC, and I had a horrendous commute and was basically an exhausted single mom during the week. Though we loved our beautiful home and (previously) easy, comfortable life, I found the new setup untenable, so we moved ourselves to an area of the country where the airport almost never closes (DH was a consultant, Logan was a nightmare) and the COL was low. Because we were already well off, we were able to move where we had better control over our lives and finances and realize better prospects for wealth over time by saving the COL difference between the old and new location. When DS was two, I gave up a lucrative income and stayed home with him until the middle of first grade. That was one of the best times of my life even though I was concerned about what the five-year hiatus might do to my income potential. Fortunately, I was able to get back into the game and back to my salary potential within a few years.
After paying for an expensive boarding school for high school, our son chose a service academy for college, so he was off the payroll early. By that time, we had 1-5% income and had not had any debt for several years. We could have continued to rake in that money indefinitely, but we had long ago decided “how much is enough?” and had prioritized time, experiences, family, and other pursuits over paychecks. When we met our retirement goals, we left our corporate jobs. Barring the apocalypse, we have more than enough to fund the modest lifestyle we currently enjoy. By this definition, we are rich.
But, we have considered ourselves rich since the day we started our first jobs, and we have taught our son that he is rich simply because he is healthy, loved, and educated. He has watched us meet our financial objectives and will work his own plan toward financial independence, deciding for himself how much is enough with no guarantee of much inheritance; he knows we plan to die with a dollar or as close to as we can. He also knows the difference between income and wealth and understands that just because he is in a position to consider these things and work a likely plan to financial security, he is already rich.
If you have income that puts you in the 1% or 5% or 10% or 20%, you are rich and need to stop quibbling over where you (must) live, where all that money is going, and why what you are left with makes you “feel” less than rich. You have resources, you have disposable income, you have choices. Rich IS a number, and I’ll go with those given in this thread for each of the top thresholds. If you are at or above those lofty thresholds, you can make choices that will build wealth and eventually fix your “feelings.” You are fortunate beyond words.
Hear, hear!
I suppose there are just differences in childcare facilities. The ones that I have experience with, that my grandchildren attend/have attended, are ~$2300/month for infants and ~1800 for toddlers. Not everyone can afford that, especially if they have more than one child of pre-school age. Two grandchildren attended Montessori based childcare centers that were wonderful. Two others attended a center that was a chain and with excellent adult to child ratios, better than the regulated numbers. Full-time cooking staff, all meals included. No late fees for pick-up. Twice a month evening hours included for parent nights out. I acknowledge that when one or both parents are in professional careers and can determine their own hours, it is easier to leave when you need to do so. Field trips, special events in the school for the older kids, concerts at the end of the year, socialization with a diverse group of other kids.
A nanny can be great if you get a good one but I am aware of too many instances where they aren’t great. I see them on a daily basis, walking along a busy road looking at their cell phone while toddlers follow behind them unsupervised. I know several young women who have been terrific nannies but I think it’s difficult to find a great one that will gel with your family, your schedule, your rules and expectations. Not to mention that not everyone wants a stranger moving into their home. Here you would not be able to legally ask a nanny to have kids bathed, fed, and also cook dinner for late-arriving parents. There are strict limitations on number of hours worked and the type of work that you can ask them to do. Everyone has to make a decision that works best for them. I should correct my earlier statement about a nanny being the least expensive childcare option, that isn’t actually the case. Home daycares are the least expensive and many are not regulated, and thus have far too many kids, but they are cheaper.
I was fortunate to be at home with my Ds and I wouldn’t change that for anything. Also fortunate that I lived in an area where most families could afford to have one parent stay at home and we have a longtime circle of friends from those years. That is far less common today.
We’ve been very fortunate in life. Success achieved beyond our wildest dreams. We started off married life with a grand total of $100 in the bank. We’ve been able to do so much for our children, their spouses and our grandchildren; our extended families; our communities; our favorite charitable causes. We are wealthy and would never complain about not feeling it.
Absolutely nothing wrong with it! If those same families complain that low income kids are getting financial aid, then there is something wrong. But I am all in favor of people enjoying the money they earn and spending it as they choose. My question is whether the people who live as you describe feel rich because I imagine I would if I had that lifestyle.
This is very true. When I was a kid the afterschool activity was playing in the yards of all the other neighborhood kids. We would ride our bikes up and down the street and eventually wander home for dinner. I assumed it would be the same for my kids. But there are NO kids out on the streets or running from yard to yard. All the kids are scheduled nearly 7 days a week in activities that mostly cost money. It can be very isolating for the kids of families who don’t have the funds to participate.
I mentioned that in a post upthread…there is a tendency to start to see things that are objectively luxeries as necessities. I am not immune from that at all. Giving my kids ballet or piano lessons doesn’t really feel like a luxery. It seems different somehow from buying a designer handbag, but of course it really is a luxery.
I could barely take care of one infant by myself, so I couldn’t see how someone could take care of 3-5 infants. I also didn’t want to have to take my kid out in the cold every morning. I opted for home care for my kids. I was lucky that I only had 3 nannies while my kids were growing up.
Being more than a little paranoid, I chose to trust my kid to a licensed daycare with childproof facilities rather than a single stranger, even though we could afford both.
I was home for three years. Went back FT; S1 went to preschool in the am and to licensed family daycare in the afternoon. S2 was at the family daycare all day til he started the split days. (Both guys napped til 4yo preK, which was part of why we did contortions.) They were FT at preschool by preK. It was an independent Jewish preschool which was a great experience for all of us.
DH got them ready and dropped them off around 8:30 am; I went to work early and got out early to avoid the worst of DC rush hour. Guys and I were home by 4-4:30. DH worked late to compensate for getting in to work at 9:30-10 am.
We were using flex dollars to help pay for childcare, so everything had to be above board. DH also had professional licensing/clearances to consider. Yes, he was asked in security clearances if we had paid household help/yard help/at-home childcare, and he was specifically asked if we paid SS/fed returns.
Nannies around here come via agencies, which had standards about room/bath accommodations for a nanny, time off, etc. Live-out sitters wanted to be paid under the table.
I went PT a couple years later so I could be involved in school activities, and then in and out of the workforce after that as health issues permitted. Pretty much everything I made went to daycare, but it kept my skills sharp and enabled me to work professionally on a PT basis later (when I needed to do so for unrelated-to-kids reasons).
We did what made sense for us, as we all do for our own families.