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Mother at 28 or 36 – How will this impact your finances?

For a lot of young Indian urban working women, motherhood is no more a simple decision. The question often arises, that does it make sense to become a mother in their 20s or delay it to their 30s when they are more likely to be financially stable?

For a lot of young Indian urban working women, motherhood is no more a simple decision. The question often arises, that does it make sense to become a mother in their 20s or delay it to their 30s when they are more likely to be financially stable? 

Child-costs

Raising a child costs a lot – be it for education, healthcare, food, clothing or entertainment. In the initial four years, medical costs soak up a higher component of overall costs, while the education costs are higher for children in their late teens. Entertainment costs also increases with age, along with improvement in life style. 

In the past, inflation for education and medical-related costs has been upwards of 10 percent every year. From this perspective, having kids early could mean tackling expenses beforehand and walking ahead of inflation. Moreover, having kids later in life can increase the cost of giving birth – due to health-related challenges. As we will see, there are advantages and disadvantages to both options. What you need is awareness of the impact, no matter what you choose to do.

Saving Patterns

Couples having kids early in life seem to steer clear of unnecessary spending. Young parents tend to become focused towards taking care of their kids. 

However, couples in their 20s tend to earn lesser than those in their 30s. At 30s, they would be relatively well-off and settled in their career to afford child-related expenses. Higher household income also allows greater flexibility. 

Generally speaking, couples having kids later in life are likely to fast-track their financial goals and build a reasonable retirement pot.  

Let’s take an example. Parents in the 20s are the ‘Early Birds’ and those in the 30s - the ‘Late Bloomers. Both households start with annual income of Rs 5 lakh, when the woman is 23 years. And it keeps growing at six percent per annum till she turns 65 years.  Each household manages to save 20 percent of their income every year; however during the vital stages of parenthood (0-21 years) and during the initial years they save only five percent of their income. While ‘Early Birds’ have their first kid at 28, late bloomers have them at 36. 

Our number crunching shows that Late Bloomers manage to have a larger retirement pot of Rs 6.5 crore as against Rs 6.1 crore for Early Birds or 5 percent more. If both the couples don’t save anything during parenthood (0-21 years) (instead of five percent saving of income), the gap widens to 17 percent. Since the Late Bloomers started saving early, the power of compounding has helped them stay ahead. A 10 percent annual return has been assumed for both the investment portfolios. 

In short, having kids later in life helps your retirement and other financial goals. 


Sandwich Generation

Having kids later in life could mean simultaneously supporting both, children and ageing parents, financially. It could dent your ability to save. Younger parents are at an advantage here as they get the opportunity to recoup their finances once the child graduates. They could look forward to building an income stream in their 50s for the next 10-15 years and boost their retirement kitty. 

First of all, ensure you have a stable career with good disposable income. Build an emergency fund to take care of contingencies and keep saving for retirement and other financial goals. Prudent management of time and finances could help you cope with the dual financially responsibilities of a Sandwich Generation. 

Things to do before becoming a Parent

First of all, ensure you have a stable career with good disposable income. Build an emergency fund to take care of contingencies and keep saving for retirement and other financial goals. Prudent management of time and finances could help you cope with the dual financially responsibilities of a Sandwich Generation. 

In a Nutshell

It’s a draw. Becoming a parent early or later in life can sometimes be a choice and sometimes not. Both come with benefits as well as challenges. Be prepared financially for either. Moreover, look beyond the spreadsheet – by referring to both your heart and wallet while taking the mother of all decisions.  

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