When to invest in kids vs build wealth

When we posted the wealth bucket someone told me that I was old fashioned and building wealth can take a different path. Maybe you don’t build wealth in your 20s and 30s, maybe you build it in your 50s. Maybe it’s somewhere in between. Here are some different viewpoints:

The financial analyst view

Financial analysts will tell you that a dollar saved now is worth more in the future — thanks to compound interest! Invest as early as you can in life and it will pay off later. But sometimes this isn’t practical, or we simply don’t think about an alternative investment method when it comes to our kids.

The twenty-something view (aka the fun view)

In your 20s and 30s you might be investing your money into experiences such as travel and having fun (🙋‍♀️). But yes, there is still plenty of time to invest later in life, especially as you earn more.

The working parent view (aka practical view)

While we would probably all love to invest while we’re young it may not be practical. You’re not investing, you’re surviving. You’re making life choices for that moment in time. The cost of child care is real and it can be a struggle for working parents.

Even if it’s not a struggle financially, we often make choices given our limited time. Maybe you choose to spend more time with your kids therefore earning less hence not as much money earned. Or maybe you’re working hard, you’re a mum and have a ton of commitments so you invest more in childcare so that you can get some semblance of “me time” (I know someone that lived in Russia and had three nannies, all called Natasha, who organised themselves to cover pretty much 24hrs when the children were very young).

The long career view

The generations raising kids now are likely to work for the next 30–35 years given changes in working conditions and overall health improvements. So even if you’re investing in other things that build wealth in your younger career years, you have plenty of time to build wealth in your fifties. In my case I had kids in my 40s, which means my husband and I are dipping into the wealth we built up in our 20s and 30s to buy a bigger house, get childcare and possibly pay for our boys education.

The investing in education view

This is a combination of some of the above points but one we think needs noting. There is a lot of research that shows that the first 7 years of a child’s life are the most formative. You can see it as the compound effect of education. If a child starts learning to read at a young age, they can digest more and self-teach and the more they learn the further ahead they get. But this isn’t cheap. In LA private schools, even for a 5 year old are a jaw dropping $40k/year. So this is a real trade off between building wealth and consciously investing in our children: whether it be private schools, extra curricular activities, or developing specific skills.

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Of course there isn’t one right answer. You have to do what’s best for you. There are some very real trade offs but they should be made consciously.