I’m not familiar with the theory behind the time value of money to appraise it, but it looks to me like your calculation here has taken my per parent figure and come out with a per couple figure, which (I’m sure unintentionally) makes it look at first read like my estimate is <50% of the true cost). But the figure of £4700 per couple is not wildly different from £4000 per couple per annum, given the uncertainty bounds I’d put on it.
No, sorry: I took the middle value of your £150-£200,000 estimate (£175,000) then divided this figure by two and used one of the many amortization schedule calculators found online to reach the £4700 figure, assuming a 5% interest rate and 50 annual periods. So £4700 is what each parent would need to pay at the end of each year, over the following 50 years, to cover the costs of having the child. (This assumes £175,000 is the present-value cost of parenthood, rather than the nominal cost.)
I have nothing to add to your comments about Brian’s estimates, and I agree with much of what you write. I relied on those estimates because I knew of no better ones. I do however think that if you believe his calculations are inflated you should, if possible, use figures that match your own estimates, rather than no estimates at all. But I grant that this may be quite complicated, since the opportunity costs of parenting may be highly sensitive to factors that vary significantly among different people, as Brian himself acknowledges in his comment.
Bernadette makes some good criticisms, and I’ve updated my piece in response. I now put the opportunity-cost figure around $100K of present value, which seems low but not obviously too low if much of the parenting time is not “work.” I also changed the opportunity cost from being about extra income to being about how much you value what you would have been doing instead.
Individual differences seem big here. While there are some people like Bernadette and Julia who give extensive thought to this issue, there are others who don’t actually care about kids as much but just go along with social custom, spousal pressure, or the results of carelessness with birth control. It’s this latter group that my piece is mainly intended to speak to. I don’t know the relative proportions of different types of people in the population.
Thanks for the reply. You write:
No, sorry: I took the middle value of your £150-£200,000 estimate (£175,000) then divided this figure by two and used one of the many amortization schedule calculators found online to reach the £4700 figure, assuming a 5% interest rate and 50 annual periods. So £4700 is what each parent would need to pay at the end of each year, over the following 50 years, to cover the costs of having the child. (This assumes £175,000 is the present-value cost of parenthood, rather than the nominal cost.)
I have nothing to add to your comments about Brian’s estimates, and I agree with much of what you write. I relied on those estimates because I knew of no better ones. I do however think that if you believe his calculations are inflated you should, if possible, use figures that match your own estimates, rather than no estimates at all. But I grant that this may be quite complicated, since the opportunity costs of parenting may be highly sensitive to factors that vary significantly among different people, as Brian himself acknowledges in his comment.
Bernadette makes some good criticisms, and I’ve updated my piece in response. I now put the opportunity-cost figure around $100K of present value, which seems low but not obviously too low if much of the parenting time is not “work.” I also changed the opportunity cost from being about extra income to being about how much you value what you would have been doing instead.
Individual differences seem big here. While there are some people like Bernadette and Julia who give extensive thought to this issue, there are others who don’t actually care about kids as much but just go along with social custom, spousal pressure, or the results of carelessness with birth control. It’s this latter group that my piece is mainly intended to speak to. I don’t know the relative proportions of different types of people in the population.