Mid 30s with some big childcare costs on the horizon

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delta_bravo

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Personal details

Age: 33
Spouse’s/Partner's age: 34

Number and age of children: 1, under year old


Income and expenditure
Annual gross income from employment or profession: 60-65k depending on bonuses
Annual gross income of spouse: 65k

Monthly take-home pay: approx €2600, spouse €2800. From my pay I am covering health insurance bik, maxing out my pension and a 5% net deduction for employee share scheme

Type of employment: Employed in Tech Company, Spouse working in Public service

In general are you:
We are currently saving more than we earn but anticipate some significant changes as our child will go into childcare in autumn costing around €1000 per month


Summary of Assets and Liabilities
Family home worth approx €700k, remaining mortgage 380k
Cash of €20k
Defined Contribution pension fund: €75k. Spouse has a very small private pension (<€10k) and is on the public service scheme but only around 4 years. I am maxing out my AVCs, Spouse has no AVC
Company shares : €0 (all sold)
Investments: Investment account worth approx €25k

Family home mortgage information
Lender: Avant
Interest rate: 2.25%
If fixed, what is the term remaining of the fixed rate? 6 years

Other borrowings – car loans/personal loans etc

No other debts, credit cards all paid in full

Other savings and investments:

Do you have a pension scheme?

Yes, as mentioned mine is valued around €75k defined contribution. Maxing out AVCs. Spouse has a very small private pension but is on the public service pension scheme (the new one)

Do you own any investment or other property?

No, bar an investment account with Zurich which has around €25k in it. Tracking S&P 500

Other information which might be relevant

Life insurance:

Mortgage protection costing around 70p/m (due to health issues, unlikely to be able to move)

Death in service through work for me is 4x salary and and I think 2x for my spouse
No other life policies

What specific question do you have or what issues are of concern to you?

In general I think we are doing ok as we are now. However I am concerned a bit around my spouses pension that they aren't paying in an avc but I think the public service scheme is probably going to end up worth more than mine based on my calculations.

My main concern is upcoming expenses around children. Our child will be entering childcare later this year costing €1000 per month, this will be via a childminder so I don't think we will get any taxback reliefs. We cannot find a creche place currently. Potentially we might have another child in the next 12-18 months. Then on top of that we most likely will be privately educating our child from primary age (there are some personal reasons/advantages to us doing this) so we essentially need to continue budgeting that €1000 per month for most of our child's education years. I feel this is going to have a big impact on our cashflow as its essentially a 2nd mortgage we will be paying. This is the main reason I am investing money is to try help cover this but looking for any advice or suggestions on how we're doing. I worry that childcare costs are going to drain out other ambitions we might have such as doing house improvements, holidays, new car etc down the line
 
I think in general you have a good set of finances for your age and income level. With mortgage and childcare these are your peak expenditure years but most likely your incomes will rise as well over the next decade or so.

delta_bravo said:
we most likely will be privately educating our child from primary age (there are some personal reasons/advantages to us doing this) so we essentially need to continue budgeting that €1000 per month for most of our child's education years.
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I could write pages on this but I don’t think the benefits of fees are worth the costs. At primary level it’s even more the case. I’ve had kids in three different primary schools and what matters varies (and matters) the most is the teacher. And quite honestly teacher quality is the same if you pay fees or not.

As you say €1,000 a month in taxed income is a lot of money and will materially impact your lifestyle. If at all possible I would reconsider this plan.
 
I think budgeting €1000 euros per children in private secondary level education is actually low. I have 2 teenagers. I guesstimate that the costs directly linked to them (school, activities, health, clothing...) is about €500 per month each. I am not taking into account food and accommodation or anything we actually do as a family (trips, social outings...). We are fairly reasonable in what we indulge our kids and they are really not demanding and easily satisfied in terms of material goods. Your income will increase in the next 10 years. At the same time, one of you might want or have to reduce hours/take some time off to accommodate family life
 
it is an expensive time of life for you at this stage and you may have multiple children and one parent may reduce hours/become a full time parent for all sorts of reasons.

I would prioritise, mortgage, childcare and only then consider what is left for maxing out pensions. Your other spending is probably not discretionary, so the only expense to have wiggle room is pension payments.

As you earn more and have some more disposable income then you can go back to the pension payments. I suppose you can consider educating your children privately will give them an advantage to earn more as adults and thus support you better in your old age.
 
Clamball said:
I suppose you can consider educating your children privately will give them an advantage to earn more as adults and thus support you better in your old age.
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I could write paragraphs but there is no evidence it confers any earnings advantage over a lifetime.

I’m not saying never do it. My daughter will probably go to a fee-paying school for various reasons but financially I think she’d be better off in forty years if I put the fees in an ETF.
 
Clamball said:
it is an expensive time of life for you at this stage and you may have multiple children and one parent may reduce hours/become a full time parent for all sorts of reasons.

I would prioritise, mortgage, childcare and only then consider what is left for maxing out pensions. Your other spending is probably not discretionary, so the only expense to have wiggle room is pension payments.

As you earn more and have some more disposable income then you can go back to the pension payments. I suppose you can consider educating your children privately will give them an advantage to earn more as adults and thus support you better in your old age.
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OP would be wise to not depend on his grown children for support in the decades ahead as who knows what financial responsibilities they will have.
Not sure if the 1k per month would cover private school AND after school costs being honest.. One payment wont replace the other and a minder will want to be reimburse for travelling to drop off/collect child, unless the school has an afterschool program. If child is in private school there may also be an expectation to take part in aftercschool activities and excursions which could ramp up costs pretty quickly.

Woild a house move be considered in few years to lower mortgage or is that a non runner? Also is it necessary to max out AVCs right now?
 
Thanks all,

Just to give a little more context on the private primary education. The cost does have some benefits in that it would include after school care for the child. So I guess I have to balance potential savings there of not having after school care. Probably still doesn't make financial sense. I'll see what I can do!

Thanks for the context regarding cost of secondary etc. Selling house isn't an option as we're very happy. I hadn't really thought about the avcs to be honest. I just assumed it was the right thing to do but perhaps a reduction to free up some cash flow is no harm
 
delta_bravo said:
Thanks all,

Just to give a little more context on the private primary education. The cost does have some benefits in that it would include after school care for the child. So I guess I have to balance potential savings there of not having after school care. Probably still doesn't make financial sense. I'll see what I can do!

Thanks for the context regarding cost of secondary etc. Selling house isn't an option as we're very happy. I hadn't really thought about the avcs to be honest. I just assumed it was the right thing to do but perhaps a reduction to free up some cash flow is no harm
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Just on the after school care, what would you plan to do over summer, easter, Christmas, half term etc?
 
Blackrock1 said:
Just on the after school care, what would you plan to do over summer, easter, Christmas, half term etc?
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My spouse works in the education sector so will have matching holidays. Im sure I should budget for inevitable summer camps etc but no particular care should be required which is a bonus
 
While it is def appropriate to plan ahead for various expenses, (and certainly prudent to plan ahead for childcare), you still have a few years to decide on schooling for your existing and future children.

Many public primary schools offer afterschool places on site or have services offering it who collect from school, so I wouldn't be making a decision on availability of afterschool alone. However if the school you are considering is easy to access (like the closest one, at the end of your street type of thing), you get a staff discount if it is where your spouse works or offers something very specific (like one of the language schools) then perhaps that makes sense.

Consider that you might also reassess your childcare model down the line, eg you might start with a childminder or creche for the early years when full day care is required, then move to something more part time when they are in school, so an au pair or part time childminder might work better, so to pay privately for school to be able to access afterschool seems like a big investment when there are alternatives.

And after school activities get more important as kids get older, and want to do dance, sport etc so you might find that you are getting requests to attend classes outside of the school environment depending on interests. How flexible is the after school in terms of reducing or dropping it down the line or is is wrapped up in fees?

Have you also done the sums on how you would have the cashflow for fees for your desired family size, considering they would likely be attending concurrently? Say 3 kids at 12k is 36k after tax for maybe 5 years. What is the alternative ie public primary and childcare costs that you can flex? What is the opportunity cost of the fees, ie what else would you consider spending on your children to set them up, like another poster mentioned an investment? Then secondary is far more expensive and what about third level?
 
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