Starting a Family MM

T

tomwa

Registered User
Messages
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Personal details

Your age: 38
Your spouse's age: 28

Number and age of children: None, but planning for next year


Income and expenditure
Annual gross income from employment or profession: PAYE €125,000 and €10k average bonus
Annual gross income of spouse/partner: Self-Employed Contractor (hourly rate) €140,000

We contribute 75% of employment earnings (incl. bonus/exceptional payments) and 100% of rental income to joint account.
Of this we average about 70% of our net contribution to joint on living expenses/transport/utilities/mortgage payments.

Our cash/investments are low currently due to spending €70k on wedding and honeymoon this year.

Summary of Assets and Liabilities
Family home value: €1.45m
Mortgage on family home: €915k
Net equity: €535k

Cash: €20k

Family home mortgage information
Lender AIB
Interest rate 3.3%
Type of interest rate: Green Fixed (A2 BER) to 11/2029

Remaining term: 29 years
Monthly repayment: €4120

Other borrowings – car loans/personal loans etc

None

Pension information

10% contribution with 10% employer match

Value of pension fund: Don't ask... I just started it this year.

Planning to increase to 25% next year and planning to start something for my wife.

Buy to let properties

1st Buy to Let Property value: €325k
1st Buy to let Mortgage: €77k on a 1.1% tracker
Rent: €2.1k/month

2nd Buy to Let Property value: €465k
Mortgage Free
Rent: €2.4k/month

Other savings and investments:

€120k with an insurance based investment product, maturing 2027
€20k in EIIS (1st credit due next year)

Other information which might be relevant

Life insurance:
Two Mortgage Protection policies, one joint, one for just me. Both are for the original mortgage amounts, but we have paid down both mortgages quicker.
I have an income protection policy covering €50k of PAYE income


What specific question do you have or what issues are of concern to you?
Preparing for the expense of starting a family. Not sure sure what to prioritise. Do we minimise tax by maximising our pension contributions or do we focus on building up cash?

Planning to have 4-5 children over the next 10 years. I've based my planning on needing an average extra €6k net per child to cover increased costs.
Am I way off? Nervous that we're trying to build back up emergency fund effectively over what might be the first pregnancy.
Also have to look at covering the loss of income during maternity/paternity leave (Wife being self-employed means just state benefits, I get two weeks full pay + the statutory two weeks)
 
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What is that calculation of 6 k net per child ? Is it a cost per child per year? If so, I am going to say they in fact cost quite a bit more than that, even when childcare is no longer an issue
 
Premos said:
What is that calculation of 6 k net per child ? Is it a cost per child per year? If so, I am going to say they in fact cost quite a bit more than that, even when childcare is no longer an issue
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Yes, I was estimating per child per year excl child benefit. It is very much a number pulled out of the air I have no real basis for it.
Been trying to look at numbers but none of the local childcare places list pricing online, and I'm not even sure what our childcare needs will be.
We have a good amount of flexibility with our working arrangements (I can partially WFH and on flexible hours, Wife chooses her hours and gets higher rates for weekends/unsociable) and might be able to avoid childcare costs 9-5 workers would have no option but to accept.
 
Your biggest expense will probably be the loss of one income or huge expenditure on childcare as your family grows - especially where your wife won't have paid maternity leave from an employer. With every additional child that you have, the complexity, age gaps, and therefore the cost of raising them increases. Three kids is where I see most drop off of parents who can keep working full time in demanding roles. It just becomes too hard to meet all the caring needs even with massive help, paid or unpaid ie with family help. It is probably physically possible, but see if you can talk to people further down the road and how they fared and what advise they might offer. I suspect it is not have less children, but more along the lines of expect one of you to need to massively scale back on work.
 
yes if you are planning 3 kids plus id be taking a big chunk off one of your earnings (most likely your partners as thats how it usually goes)
 
Would focusing on reducing the outgoings be a good aim? Maybe selling one of the buy-to-lets and knocking half off the mortgage?
Our day-to-day/utilities are already cut to the bone unless we want to make compromises to our standard of living.
 
Try to imagine your standard of living if both of you are working opposite hours to avoid childcare and both working during what should be your downtime. It can be and is often done but usually because there is no other option. Weigh that against formal childcare costs.
 
tomwa said:
Yes, I was estimating per child per year excl child benefit. It is very much a number pulled out of the air I have no real basis for it.
Been trying to look at numbers but none of the local childcare places list pricing online, and I'm not even sure what our childcare needs will be.
We have a good amount of flexibility with our working arrangements (I can partially WFH and on flexible hours, Wife chooses her hours and gets higher rates for weekends/unsociable) and might be able to avoid childcare costs 9-5 workers would have no option but to accept.
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Work from home and flexible hours is great once all your kids are in school, but until then it doesn’t really help with childcare costs, most places won’t do much part time care as they have a waiting list for full time. Also a lot of places don’t take babies now due to the extra ratio required. 4-5 kids puts your other half out of proper earning for 6-8 years and/or will cost you 4-5k a month in childcare (in Dublin)Once you have a mix of kids in crèche, school, etc for 5-10 years it gets harder with multiple drop off, pick ups, meaning even with two flexible jobs you’ll likely need childcare ongoing for many years, that’s before they start activities.

Speaking just purely financially planning wise if you are planning 4-5 kids your partner should be looking for a salaried job with good benefits asap.
 
Even at school age childcare is required, either by parents or externally. It is only in the very last years that you could possibly have kids mind themselves. And school is 38 weeks a year, the rest of the year has to be covered. Even with taking opposite holidays (again, not very nice but we did it for a few years), that still does not come close to covering it. Camps offer some coverage but all run at funny times and you are almost guaranteed that your kids will be interested in different things and eventually will only agree to attend certain ones.

I would say do up a spreadsheet for the next 15 years with your potential salaries and income. Add in as each child is planned for the unpaid portion of ML and layer in the potential childcare costs over the subsequent years, whichever way you choose to manage it. That will give you a better view of your family income down the line and will help to inform your strategies.
 
Setforlife said:
Work from home and flexible hours is great once all your kids are in school, but until then it doesn’t really help with childcare costs, most places won’t do much part time care as they have a waiting list for full time. Also a lot of places don’t take babies now due to the extra ratio required. 4-5 kids puts your other half out of proper earning for 6-8 years and/or will cost you 4-5k a month in childcare (in Dublin)Once you have a mix of kids in crèche, school, etc for 5-10 years it gets harder with multiple drop off, pick ups, meaning even with two flexible jobs you’ll likely need childcare ongoing for many years, that’s before they start activities.
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Really €4-5k/month?

Setforlife said:
Speaking just purely financially planning wise if you are planning 4-5 kids your partner should be looking for a salaried job with good benefits asap.
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I've raised that with my OH, she is in a profession where she can walk into a public job for €80-90k or private sector for €110-120k tomorrow. But the private sector jobs tend not to offer any additional benefits (she's never heard of additional maternity over statutory in private sector, public maternity is 26 weeks full basic pay) and she doesn't want to lose the relationships she has with her current customers, where she usually makes 10-20% over freelance market rates on any given day. It might be worth me discussing it with her again, but I'd need to lay out the costs/benefits for her.
 
With 4 to 5 children, 15 years planning will probably not be near enough to cover.
I understand your partner wanting to continue the way she is. However, I would suggest she consider the number of hours she currently works and how you both would make it works.
 
In terms of work, flexibility will be absolutely key. And children are a schok to the system when you need to balance childcare, sleepless nights, sickness and demanding work.
 
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A lot of private companies pay full maternity leave but you mind need to be in for a certain amount of time before having access to it.
 
The biggest thing that jumps out to me. Your two rentals are valued at €790k.
They generate you a blended yield of 6.8 assuming no overheads whatsoever.
You are both higher tax rate payers. Again assuming Zero expenses, you are netting 3.3% on your money.

You can get a 3.3% return risk free by paying down on your mortgage.

Unless one of you is planning to stop working (and therefore become a lower rate tax payer), I can’t see how you don’t sell the two rental properties.

Two working adults with 4-5 kids do not need two rental properties making a lower net yield than they’re paying on their own debt!
 
tomwa said:
Really €4-5k/month?



I've raised that with my OH, she is in a profession where she can walk into a public job for €80-90k or private sector for €110-120k tomorrow. But the private sector jobs tend not to offer any additional benefits (she's never heard of additional maternity over statutory in private sector, public maternity is 26 weeks full basic pay) and she doesn't want to lose the relationships she has with her current customers, where she usually makes 10-20% over freelance market rates on any given day. It might be worth me discussing it with her again, but I'd need to lay out the costs/benefits for her.
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anywhere ive worked does 6 months paid maternity. Thats across 7 or 8 different private sector entities.

Honestly 4 or 5 kids is not for the faint hearted you absolutely wont be able to continue as you are its a logistical nightmare and someone will invariably be sick, have an appointment, need some sort of special attention. Try one first see how you go :)
 
Premos said:
A lot of private companies pay full maternity leave but you mind need to be in for a certain amount of time before having access to it.
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It's a specific thing to her area of work, for most of the businesses they could literally become unprofitable for the 6 month period when the cost of hiring maternity cover and any payment to her is counted. Even among the three largest private employers in the market, two offer no maternity benefits at all and one offers nothing at all up to 1 year service and after that a sliding scale of a fixed/low number of weeks pay based on length of service. The only realistic option for her to get paid maternity leave is the public sector I'm afraid.

Zion2022 said:
The biggest thing that jumps out to me. Your two rentals are valued at €790k.
They generate you a blended yield of 6.8 assuming no overheads whatsoever.
You are both higher tax rate payers. Again assuming Zero expenses, you are netting 3.3% on your money.

You can get a 3.3% return risk free by paying down on your mortgage.

Unless one of you is planning to stop working (and therefore become a lower rate tax payer), I can’t see how you don’t sell the two rental properties.

Two working adults with 4-5 kids do not need two rental properties making a lower net yield than they’re paying on their own debt!
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We might end up with one of us giving up work at some point by choice. I've always valued that I have a fallback income that would allow us to at least meet expenses if I lost my job or my wife wanted to stop working. Selling everything and paying down the mortgage is the current break glass financial emergency plan, but I can see how it's exposed to recessions etc where paying down debt is a certain return. I will be pushing the mortgage down to 3.1% next month and I plan on breaking and re-fixing over the next 6 months until I can lock in a 2.x% rate for 5 years.

I could also do it bit by bit... sell the €465k property now, lock in <50% LTV mortgage rates, and see where the land lies in 2027 when I would have funds to pay down the mortgage to €2k (To keep our free current account fees)

Blackrock1 said:
anywhere ive worked does 6 months paid maternity. Thats across 7 or 8 different private sector entities.

Honestly 4 or 5 kids is not for the faint hearted you absolutely wont be able to continue as you are its a logistical nightmare and someone will invariably be sick, have an appointment, need some sort of special attention. Try one first see how you go :)
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We've borrowed four (under 6) for a day before. But we had the luxury of handing them back to their parents the next day. They went for the shock and awe strategy of having all four in rapid succession. But as you say... we might try one first...
 
And again on the rental properties, unless you have an agent managing those, further eroding your margins, it will be next to impossible to contiue to manage once kids have arrived. Being a parent is not just the childcare, all the spare time outside of work will be spent volunteering, helping your kids to keep up friendships and relationships with family outside of the immediate one, trying to carve out 1 on 1 with your kids and helping with lots of ad hoc other stuff like managing appointments, schedules etc. And then you still need to have time for yourselves as a couple and also to have your own individual interests. Otherwise life will be all about work with no play.
 
One thing that I have heard quite a number of professionals complain about is that they find it heavy going when the creche rings if the child's temperature goes even slightly above the norm. They have had this happen quite a lot so someone has to be available to go immediately and collect. Very hard to do if you don't have family back up. Because the children are mixing on a bigger scale rather than just being at home they pick up colds etc. more often. One of them did try to get a person to come to their home to mind but very few and far between.
 
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