Pricing marriage and children

For better or worse, we're clueless about the financial commitment we make when we take our wedding vows and start a family, says economic columnist Scott Burns.

If we use a tool once used by the Department of Labour called the revised equivalence scale, we can sort out the differences in cost of living for households of different ages, sizes and composition.

  • Assume that the cost of living for a young married couple without children gets an index number of 100.

  • A young single person, for instance, would get an index score of 71.

  • Marriage and the arrival of a first child takes the index to 127.

  • The arrival of a second child moves the score to 147.

    The cost of living relative to the young couple continues to climb as the children age.

  • The index score reaches 204 when the older child is 6 to15 years old and peaks at 231 when the older child is 16 to 17.

  • From there the score starts to descend, going down to 186 when only one child is at home.

  • It reaches a mere 120 when the couple makes "Empty Nester" status.

  • It hits 104 when the couple is retired and bottoms at 57 when a spouse dies and leaves a widow.

    So, if real family income needs to grow at 4.5 to 5 per cent a year and inflation is 2.5 to 3.5 per cent, the simple project of marrying and having a family requires income growth of 7 to 8.5 per cent a year to maintain our standard of living, says Burns.

    Source: Scott Burns, High Cost of Living as Family, Dallas Morning News, August 21, 2005.

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    For more on Wealth and Poverty:

    FMF Policy Bulletin/ 6 September 2005
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