Sara Mauskopf
Sara Mauskopf is the co-founder and CEO of Winnie. She’s also the mom of three young children and vocal advocate for high quality child care and early education for all.
Millennials need a salary of $525K to feel happy, according to a recent survey by Empower. That's 4X any of the other generations surveyed. That's because Millennials, the generation born between 1981 and 1996, are the generation with young children.
The survey makers believe Millennials have higher financial aspirations because of the economic headwinds they experienced during their formative working years in 2008. While this may play a role, the reality is that raising young children requires a lot of income.
Let’s break down a realistic budget for a family with 2 kids ages 0-5 in or near a major city.
|
Budget Item |
Explanation |
Annual Cost |
|
Childcare |
At the heart of this financial strain is childcare. In or near major cities, center-based childcare for one child can cost around $20,000 annually. For families with two children, this expense doubles, not to mention additional costs for activities like summer camps and babysitting. Childcare makes up 25% of total expenses for a Millennial family. |
$40,000 |
|
Rent/Mortgage |
Housing in and around urban areas, where many millennial families reside, adds significantly to the burden. A modest three-bedroom apartment or house can cost upwards of $3000 per month, or $36,000 per year, in rent or mortgage payments. |
$36,000 |
|
Healthcare |
In 2022, annual premiums for health coverage for a family of four averaged $22k, but employers covered 73% of the cost on average leaving families to pay $6k. Of course, there are additional costs outside of premiums (co-pays, deductibles, etc) that need to be factored in as well. |
$10,000 |
|
Retirement and Education Savings |
Despite these challenges, millennial parents strive to save for retirement and their children's college education, further stretching their finances. It’s recommended that millennials save 15% of gross income for retirement. Let’s also include a little savings for both children’s college funds. |
$40,000 |
|
Student Loans |
The average student loan payment is $500 per month and we know about half of Millennials have student loan debt so we can assume that at least 1 parent in a 2 parent household is paying back student loans. |
$6,000 |
|
Other Expenses |
There’s obviously a lot of other costs needed to live day-to-day. While transportation, groceries, utilities, and personal expenses are common to all, for millennials, these costs are compounded for Millennials by the need to provide for their young families. Transportation, food and other miscellaneous expenses roughly cost $2,000 per month. |
$24,000 |
|
GRAND TOTAL ANNUAL COST |
$156,000 |
|
Remember, for higher earners in many states (as most families need to be to afford childcare), you might see as much as 40% of your income go to taxes. So if you're paying $156,000 per year in expenses, you have to earn nearly $260,000 simply to cover those costs. As a millennial family with 2 or more young children living in or near a major city, you could easily earn $260K and still be barely covering your costs of living as detailed above. What if you also want to afford a family vacation, extra curricular activities for your kids, or a new car?
While the survey’s figure may seem high at first glance, it becomes more reasonable when considering the specific financial demands of raising young children today. Unlike previous generations, Millennials face unprecedented childcare costs, compounded by other significant expenses. This generation isn't greedy; they're simply trying to afford the basic costs of raising a family in 2023, a challenge that is often underestimated.
