A Guide to Financially Preparing to Raise Children in San Francisco

Brian Chinn, Wealth Manager, Roberto Rivera, Relationship Manager, First Republic Investment Management
July 25, 2019

No matter where you live, raising a child can require sizable financial resources. In fact, according to the most recent data from the Department of Agriculture, expenses can total between $12,000 and $14,000 a year on average. Yet in highly coveted urban cities such as San Francisco, that price tag can rise even further. Beyond covering a child’s basic needs, families need to factor in greater housing, childcare and, eventually, education costs.

Fortunately, these expenses don’t arrive all at once — new parents have 40 weeks to prepare for the initial outlay — and there's no one-size-fits-all approach.

Here are tips on navigating the financial commitments of this life change with as little stress as possible.

Childcare: Save early, look for flexible solutions

If both you and your partner have a steady job, you’ll first need to weigh the loss of income against the cost of childcare should one of you decide to become a stay-at-home parent. This is a very delicate and personal decision, requiring you to balance the financial implications of taking a break from your career and the desire to spend more time with your child.  

Whichever route you choose, start preparing early. Adjust your budget as soon as you learn you’re expecting. If you think one parent will likely stay home with the child, begin living off of one salary now and bank the leftover income. If you plan to use childcare, start budgeting for that expense now and direct what you expect to spend on childcare to your savings account. Treat this as you would any expense or investment by deducting a set amount every month or couple of weeks.

Keep in mind that work and childcare options are often not simple black-and-white decisions, so explore the alternatives. Flexible work arrangements can make it possible to scale back on work hours without sacrificing a career entirely.

Also, an increasing number of parents are finding success with nanny-share arrangements in which several families work together to employ one nanny who looks after several children at a time. Just remember, while such a strategy makes it possible to secure high-quality care with a part-time schedule — and for significantly less than paying a dedicated nanny since you're sharing the cost with other families — for a nanny share to be beneficial,  it’s important that the ages and number of children in the mix are appropriate.

If you can be flexible with the needs and schedules of other parents, your children could get a more personal experience than what you’d expect from a childcare center and still benefit from regular interaction with other kids.

Education: Focus on what’s right for your family

For some families, the school years bring some welcome financial relief. Of course, depending on how many children you have and where they go to school, education can also prove to be a big expense — and potentially an even bigger stressor. For example, yes, the San Francisco Unified School District encompasses several terrific schools. For many, however, its lottery system creates a great deal of competition and confusion

The lottery can place your child in a high-performing school, but have a backup plan in case your child isn’t admitted to one of your top choices. Common alternatives are either private school, which can range from $15,000 a year for private elementary school to more than $25,000 a year for high school, or a move out of the city.

From traditional private schools to up-and-coming alternative schools and immersion programs, one of the perks of living in a city as diverse as San Francisco is the wide range of educational opportunities. So, while recommendations from friends, family and colleagues are a great starting point, don’t limit your options based on what other people insist are the best schools. Focus on what makes sense for your family.

When it comes to cost, much as with childcare, start saving early and treat it as any other fixed expense. If you are lucky enough to find a great match in a public school, try to budget as if you are paying private tuition. With a dependent care flexible spending account, you can put pre-tax dollars away every pay period for use on qualified expenses. Those savings will come in handy down the road when extracurricular activities kick into full gear and college costs begin to come into view.

Housing: Think about it holistically

You don’t need to have kids to know housing prices in San Francisco are off the charts. Median home prices in the city were recently about $1.15 million, according to Zillow, or nearly six times the national median. Rent isn’t exactly a bargain either, with the median at $4,170 a month.

Still, where to live — like your choice for childcare and education — is all about what works for you and your family.

If you’re considering moving out of the city — where you may get more house for your money and potentially access top-notch public schools — don’t discount the lifestyle factor. While it’s hard to put a price on commute times, access to culture and proximity to friends, these and other quality-of-life elements should remain part of the equation.

A very personal choice

Determining where and how you raise kids is a deeply personal process that requires you to think long and hard about your values as well as your greatest hopes and aspirations for yourself and your family. It isn’t, and probably should not be, easy, but with a little planning, creativity and exploration, you can strike the right balance.

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