The Economic Parents

Acting chief executive Donald Tsang last month encouraged people to have three children. Many people laughed at the idea, saying that the top official doesn't understand households' financial constraints. Giving birth to one kid is already forbiddingly costly, some believe, let alone having three kids. Some couples even say they do not want their kids to suffer the pains of this world, and therefore, they would rather have none. Nevertheless, as the Hong Kong economy bottomed out in 2003 and people are gaining confidence about job security, there are signs that people are more willing to have babies.

A friend of mine, one day, sought my advice from the economic point of view how many kids she has got to have, after giving birth to her first a few months ago. We both agree that giving a new life is so meaningful that the decision is beyond any cost-and-benefit analyses. Nowadays, the younger generation of parents does not expect kids to support them financially, like the older generation did, thanks to improved welfare benefits and better financial planning for retirement. Some parents would rather not give their kids any burdens, foreseeing a tougher working environment in the future.

Still, family members are the people closest to us. They take care of one another. The help could be financial, physical and spiritual. Below is an abstract from the conversation between the friend and i, which hopefully offers you more than a laugh-- or some economic concepts.

Economies of scale
Economies of scale are realized when parents have more than one kid, because baby brothers and sisters could share the shoes, clothes, toys, strollers and beds, one at each time. The costs for each baby can be reduced.

Diversification of risks
No matter what, parents must have certain expectations for their sons and daughters. There is no guarantee that their first kid can meet them. The parents might think of splitting their bets. Diversification of risks applies. It sounds a bit coldhearted, but it was certainly useful in earlier history when mortality rates were high. Today, parents become more focused on one or two kids.

Diminishing returns
If the parents expect some returns, financial, physical and/or spiritual support, the return would unlikely increase in proportional to the number of kids they have. They are likely to experience a diminishing return for every additional kid they raise. Simply speaking, in a holiday gathering, some brothers and sisters do not show up because they know the others will go. Of course, from the children's point of view, they easily share the responsibilities.

Public assets
In the worst case, the parents will become "public assets" when they have too many kids. This is sad, but it is hard reality. When so many, say six to ten, people share the responsibilities, no one will take them. They would just point fingers to the other brothers and sisters. Of course, there are exceptions in big families where each member takes their suitable roles.

Free riders
Those couples with no kids would be the free riders. Thanks to a post-war baby boom, a quarter of Hong Kong's population would be aged 65 or above by 2031, the government said. In the meantime, the proportion of the working class would shrink. Each taxpayer will take care of more elderly than he does now. For those who have no kids and receive welfare benefits, they will have the support from the kids of someone else.

From the analyses above, it seems that one would prefer to have either no kids or a few kids, rather than only one offspring or too many children.

Dollar cost averaging
Dollar cost averaging is a strategy in which an investor buys shares one tranche at a time over a long period. Personally, i am a product of dollar cost averaging. My parents have three children. My elder sister Charlotte is five years older than i. Younger brother Rex is nine years younger than i. My parents managed to spread the costs of raising three children over more than 14 years. "Dollar cost averaging" could be a solution for those who cannot afford to raise more than one child at any point of time.


Inflation is really concerning parents. Particularly, the costs of raising kids appear to inflate much faster than the general consumer prices. Parents have to make all the choices. They include whether to give birth in a public or private hospital and whether to hire a babysitter or not. When the kids get older, the parents might have to look for play-groups in which their kids can learn English story telling, playing piano or painting. According to the parents, these extra-curriculum activities are important for the children to get enrolled in good schools. Such training can be painfully costly.

Some parents also consider buying a bigger car and a bigger house because of the kids. How the parents raise their kids, it seems, reflects their own expectations of life. With the parents' living standards improving, they want to give their kids the best. That's nothing wrong, as long as they can afford it. But i suspect that there are things money can't buy. As a kid, the poorest and thriftiest years were those i enjoyed the most.

For those who do not want kids solely because they don't want them to suffer, they should ask themselves whether they have ever enjoyed life for a second. i thank my mum and dad for bringing me to this world, one that has both goodness and badness.

Apr 6, 2005
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