Here's How to Financially Thrive by Not Having Kids

Being childless is nothing new. By 2018, at least 19.6% of all American adults aged 55 to 64 had no biological children. For some, it's a matter of not meeting the right co-parent at the right time. For others, it may be a fertility issue. And while those of us who have children can't imagine a life without them, there are plenty of people who have a different picture of what they want their lives to be.

Childfree couples amass more wealth

It may or may not surprise you that households with children tend to earn more than childfree couples. According to the Federal Reserve, the median pre-tax income for households with children in 2022 was $110,250, while the median household income for childfree couples was $101,610, nearly $9,000 less. And yet:

• A Census Bureau study, Childless Older Americans, 2018, discovered that childless women had the highest median net worth among Americans age 55 and older. While the median personal net worth among all adults 55 and older was $133,500, childless women had a net worth of $173,800.
• Among all households, the Federal Reserve's Survey of Consumer Finances found that couples with no children also have the highest net worth, despite earning less than households with children. In 2022, the median net worth of couples with no children was around $150,000 more than that of couples with children.

Whether you're childfree by choice or circumstance, here are some ways to make the most of your lifestyle.

Outwit taxes

Parents get tax breaks that are not available to childfree adults. That means it's even more important to find ways to lower your tax burden if you're childfree. The easiest way is to lower your taxable income by taking advantage of tax-deferred retirement plans, such as these:

• 401(k)
• 403(b)
• SEP-IRA
• IRAs
• Annuities
• Permanent life insurance
• Health plan

A tax-deferred plan allows you to make contributions before taxes are taken out. Let's say you earn $2,400 weekly. By contributing $400 to a tax-deferred plan, you only pay taxes on $2,000 weekly. You aren't required to pay taxes on the money until you withdraw it when your annual income (and tax bracket) are likely to be lower.

Furthermore, any health insurance premiums paid by your employer are exempt from federal and payroll taxes. And the portion of premiums you're responsible for paying is typically excluded from taxable income.

Making tax-deferred contributions accomplishes two things at once: You lower your current tax bill and build up a nice nest egg for your retirement years.

Carve out time to improve your financial situation

As much as most parents adore their children (and we do -- most of the time), there's no denying that parenting is expensive. Parents grow accustomed to sacrificing both time and money. The Motley Fool Ascent found that the average cost of raising a child to age 17 is over $300,000. In terms of time, a parent can pretty much expect to spend the majority of their time either with their child or doing something for their child.

It's possible that you, as a childfree person, have more time to focus on personal finances. If so, you may want to spend time studying the stock market, refining your personal budget, or even taking on a side gig you love to pay down debt faster.

If you find that you enjoy the nitty-gritty of finances, consider taking an investment course or using a financial literacy app to help build confidence.

Prioritize saving an emergency fund

Kids or not, life happens. Water heaters break, cars conk out on the side of the road, and companies make layoffs. One of the easiest ways to get into financial trouble is to forgo an emergency fund. The general rule of thumb is that you should have enough money put away to cover three to six months' worth of bills. For example, if your monthly bills -- including food, gasoline, and any other expense you typically run into -- run $4,000 per month, you should aim for an emergency fund of $12,000 to $24,000.

There are several dangers associated with not having an emergency savings account. The first is losing assets. After all, if you can pay your mortgage or car payment, those things can be repossessed. The second danger is counting on credit cards or (worse yet) payday lenders for the money you need to get through.

The solution is to make your emergency fund a priority long before you need it. That means building the fund before you pay down bills and certainly before taking on any new debt.

Tucked away in an account you can easily access, like a high-yield savings account or money market account (MMA), you may never need the funds in your emergency account. However, just having them there can help you rest easier at night.

Ultimately, it's not how much you earn, but how you handle your finances that matters. Whether you have children or not, the more you know about money, the better prepared you'll be to build your own version of wealth.