Having Dual Income, No Kids, and What that Means for Your Credit
The Dual Income, No Kids (DINK) label applies to couples that are waiting to have kids, are not having kids, or whose children have moved out of the house. Being a DINK is not only sort of fun to say, it leaves room for a pretty fun lifestyle. Not that a lifestyle with children isn’t fun as well, but it’s definitely one with a little less financial freedom than having no dependents. If there are no children in your household — whether you’re waiting for them, they moved out, or you aren’t planning on them at all — your financial situation is a little different. Either it’s different from what you’re used to, it’s different from others your age, or it’s different now than it will be later. In order to take advantage of your DINK status, it’s important to understand what that will mean for your finances.
Waiting for Children, or Not Having Them at All
DINK life used to be a lot less common than it is now, at least among young, married couples. Waiting for children historically wasn’t very common, and neither was living without children at all. The majority of couples living without children were older couples whose children had moved out. However, there has been a significant rise in women having children later in life, or deciding to forgo children altogether. The average age of first-time mothers in 2014 was 26.3, up from 24.9 in 2000. In the same year, 47.6 percent of women between age 15 and 44 had never had children, up from 46.5 percent in 2012.
These numbers, despite what seems like a small change, are pretty significant. The reasons for the change can only be speculated, but it’s creating an entirely different reality in which women spend longer cultivating their career before getting married and having kids. Or, a reality in which the goals of a young, married couple don’t center around children at all. Instead, finances are focused around investments, saving for the future, or retirement.
A middle-income, married couple with two children is estimated to spend $233,610 to raise a child born in 2015. That is a lot of money that DINK couples are saving by choosing not to have children. As a result, there is a lot more disposable income floating around. Without children, your income has the ability to stay within your financial dictates whereas the money spent to feed, clothe, supply, and educate your children isn’t gaining any equity for you. For this reason, there are obvious financial perks to living without children. For those that are waiting to have children, they have the time to build their careers, earn a higher salary earlier, and save the money need to have children. For those that have already paid to raise their children, they are able to utilize all future earnings towards themselves.
Finances and Credit with and without Children
Having extra disposable income does not automatically mean higher credit scores. Credit is something that needs to be built, and there are plenty of opportunities to strengthen overall financial health and build credit in both a child rearing and a childless reality. When children are present in your financial sphere you’ll build credit with credit cards, common loans, and paying bills and debt on time. This will create a cautious financial environment where you’re leaving a lot of room for the money required for the essentials needed to raise a child. When children are not present, you have the financial freedom to build credit with more lucrative opportunities like starting your own business, investing in real estate, or having the finances to further your education. You can also build credit in ways that mirror your lifestyle such as utilizing travel reward credit cards.
The important consideration for DINK households is keeping track of debt utilization ratio; that is, making sure you don’t leverage credit cards or other forms of lending for more than around 30 percent of all spending. Credit bureaus are less interested in your status as a parent than they are in how responsible you are as a borrower. Ultimately, children should have more of an influence on your budgeting than on your overall creditworthiness, as long as you plan ahead, borrow with discipline, and make your payments on time. DINKs simply have the luxury of making those payments toward things other than necessities. Building wealth and credit is a reality in both scenarios, it’s just a different process for DINKs.
Help your DINK Taxes and Future Stability
Whether you’re a temporary, full-time, or first-time DINK, it’s important to understand how that status will affect all areas of your finances — including your taxes. In order for tax season not to be a huge bummer for you, you should consider how you handle your money throughout the rest of the year. Childless households have fewer deductions than a traditional family and may end up owing more in federal and state taxes at the end of the year. You can help offset what you owe by making charitable contributions through the year that are tax deductible, and making sure you have money in savings to pay the IRS if you end up owing a significant amount. Also, simply understanding how many allowances to claim on your W-4 can make a huge difference for your household:
- Claiming Zero: If you have a combined income that falls within the 28% or higher tax brackets, claim zero and you will owe less money during tax time.
- Claiming One: If your combined income falls below the 28% tax bracket and you both work, you should each claim one. You’ll break even or get a small refund back when filing.
- Claiming Two. If only one of you work and your income falls below the 28% tax bracket, you should claim two.
Additionally, making financial decisions to benefit your future stability should be priority. Focus on retirement and elderly care, especially if you do not plan on having children at all. That way, you’ll ensure your care in the future when you won’t have any children to handle your care once you’re older. By investing early and more often in retirement, you and your spouse will have more of a cushion in retirement – or maybe the ability to retire earlier.
Everyone is a DINK at some point whether you don’t’ have kids yet, you aren’t having them at all, or they’ve moved out – it’ll most likely happen at some point. More and more people are embracing this aspect of life with higher numbers of women waiting to have kids, or not having them at all. Having dual income and no kids will mean travelling a different road toward credit health than the one traveled by couples with children. You’ll have more freedom to improve your credit in ways that benefit your lifestyle the most whether it be investing, spending in ways that benefit your lifestyle, or taking risks with your money. It’s important to take precautions with your taxes and retirement, but otherwise the relationship with DINK life and your finances involves a lot more freedom.
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Chelsy is a writer from Montana who now lives in Boise, Idaho. She graduated with her journalism degree from the University of Montana in 2012. She enjoys talk radio, cold coffee, and playing Frisbee with her dog, Titan. Follow Chelsy on Twitter @Chelsy5