Having kids in London with a PE job
Hi all,
Post here is mainly for London and EU monkeys.
For background, I am a VP in a MM PE fund in London, turned 30 and thinking about having a kid with my partner. Following a budgeting exercise for what it would cost for me today to have a kid (assuming partner keeps working), I came to the sad conclusion that the amount I could save is pretty much insignificant if I were to have a kid. A few assumptions worth bearing in mind:
- £4k pcm mortgage + home expenses (zone 1 / zone 2)
- £2k pcm nursery costs for kid
- £1k pcm nanny / babysitter costs
- Decent social life (dining out etc.)
- International holidays once or twice a year but nothing too crazy
All in all, with our current (good, “high paying” jobs), we could live a comfortable lifestyle but far from luxury, have a kid and basically end up with minimal savings. Quite depressing since we are “top 1% earners in the UK”.
So, I wanted to ask monkeys who have had kids:
- Does the conclusion I came to above make sense / is it consistent with your experience?
- In your experience does it make any sense to have kids in London? Feels like you work your ass off to get into and keep doing well in high paying jobs just to live a very “average” life with fairly insignificant savings. Am struggling to justify this to myself. Prospect of generating real wealth I can retire on feels so far off.
- If the answer to #2 is “no”, what other cities in Europe would offer a better deal? Keen to hear experience of people who have moved to other cities (in and outside the UK)
- Are there any MM PE firms offering ability to fully WFH and potentially from abroad? Considering option of moving family elsewhere in EU and commuting to London a few days a week.
- Have you considered moving to the suburbs and having a long commute to the office? Feels like this defeats the point of living in London
Thanks for your insights!
Reading this is not inspiring a lot of hope in me...
Not at that stage in my life as of yet, but for what it's worth principals and up in my fund all seem to live outside of London in Surrey, Herts etc. Is this the same as what you're seeing in your own firm?
Hi man,
I am in a very similar situation, early thirties, VP in a LMM shop. However, my partner has a much lower income but everytime we think about nursery costs (or child minder) + nanny, it drives us nuts to the point where we might be better off having my partner to stop working entirely. It feels totally unfair for my partner and I don't really get it why this country works this way. Surely it is loose/loose for the Government given the amount of taxes lost.
We made the conscious decision to move out outside Zone 1-2 to have more space. We now own a freehold (with 3 bedrooms house + office space) with garden so much bigger place with loads of green and amazing schools nearby. We now live at the border of Zone 3-4 but with great connection and he takes 40min me door to door to get to my office so not too bad afterall.
We alternatively thought about relocating to either France or Italy. My shop used to allow this on a case by case basis but I think it's changing as top management keen to have everyone around in London. Both countries offer much better quality of life but PE market is way less liquid and seats are scarce if you want to explore lateral moves.
I have not looked at it in details but in the event where you are above the £100k threshold for the 30 free hours, you can still get 15 free hours regardless of your income. Better than nothing if that's correct.
Bottom line, you are not alone and I am sure there are plenty of other Monkeys in the same situation, consciously balancing the financial aspects, pros and cons of having a family which to a certain extent is very sad. Don't think our parents ever thoughts about those considerations when they decided to have kids.
In a very similar situation and also work in PE. Have 2 small kids and based in Zone 3, but still pretty central and takes c. 20m to get to the west end by car/tube.
My wife stopped working after our second was born (currently still on mat leave), and would ideally not like to return - raising 2 kids is HARD - but debating it.
The sad truth is, it is really tough and you just feel like you will never get off the hamster wheel barring some enormous liquidity event (like carry), and waiting for those mythical carry dollars is in my opinion a bit of a pisstake as the majority of people I know at MM funds got about 10%-20% max of their originally expected DAW.
Your costs are broadly in line, and yes the 15 funded hours does help. If you choose to send the kids to private school, which many do as it may not be feasible to up and move to a good catchment area that easily for state schools, kiss any savings goodbye, honestly. The tax burden is SO high in the UK for such poor service that we are seriously considering leaving and moving elsewhere (not Europe). My firm is one of the few that is highly flexible with location, so yes it is possible, but it certainly isn't the norm.
Also define "suburbs" lol - some "suburbs", i.e. the nice ones, are equally as expensive as central - places like hampstead, richmond etc. If by suburbs you mean commuter towns like St Albans (c. 30m into central), then yes I know a lot of senior people who have made that move, less so mid-level folk who are stuck getting fleeced in London for whatever reason.
I too am having serious thoughts about whether working 70+ hours a week, the insane stress, not seeing my kids in the evenings etc. is worth just being able to afford to LIVE a decent enough life, with very little savings left over. I feel more and more like this country just isn't right for us anymore, and may well end up leaving.
Feel free to PM to commiserate further!
Recently moved to London and started working here, this post is giving me bit of a crisis lol.
If you don’t mind, which country(ies) you’re exploring moving to? I am assuming you’d want some place that has a good return on your taxes while giving you the opportunity to continue working in PE? It’s a bit scary and sad to see how VP level folks at decent funds in a city like London have to contemplate and plan so much before having kids. If PE VPs cannot make it, I don’t know who can
Yep, it’s just the reality here. I always think that too - while recognising we are still extremely privileged in a broader sense, if PE people aren’t seeing any real benefits from being here, who is? I also realised gradually that the UK generally despises wealth creation and prefers you to just inherit it.
We would move to the Middle East potentially.
Can you elaborate on knowing lots of people in MM funds only getting 10-20% of their DAW? I assume this wasnt the case for performing funds over the last decade...
Curious as I think about staying in the industry
It does make you question that the UK has a wage crisis as well as a cost of living crisis too. Other comments are bang on right that commuting from Surrey / Home Counties is perhaps the way to go
Hi,
A lot of sensible thoughts above - we're in a similar stage (marrying, not pressed the button on kids but it's a "real" topic / decision).
For better or worse, we both work in the industry (IB / PE) and are similar age, and she's keen to keep working (which as another user points out, is the fair and right thing - fully agree with the sentiments that this country is somehow structured to encourage one partner to drop out, and despite the high gross earnings its easy to not feel that way).
Anyway, here's a bit of second hand advice from a partner at my other half's shop (and we're still chewing over it - I'm just passing it on for you to consume or throw away): you will feel cash-stretched in those early years. Don't be afraid of low or even negative savings. In particular with childcare / nanny costs, understand that these stop for the most part when the kid goes to school (unless you go private which is a different topic) so it's almost like an "investment" you can gross up and amortise. Your earnings and those of your partner (even if he / she is on a lower compensation than you) will only go up while the burdens of raising kids is most acute in the first few years (they never go away of course).
In terms of other cities / countries, we've only considered the latter. (1) New York has a huge financial industry. My counterpart in our NY office told me that childcare is relatively cheaper there than in the UK as there's a big network of illegal immigrant nannies and you find them through word-of-mouth. Authorities sort of get the joke that they exist but look the other way. (2) Hong Kong / Singapore. Both big financial centres with low taxation and a massive number of low cost nannies (Philippines / Indonesia respectively). With either of (1) or (2) though there's visa issues, etc. so this isn't an easy move.
Keen to keep following this post.
Totally understand this issue and am not yet at that phase of life yet. I think London definitely has a wage crisis. It’s ridiculous how low people get paid on a like for like versus the US. And it’s not like cost of living is that much lower. Savings margin is definitely lower in London. Guess some of the theory is that you have NHS in London (but let’s be real, many of us will just see private if we can).
I’m trying to back out from your numbers. Let’s say £5k/month for social life + other family stuff. So £12k monthly expenditure or £144k/yr. Add £15k/yr for holidays and it’s £160k. Gross that up at 45% tax and implies ~£290k.
Kind of crazy given both have to clear about 150k each and on that math, will have zero savings. That said, if you’re both in mid lvl high finance roles, would’ve thought total income would be closer to £400k at least (or am I out of touch?). So at least you have savings balance every year. Either way, it’s crazy imo.
What do you guys think is a reasonable total gross to live comfortably with 2 kids then with a mortgage, savings for retirement, and 2x holidays? 300-400K GBP gross?
This thread is wild when you consider that the median income in London is less than GBP50k.
It's the beauty of living in a socialist country with third world public service. You are either living off benefits / implicit state subsidies on 20-50k or you are are screwed if you fall in the 50-200k income bucket. It gets better >200k and if you are happy to live frugally. This assumes partner doesn't work or has a similar income.
Thread is wild when the top 1% income in the UK is £180k.
Between CoL and the "newcomers" London has really gone down the tubes over the last decade. GL raising kids there man, not many places across the UK/US I could imagine it being more difficult.
Edited.
I don’t think this is London alone. You’d struggle in Manhattan (or HK or Singapore) as a VP in MM PE having kids at 30. I’ve lived in all four and def believe London is far and away the best for families.
My early 30s were def when I felt the most stretched. If you have a successful career in finance your costs will be flat (and remember an amortizing mortgage is forced savings) and your income goes up, so all of that should go to savings as long as you don’t have lifestyle creep.
And plenty of great places to live in London outside of Zone 1 or Zone 2 where the commute is equivalent
Disagree. HK/Singapore have favourable wages (at least in finance) but low tax burden. Manhattan has high pay and high tax burden + cost of living. London has low wages, high tax burden + high cost of living.
Hum. Schools are 4x in NYC/SG and mortgages are 2x for same loan amount (compared to London). The grass is not always greener. Out of the big financial centers London is probably the “easiest” one for families.
VP bases are in the range of £150k - £200k, so let's just assume a £165k base. That gives you a net take home of £8.3k per month. You should be able to cover all running costs (mortgage, nursery, bills, etc) out of that. You don't tell us what rank the wife is at, but I will assume she's on a base of £100k. That's another £5.7k per month after taxes. The goal is to fund your lifestyle out of your base and bank 100% of bonuses/carry. People freak out about nursery fees but they are only for a few years before school starts, not an 18 year cost. Also, along the way you will be building equity in your primary residence (not subject to CGT, at least not yet!) so you have to view that 4k mortgage as an investment of sorts.
London is a city that rewards inherited wealth and rentier class types (we have a monarchy after all!) and not a city that rewards work. You have to just accept that there is a lot of wealth in London that you (with your 6-figure job) just can't compete with. The worst thing you can do is to spend your bonuses trying to appear wealthy (exclusive private schools/membership clubs/expensive cars/2nd homes). If you're not British, the best way to view London is a place to work, accrue equity in a home, earn bonuses/carry that exceeds anything you can earn in Europe (bar Switzerland, but that's a whole different system), and when you retire you leave the UK to a lower cost country on the continent.
Let’s say base £165k / £8.3k net. £100k wife is not always a given. Let’s say more likely £70k / £4.2k which is an upper mid-management corporate salary. Total £12.5k.
£800k mortgage for a 2B2B in a reasonable area of London (I’m being conservative) costs £4k at recent rates (not peak 2023). Service charge £500 pmo equivalent = £8k left.
All-in costs including meals, hols, taxis, gifts, clothes, tube, flights to see family in Europe, I guarantee you it’s £4-5k per month. Some months you will be less but summer hols in a normal destination will be £10k easy expense for 2 people = £3-4k left.
If you think I’m exaggerating, think that lunch in London 2 people £13 per person is £26 per day = £520 pmo on 5 days/week. Dinner will be a tad more expensive (deliveries, not eating out) say £800 pmo = £1.3k pmo on 5 days/week. Weekends will be more expensive say £1.2k for simplicity = £2.5k pmo ONLY on food.
Nanny I don’t even consider as it’s too expensive. Nursery: £2k in London not including the extended entry/exit time, etc. = £1-2k left. You have to feed your kid and buy stuff (nappies, etc).
Above is not a guesstimate btw, it’s real numbers ran over years of expenses - NOT LAVISH LIFESTYLE. Remember that a £800k mortgage at 85% LTV means £140k savings were used as deposit + ~£30k stamp duty. Doesn’t consider that most Londoners with kids buy a car.
You gotta bank on bonus and hope job stays safe. Both not guarantees in London nowadays. The “avg income £50k” thought process is pointless: clearly people with £250k+ household income are not complaining, I just want to emphasise that you are far from well-off and you need to make compromises to live a better-than-average life.
What do you mean your partner?
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