Family Equivalence Scale

The US Bureau of Labor Statistics (BLS) has developed an estimate of how family size and type affects budget. You can use their estimates to evaluate cost of living changes along a typical family life cycle. All estimates are normalized to the costs for a family of four (two adults and two children). All other budget entries represent the normalized funding required for the specified family to maintain an equivalent lifestyle to the base family.

Family Type--BLS Normalized Family Budget
Single Adult--0.360
Two Adults--0.600
Two Adults, One Child--0.820
Two Adults, Two Children--1.000
Two Adults, Three Children--1.116
One Adult, One Child--0.570

For a single young person prior to marriage the cost of living is 36% that of a normalized family of four. The cost of living for a married couple increases to 60% of the normalization base. When one child is added, the family budget is at 82% of the base. A second child puts the family at base budget level. A third child places the couple at 111.6% the cost of a family of four. For cases not shown in the table, the equivalence family budget can be roughly approximated using the expression:

E = [(A + pK)^F]/2.751

where A is the number of adults in the family, K is the number of children, p=0.92 and F=0.75.

The USBLS equivalence scale indicates how difficult it is for a family to grow, maintain a lifestyle threshold, and continue to save for future retirement. If you hope to maintain a constant lifestyle, your family of three (two adults and one child) requires a 36.7% higher budget than a married couple with no children. If you (and your working spouse if he/she works) earn a salary increase of 5% over inflation per year, your income does not reach a level to support a first child until you’ve worked for more than 7 years. To achieve an income that would support a second child at the same standard of living would take an additional 4 years on the job.

A single engineer who wants to marry, or a couple that desires children have other options. You can choose to lower your lifestyle and carry on with family plans. You can choose to invest less money toward retirement, maintain your standard of living with family additions, and work more years before retirement. You can do a combination of both. When going from single to married, a couple consisting of two wage earners might easily exceed the required 66.7% income increase implied by the table simply by combining salaries. Although two cannot live as cheaply as one, two wage earners can live a more comfortable lifestyle or can save more toward their long-term goals.

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