Back when I was 20 years old, I decided to get a puppy. He is a great dog and to this day I’m very glad I have him. However, when I was young I didn’t know any better and looked at the cost of owning the dog incorrectly. I took into account how much it would cost for his initial veterinary care, shots, food and those sorts of everyday costs. I had the money in my pocket to pay for the vet bills and I assumed the food and other day-to-day expenses would only cost me $20 a month. That’s almost exactly what I have to spend on him each month to this day. For this article, I looked back at vet bills and learned that I’m spending approximately $200 per year on average for veterinary checkups, shots, and medicine when he is sick. That’s really not a lot of money, right?
This is exactly what most people think and it is wrong for a number of reasons! In basic Economics, students learn about something called opportunity cost. Simply put, opportunity cost in this example is the value of money if you used it for some other purpose–say investing for your retirement. Your retirement is nowhere near as exciting as having a new 8-week old puppy but it is something we all need to think of as early as possible. So let’s take a quick look at how much my dog is really costing me!
| Dog Expenses | Cost |
| Initial vet bills for shots, toys, food, etc. | $300 |
| Monthly food and flea prevention | $20 |
| Annual vet checkups, medicine, shots | $200 |
The S&P 500 has earned a compound annual growth rate of 10.03% from 1980 to 2006 (source: Moneychimp.com). So instead of buying the dog, let’s look at what that small amount of money would have earned if we would have just put it into an S&P 500 index fund instead. I think you may be a little surprised at what we gave up to have the unconditional love of our dog.
If the dog lives 14 years, the actual money that we spend is $6,455. That’s definitely a decent sum of money but it is easily justified. If we look at it a different way and say that each month we’ll put that money in an S&P 500 fund instead and we earn the average rate of 10.03% per year over that time, we would have $14,283.61 at the time our dog would have expired. I know what you’re thinking… “I still would take the dog over the $14,283.61.” Me too! But let’s think this through a bit further.
Just because the dog dies at age 14 doesn’t mean we’d stop earning interest on our money! If we buy the dog at 20 years of age and he dies when we’re 34, let’s say we keep that money another 21 years so we can retire at age 55 with our pooch fund. If we continued to earn 10.03% over the next 21 years but don’t add another penny to the pot, we would have a fantastic sum of $116,356 when we retire!
It goes without saying that we’re not going to be able to successfully retire on just this amount. We would however have a great bit of extra savings. Now is the dog worth it? My advice is that if you’re not absolutely dying to have a dog then you should invest your money wisely. As we’ve seen, a dog is extremely expensive if you look at what the monthly costs of ownership can amount to! Don’t buy your dog in haste–plan for your pet and make sure you are on track for a healthy retirement before jumping into a six-figure decision.
One Little Caveat To This Example
I don’t want to preach about the cost of having a pet without again mentioning that I do still have my dog, Miles. He’s an incredible friend and I wouldn’t trade him for anything. If someone came to me today and offered me $116,356 for my dog, I would turn down the offer without hesitation.
In no way am I discouraging people from owning pets. Instead, I want people to make sure that they are on track for their retirement (even in your early 20’s) and make a wise decision when adopting your first animal. If you can afford the $116,356, definitely go forward and get a pet. If it is something that won’t add a financial strain on your life, you will be making a great decision!
DailyBrilliance RSS Feed
10 Responses From Our Readers
1.) Andrew at December 4, 2007 around 9:09 pm
Would you trade your dog for $116,357?
2.) Martiens at December 5, 2007 around 6:54 am
@Andrew
[quote]If someone came to me today and offered me $116,356 for my dog, I would turn down the offer without hesitation.[/quote] from the second last paragraph
Good on you mate.
3.) xxxciter at December 5, 2007 around 9:05 am
Are you sure you did the original calculations correctly? It seems like you are investing the $6,455 as a lump sum, but that would not be the case… So the amount at the end of the 14 years would be quite a bit less!
Also, your “logic” applies to eating food, buying clothes, seeing movies, drinking coffee, etc — should one also forgo those because one is losing money if its not invested for retirement? That would be a silly conclusion — as is yours!
4.) Chris at December 5, 2007 around 9:59 am
@xxxciter
The monthly expenses are invested just that–monthly, with 10.03%/12 compounding. Then, we’re left with $14k something. That amount is then invested in a lump sum for the remainder.
In response to your last part about the logic. Clothes and food are necessary items. You could apply this to movies, drinking coffee and so on but I think most people reading this would understand that it is just food for thought. If you read the full article, which I don’t know that you did, you would see that in the very last paragraph I mention that I’m not discouraging people from owning a pet. Instead, I just want people to realize just how much that decision will cost them. If the purchaser is prepared to give up that amount for their retirement (as I am), then more power to you!
5.) Dave at December 7, 2007 around 3:07 am
We have two dogs, brother and sister from same litter, and they are almost three years old now. Since we have two does this mean we are missing out on close to a quarter million dollars in failed investments?
6.) Matt at April 3, 2008 around 2:17 am
That’s awesome. That means when I retire I can buy 15 dogs instead of having just one when I’m in my twenties. Thanks for the advice.
7.) Weekwrap: Hair Extensions, Thrifty Families, Predicting the Future and More at July 7, 2008 around 11:25 am
[…] you own a pet, hope that your refund is a hefty one. Daily Brilliance discusses the real cost of having a pet and winds up with $14,283.61 as a total for owning one dog, […]
8.) fornetti at August 31, 2008 around 8:39 am
I do not believe this
9.) David LaFerney at January 19, 2009 around 1:16 pm
Actually I suspect that your number is low. You didn’t count wear and tear on your home, all the stuff that dogs can tear up, or pet “accessories” like fences, collars, and doggie doors. How about the time that you spend cleaning up after (and repairing things) after your pet, and taking them to the vet or groomer. Speaking of grooming if you have a dog that needs that or even cosmetic surgery like ear and tail work those things can run into the thousands. If you rent you also might have to pay increased rent or security deposit for having a pet.
Young people especially need to understand that owning a pet is a pretty big financial responsibility. Until you have absolutely zero financial problems taking care of yourself and your family (still having some left over) you really shouldn’t have a pet like that. Like I did.
10.) Lylarose at October 2, 2009 around 4:36 pm
I don’t know where you guys live, but I am in LA with 4 Chihuahuas. The food rarely costs anything. I mean they are 2 lbs. They don’t eat alot. I buy them special treats which adds up but, not that much(I get them from Big Lots.) My vet is also, cheap cheap. And as far as updates on shots, they don’t need continual updates just like we don’t need to get a booster for the Hep A and B shot we got in College. I mean seriously, maybe I just have the easier to take care of dogs, but I have thought about expenses in advance and brush their teeth myself so they won’t have future problems. They also eat only Organic food to save future problems. ETC ETC. The cost of a cat is worse. The litter is EXPENSIVE! And you can say the same thing about kids. JESUS do we even want to go in to how much kids cost?
Leave a Comment