Planning for the Future: A Guide for New Parents
Your bouncing bundle of joy might need more than diapers and love right now, but, rest assured, as kids grow, so do the expenses they incur. Between cars, college and clothes, you’re in for 18 years of expenses.
It’s estimated that it costs somewhere in the neighborhood of a quarter to $1 million to raise a tiny human through adulthood. Here’s how to manage without resorting to beans and rice for each meal.
Believe it or not, that tiny baby who relies on you for everything will be a walking, talking toddler in what feels like moments. Soon after, they will be a full-blown teenager facing college entrance exams. The sooner you can start saving for this day, the better off you’ll be. The Vanguard Group suggests that you start saving as soon as your child is born. Even if you can only save $25 each week, you should have more than $26,000 put aside by their 18th birthday.
Look for ways to save (and actually do it)
Even if you don’t think you were financially prepared when you had your child, there are still ways to shave off your monthly budget and these are the dollars and cents you can put to work earning a return. You may have to get creative. Parents asserts that you can save cash by doing things such as cutting your kids’ hair, adjusting your schedule to avoid child care costs and making smart decisions when purchasing large items.
Invest in life insurance
As tough as it is to consider, it’s up to you to make sure your children are taken care of if you’re not around to do the job yourself. Calculate the amount of money your family will need to survive for at least 10 years in case of your death. BankRate estimates that a head of household with $20,000 in savings, two children, and $300,000 worth of expected college expenses should have just more than $712,000 in life insurance.
Know your worth
You’re priceless to your children, but to everyone else, your value comes down to the sum total of your assets. You’ll need to know this number if you plan to cash in on your assets down the road. Consider items such as savings accounts, stocks and bonds and family heirlooms including jewelry and artwork. Your biggest asset will likely be your home, so don’t overlook the equity that’s built up over time. This number may change from year to year. Redfin can provide a free home value estimate.
Refinance your home
One of the most often overlooked saving strategies is refinancing your home. If you’re still sitting on a high-interest rate mortgage, you could potentially save hundreds of dollars each month by taking advantage of current rates. Consider this scenario: A $250,000 mortgage with a 6 percent interest rate refinanced for the balance (estimated at $192,000) at an interest rate of 4.47 percent and $6,000 in closing costs would cut more than $500 off your monthly payments, saving you more than $40,000 over 30 years.
Take it off the top
When it comes to money, “out of sight, out of mind” should be your mantra. You will be less likely to spend money you don’t see. Consider investing in your company’s 401(k) plan, especially if they match contributions, which can double your savings. You can also have a portion of your weekly paycheck automatically diverted to a savings account or invested in a 529 College Savings Plan, which CNBC reports also comes with tax benefits that can help you maximize your savings.
Find the freebies
Despite the ever-increasing price of just about everything, there are still ways to keep your wallet in your pocket. The Huffington Post lists 31 websites that can help you save money through discount programs, “freecycle” opportunities and free samples, which will keep you from spending money on trying new products.
While your goal is saving for your child, remember that you have to take care of yourself as well. Most experts suggests saving for your own retirement first but conventional thinking may cost you in the long-term. Time explains why and offers more in-depth advice on saving for college and retirement.
After losing her husband Greg, Sara Bailey created TheWidow.net to support her fellow widows and widowers. She is also the author of the upcoming book Hope and Help After Loss: A Guide For Newly Widowed Parents.