There’s no denying that the addition of a baby to a family is a significant change. New parents will need significant preparation for their children, not only in material things but also for finances, too. Nevertheless, parents have their own needs for the future, including retirement and life insurance. But, when raising a child in the modern world costs $250,000 from birth until 18 years of age, according to a recent Boston Globe article, how does a middle class family, who would be making around $60,000 per year, save up for themselves and for their child?
The article in the Globe gives an account of new parents changing their financial strategies not only for their new baby but also for themselves. The couple is already saving by using second-hand baby products, but more needs to be done – especially after the child is past the infant stage. Through consulting with a financial advisor, they found – and the article lists – some important points for saving for the future, which may include college tuition, retirement funds, life insurance, a new home, and general everyday expenses:
• Always put away a small amount of money each month for these short and long-term expenses. This will accumulate over time and, when retirement comes, you’ll have enough to last you through your seventies.
• Consider inflation. Prices on everyday items and college tuition meet the pace of inflation, but your bank accounts don’t. Always put a little bit extra for all of these expenses to meet the pace of future inflation.
• If you’re concerned about not having enough to send your child to college once the time arises, consider starting a 529 savings plan. This way, funds will accumulate over time and will compound to the amount you’ve saved up for college tuition.
