If you’re thinking about starting a family, the question of just how much it might cost has probably crossed your mind.
There are the countless diapers and burp cloths needed for newborn life, and the seemingly unlimited amount of fresh fruit a toddler will want to consume. But the biggest expense of having kids is no doubt child care.
Child-care costs may vary widely depending on where you live and what type of care you choose. But unless you can get the grandparents involved, be prepared for a hefty bill: 51% of parents who responded to Care.com’s 2022 Cost of Care Survey said they spent more than 20% of their household income on child care every year. Ouch.
For prospective parents, this means drawing up a budget might be in order. Know how much money you have coming in every month to determine what kind of care may be feasible for your household.
For help with the necessities of the first years, consider being specific with registries and wishes so that your loved ones can help you in meaningful and useful ways. Hand-me-downs and second-hand purchases can also help you save money.
Congrats on the Baby, But How Will You Pay for College?
It might be years until your little one goes to college, but that shouldn’t stop you from thinking about how to fund it.
College education in the U.S. isn’t cheap, and as with all big expenses, it pays off to start stashing away money early. Putting it in a 529 plan (also known as a “qualified tuition plan”) is a tax-advantaged way to save for education costs.
There are two types of 529 plans: prepaid tuition plans, which allow you to prepay tuition and fees at certain colleges and universities at today’s prices, and education savings plan, which is a more general savings vehicle for educational expenses. You can contribute at whatever cadence works for you, deposit a lump sum, or let extended family members pay into it.
It is even possible to change the beneficiary of a 529 plan to another eligible family member, for example, if one kid receives a scholarship.
All this may sound too far away if you’ve just had a baby, or are still awaiting the arrival of a new family member. But make no mistake, saving early, and getting your ducks in a row can set you, and your family, up for financial security in the future.
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