Financial Planning For Your Child’s Future – Interview with author and financial expert Jean Chatzky about tips on how to budget for a baby.
Money and financial issues are widely discussed topics before bringing children into the world. Studies have shown that more and more couples are waiting to have kids for fear that they will not be able to afford them. And, it’s no wonder when you look at the US Department of Agriculture’s claim that a middle-income family could spend an average of $226,920 to raise a child born in 2010 to age 18, not including college. So, how do parents become proficient at financial planning for your child’s future?
I put together some interview questions for financial expert Jean Chatzky who shares her advice (have the baby!) and offers tips on how to budget for a baby. Jean Chatzky is an award-winning journalist and best-selling author, the financial editor for NBC Today, a contributing editor for More Magazine and a columnist for The New York Daily News. Huge thanks to our friends at Babycenter.com helped us coordinate the interview Here’s the interview:
Lisa LaGrou of Oakland County Moms – Before and/or after the baby is born, what is the biggest mistake parents can make that results in an expense that could have been avoided or decreased?
Author Jean Chatzky – The biggest mistake before or after the baby is born is just not paying attention. If you’re not paying attention to where your money is going, it’s like a guarantee that you are going to overspend. But if you decide that you’re going to be conscious about your money, you’re going to pay attention to what’s coming in and what’s going out, and where your money is going… and attempt to make smart choices along the way, you’ll be just fine.
Lisa LaGrou of Oakland County Moms – What are the best ways to save money after the baby is born?
Author Jean Chatzky – A couple of things to keep in mind…first of all, hand me downs are a fabulous, fabulous resource. Tell everybody you know that you are willing to take them, and when you’re done with them, pay it forward and pass them on to someone else. Also, make sure that you’re saving in an organized, habitual way. And the very best way to do that is by automatic contributions, whether it be to a savings account, 401K plan or 529 college savings plan. And finally, make sure to take advantage of all the frugal gimmicks and programs going on in the economy; everything from sales tax holidays to coupons in the Sunday paper.
Lisa LaGrou of Oakland County Moms – How do I know if one spouse can afford to stop working?
Author Jean Chatzky – I actually take a look at the largest income, depending on which spouse wants to stay in the work force and which one wants to stay home and I invite the couple to road test it during pregnancy to see if they can live on a single income while they’re going through the process of getting ready to have a baby. If you can do it then, not only will you give yourself the opportunity to know that it’ll be ok, but you can bank the other income for nine months which is a huge advantage going into your first few years of parenting having that nice nest egg and nice cushion on the side.
Lisa LaGrou of Oakland County Moms – Is it a better idea for families to prepare for retirement, or to invest in a college fund?
Author Jean Chatzky – I know that there are some parents out there who don’t like this answer, but retirement has to come first. And for a couple of reasons… first of all, there is no financial aid for retirement, but there is plenty of financial aid for college. The best thing that you can do is to make contributions habitually into your 401k’s and Roth IRA’s. Once you maximize your opportunities to save for retirement, then by all means, shift gears and save for college. And, if you feel so guilty for saving just for retirement and nothing for college, put your money into a Roth IRA because it allows you to save money now and decide down the road whether you want to use the money for retirement or college and there will be no penalties either way.
Lisa LaGrou of Oakland County Moms – Are state college funds more beneficial than other college fund investments?
Author Jean Chatzky – There are some 529 college savings plans that are better than others. The best way to figure that out is to go to a website called savingforcollege.com which ranks 529 plans like Morning Star ranks mutual funds, you will be able to pick a good one that maximizes your state tax benefits if there are any as well.
For more info on fiscal planning for your child’s future, visit savingforcollege.com.