Saving Money for Your Baby’s Financial Future
There’s no denying that raising children in the world today is an expensive undertaking. It is estimated that by the time a child reaches the age of 18, he/she will have had over $220,000 spent on upbringing (that is, in the average American family). Add a couple more kids and the number grows pretty quickly. So you might be asking yourself, with all the money you’re spending on just the day-to-day stuff, how can you afford to start saving for your children’s future? It’s probably not going to be easy, but it is imperative that you do so, and there are a few ways to get started.
You might think a savings account in the name of each child is a good place to start. In truth, it’s better than nothing. The problem with savings accounts is that they don’t earn much interest and they’re entirely too susceptible to withdrawals (for example, if the engine seizes on the car, or you face unexpected medical bills, or one of your kids needs braces and the other needs contacts…you are probably beginning to see the picture). For this reason, make your own rainy-day fund and keep the money for your kids separate.
What you should really do is make some investments on their behalf. While you can certainly start a portfolio (and this is generally a great way to get your money earning for you), stocks can be a risky proposition (as we’ve all seen with the stock market drop of the past couple of years). Bonds, however, may be a safer bet. What makes bonds a neat idea is that you can put them in your children’s names and set them to mature when each child comes of age. In the meantime, they remain untouched, earning interest. If you save up over the course of a year to purchase new ones, you may just have enough money to send each child to college when they graduate from high school.
CDs are another great choice along these same lines (although their maximum maturation date is 5 years from purchase). And if you want to try to earn more by playing the stock market, you may come out ahead. As with any portfolio, the best option is to diversify in order to hedge your bets. If one area of investment goes belly up, you’ll still have the others to fall back on.
As for how to start with a savings when you don’t seem to have two nickels to rub together, you may want to talk to a financial planner. Any budget can be cut to accommodate at least some form of savings (although you might have to scale back on entertainment, eating out, and family vacations to make it work). Even if you can only put away $20 a month for each child, it’s a start, and maybe down the line you can do more. Once you send your children off to college knowing that they can afford to complete their degrees, or help them to make the down payment on their own first home, you’re going to be glad that you started saving when they were young.
Sarah Danielson writes for Adiamor diamond engagement rings where you can find the perfect Valentine’s Day gift for the one you love.