Once you have a child, your priorities get shifted around. Suddenly you are spending a lot more time focused on your child when you used to have a lot of extra time on your hands. You need to think about your child's future. Similarly, you may be focusing a lot more of your money on caring for your child, when you used to have extra at the end of the month. You may already be concerned about saving enough to send the little one off to college. So how are you going to do it?
Many parents are tempted to put off saving for retirement in order to save for their children’s college fund. However this is a big mistake. It is important to continue to put the same amount towards retirement each month, as you were before you had the baby. In fact you should be striving to be putting fifteen percent of your income into a retirement account before you even think about saving for your child’s college.
After you have done that you should start saving for your child’s education. You should look at a 529 savings plan as an option. You can also begin to invest the money in mutual funds or other high yield savings accounts. The earlier you begin to save, the less money you will need to put aside each month.
Saving for your retirement first will protect you and your future. Your earning power will increase as you grow older, and you may be able to pay for a lot of the expenses as you go or you can have your child help out as well. Additionally, you can find ways to make extra money when it comes time to pay for your child’s education, but it is a lot harder to make up any difference in your retirement account. If you have a child with special needs, you will also need to create a financial plan to help care for him in the future.
A solid family financial plan can help you to make the best financial choices for your family and your long-term goals. It will keep things like home ownership and retirement on the radar when you may be more focused on short-term expenses like daycare costs or paying for formula. It is important to create a solid plan so that your family is equipped to handle everything from college to retirement.