Congratulations! This is an exciting time for you. It can also be a little scary as you move into the next phase of your life from couple to FAMILY. Marketing campaigns capitalize on the emotions of parents-to-be, convincing them that this joyous occasion cannot be successful without costing a small fortune. Today we’ll talk about ways to save money preparing for this wonderful event. We’ll cover costs, budgeting and some financial traps to avoid.
We hear “quality” time is more important that the “quantity” of time when raising children. Things can never replace time and love. Would you tell your boss “I’m not going to work the whole 40 hours this week, but the time I do work I will give you the best quality”. It wouldn’t work on your boss and your children won’t buy it either.
The average cost of raising a child from birth to age 18 increased from $170,460 in 2001 to 226,920 in 2011. (There are 7 main categories which the USDA uses to calculate cost: housing, food, transportation, clothing, health care, child care, education and misccellaneous goods and services.)
The average annual food cost ranges from $6576.00 to $12807.60 . Breastfeeding will save about $40 per week and about $2,000 per year in formula and bottles. Breast feeding can certainly minimize that expense but there are some hidden costs associated with breastfeeding. For example, you may need to purchase or rent a breast pump, an essential for moms who work outside the home. Nursing bras and breast pads are also common expenses. Formula: The cost of formula shocks just about every new parent. The general rule of thumb is that a baby needs about 2.5oz of formula per pound of body weight per day. Powder formula is less expensive than liquid. All of it is regulated by the FDA so generic is o.k. Sign up for free clubs at Dr.’s office, drug stores, supermarkets. Look for coupon websites or contact manufacturers directly for coupons and discounts. Food Program for Women, Infants and Children (WIC). WIC is a nutrition program that assists mothers and children under the age of 5 to eat healthy. Women who are pregnant or breastfeeding, infants and children under 5 who meet the income guidelines and have a nutritional need receive nutrition education, free nutrition check-ups, support with breastfeeding, health care referrals, healthy recipes and access to healthy foods. www.mypyramid.gov : nutrition information on website. Also has an annual cost of raising a child calculator.
Fairfax County – average child care rates – weekly Infant - $185 - $210 (Family Child care provider) and $269 - $296 (child care centers) 2008 costs: According to the National Association of Child Care Resources & Referral Agencies (NACCRRA), (naccrra.org/militaryPrograms/) daycare costs for babies and toddlers in the United States range from $4,388 - $14,647 per year ($366 -$1,211 monthly). The costs go down as the children get older. The child/caregiver ratio is higher. Baby & Toddler care - Washington DC - $11,000 per year ($917 a month). Most expensive states for pre-school age children, in order: Washington DC, Massachusetts, New York, Minnesota, Oregon, Connecticut, Washington, New Jersey. Check into putting your childcare money into a pre-taxed account called a Dependent Care Pre-Tax Expense Account.
Most people who have money didn't get it overnight. They set goals and worked hard to reach them. Financial goals take planning, patience and a willingness to work hard. They require discipline and, sometimes, changes to your lifestyle. There are three types of goals: Short-term goals. These are goals you'll set and accomplish within one month to one year . Goals can include birthday gifts, holiday gifts, taking a family vacation, paying off a credit card or buying household appliance. Mid-term goals. These are goals you'll set and accomplish within one to five years . Goals can include paying off all your credit cards, purchasing a new car, remodeling your kitchen or saving for orthodontic work for your children’s teeth. Long-term goals. These are goals you'll set that will take five years and longer to accomplish. Goals can include buying a new house, saving for a child's education (college or trade school) or saving for retirement.
Tips for achieving goals: Write down your goals. This makes you responsible for them! Figure out what the goal will cost…this may be easy for short-term goals, but for long-term goals, you may seek the help of a financial professional or financial software. Set due dates for attaining your goals. Be realistic. (Don't increase financial stress in your life when setting goals and dates.) Be flexible. (It's okay to adjust your goals and strategies.) Remember to prioritize your goals, focusing on the most important ones first. It’s ok to have more than one financial goal, just remember that you will only have some much money to put towards each one. Putting a little bit of money towards a lot of goals may not be as effective as putting all or most of your money toward your most important goal, and then focusing on the other goals once you achieve it. Review your goals. (Go back and look at your goals at least every six months to check your progress.)
We live in a society that has taught us to &quot;buy now, pay later.&quot; This method has caused some consumers to overspend and become knee-deep in debt. You need to take control of your spending and realize that your financial situation can be improved with proper budgeting. Unless you're tracking your money, it's probably not going where you really need and want it to go. A household budget is a spreadsheet that shows you the flow of money in your everyday life. A budget can help you determine where you are overspending as well as help you adjust bad spending habits. A budget is comprised of four areas: Net Income. Includes your salary, wages, child or alimony support, Social Security, pension, investment earnings, etc. Net income is the amount you bring home after deductions (such as taxes, insurance, pension contributions). Net income is used to maintain a household budget, which pays all your living expenses and debts in your everyday life. Living Expenses. Includes your food, utilities, insurance (auto, life and health), education, gasoline, personal care, child support, charitable contributions, entertainment, etc. Secured Debts. Includes your rent or mortgage payment, student loans, auto payments, past-due taxes and other secured debts and loans. Unsecured Debts. Includes your credit cards, department store cards, medical bills, bank and personal loans. The amount of money that is left over is your disposable income. If the number is negative, then you have a deficit and you may want to seek the advice of a financial professional. When you prepare a household budget, you can predict monthly net income and monthly living expenses. When you subtract monthly living expenses from monthly net income, you can monitor your cash flow. Understanding your cash flow will help you see how much &quot;disposable net income&quot; you have left over each month to save toward your financial goals.
Tips to budgeting: Track your spending; The most common and simple way to track spending is to take a piece of paper (or use a computer) and write down all your monthly living expenses and other monthly bills. Based on your monthly net income, you should set &quot;target amounts&quot; per expense (such as $200 for food, $100 for entertainment, etc.). By setting target amounts, you can monitor where you are overspending each month. Overspending leads to financial problems. Look for expenses to cut back on. Each month review your expenses. By doing this, you'll be able to see where overspending is occurring and adjust it accordingly. Use this information to set a monthly budget that includes putting money aside for savings. Get in the habit of &quot;paying yourself first&quot; by establishing a savings account. This will allow you to set aside money for emergencies and other financial needs. Using financial software such as Quicken or Money makes it easier to create a budget and track spending.
Need: crib, clothing, blankets Want: Nursery Suite, designer clothes, custom bedding Second Hand Items: use caution and keep safety in mind. Check for recalls, broken parts, safety standards, lead paint. Check out second hand stores, yard sales, eBay ( two items you don’t want second hand: Cribs & Car seats ) Look at your budget. Once baby arrives you’ll have more expenses. Try and find where you can cut back so you can balance your budget. Update W-4 check on irs.gov, withholding calculator (series of questions & will figure out what you’ll need to pay in for 2010). Child Tax Credit: $1,000 per child Do NOT charge items. Pay cash or use gift cards. You don’t need everything now!!! Check into putting your childcare money into a pre-taxed account called a Dependent Care Pre-Tax Expense Account. If one parent is thinking of leaving the workplace to care for the baby at home, experiment with living on one income to see how feasible it is. Put the second income into savings for child-related expenses. Think twice before buying a new minivan or SUV just because you’re having a baby. Consider payments, insurance and gas ie. Trading a paid sedan for a luxury SUV not the best move!
Remember: You don’t need everything right now & your baby can’t read labels so they don’t really care if it is designer. Ellie Kay, Military Spouse & author of “Living Rich For Less” suggests 3 ways to approach purchases: Spend you money on the necessities your baby needs. Be conservative when you buy items your baby will grow out of quickly. Take advantage of opportunities to use hand me downs. Buy in bulk. Make own baby food. Save now, wear later (after season sales). Don’t fall victim to marketing. Borrow for your baby (friends & family). Spend money where it matters – car seats & cribs Pick few key pieces – high quality, blend easily, classics. Convertible cribs – pay more now, but can use as toddler through full size. Fads come and go, spend less money on décor that will change as child grows. Safety first – some accessories – dangerous Give old pieces a new life (dressers, rocking chairs) - paint
These are examples of money makers for companies and rarely benefit the customer. Music/Book Clubs: tend to have extra fees, minimum purchase requirement, short return times. Work at Home: the ad says “you can make lots of money working from the comforts of your home”. If this were true, wouldn’t we all be working from home? Operating a home-based business is just like any other business--- it requires hard work, skill, good products or services and time to make a profit. Many of these companies will only sell you training and materials to find customers. Others try to con you with offers to send you an “advance” on your pay then thru a series of manuvers you end up owing the bank money. Remember, if it sounds to easy or to good to be true, it probably is. Rent-to-Own: ads are misleading. Here is an example “ How would you like to rent a new television for as low as $15?”--- sounds great doesn’t it? What if the ad said you can get a $400 TV for $1200--- that doesn’t sound as good does it? The final price has little to do with the cost a nd a lot to do with the # of payments. Somewhere in the fine print you will find the total cost. In our example, if you agree to pay $15/wk for 18mon, that $400 TV will cost you $1,170 (78 x 15). Term Insurance is better than Whole Life. You don’t need life insurance for babies. Extended Warranties: are bad deals because (1)some repairs are covered by the standard manufacturer warranty that comes with the product; (2) products seldom brak within the extended warranty window- after the standard warranty has expired but within the typical 2-3 yrs of purchase; (3) when electronics and appliances do break, the repairs, on average, cost about the same as an extended warranty (so there is no cost savings); (4) quite often the parts that tend to break aren’t covered by the extended warranty
When you’re pregnant, the offers start to appear like magic, It seems like the telemarketers and con men know you’re expecting almost as soon as you do. Everyone has something to sell to make your baby smarter, healthier or safer than the other babies. Deals that sound to good to be true probably are. Social Security Scams: Fraudulent agencies with official sounding names offer to handle the clerical details of getting a SSN for your baby for a fee of about $15. What do you get? The company fills out the application, returns it to you and tells you to take it to your nearest SS office. Getting a SSN for your child is free. Most hospitals offer to submit a SSN application to the SSAdministration when they process the information for a birth certificate– for free Watch for e-mails or letters that say your baby is eligible to recieve refunds from manufacturers of baby food, formula or other children’s products as part of a lawsuit settlement. All they need to process the refund is your child’s SSN. Nothing beats simple human interaction to increase brain development in that critical 0-3yr old period. Instead of buying gadgets and gimmicks, put the money into a college savings plan. Modeling & Photography Scams: A legitimate agency doesn’t ask for upfront fees, they take their own photos. Unless you’re in a big city like NY or LA there isn’t enough work to bring in the “big bucks”. Watch out for photo specials that require pre-payment for a lot of sittings. Companies that have these long-term contracts cont on the fact that most parents won’t come back for all the sittings.
Identify a guardian of your child and a trustee for child’s inheritance – go to legal. Health care coverage – make sure it covers well baby check ups. Don’t forget to add the baby to your policy within 30 days. Life Insurance coverage – should be 5 – 10 times your annual salary. Term insurance is the best.
Ask what they think is an emergency? Add examples that aren’t and question them. Need at least $1,000. Average AER (Army Emergency Relief) loan is about $1,000. Should have 3 – 6 months of expenses saved. In today’s economy, more like 6 – 9 months. When you reach $1000, raise your goal to one month’s expenses. Then raise it to three months’ expenses and so on. Specific things that you can do to move towards your goal: Set up an automatic transfer from checking to savings on your payday. Make it large enough to be a little painfull initially, but not so much that you can’t stick with it. Take a one-month spending vacation. Don’t buy anything that’s not absolutely necessary. Put all of your extra money at the end of the month into your emergency fund. Have a garage sale or sell your stuff on Craigslist or eBay. Some people can generate the $1,000 from this alone. After a raise, calculate how much extra you will get on your first check after the raise, and increase your automatic transfer to your emergency fund by that amount. Don’t increase your spending. Write down all of your expenses for an entire month. Then, pick at least two to eliminate or reduce.
Avoid Scams Create Goals Make a Budget Take a deep breath and enjoy! This is a wonderful time in your lives. Good Luck!
Budgeting for Baby
Providing For Your Child If You Want Your Child To Turn Out Well, Spend Twice As Much Time With Them, & Half As Much Money. Abigail VanBuren
Costs Of Raising A Child First Year Of Life ◦ $11,700 For Shelter, Food, Clothing & Child Care To Age 18 ◦ $226,920 Average NOT Including Pregnancy, Childbirth, Child Care, College or Inflation.
Food Costs Monthly Food Costs for Family of 4: (Children 2-3 & 4-5 Years) Thrifty Low Plan Moderate Liberal $548.00 $697.50 $861.20 $1067.30 Source: USDA, Jan 2012
Child Care CostsMilitary CommunityChild Care Center (CDC): Monthly Fees are Based on Total Family Income Hourly Child Care available
Financial Goals• Short-Term • 1 month to a year • Vacation, crib, car seat, paying off credit cards, etc.• Mid-Term • 1 year to 5 years • Purchasing a car, remodeling, etc.• Long-Term • 5 years + • Buying house, saving for college/retirement, etc.
Financial Goals• Write them down!• What will it cost? • Don’t forget inflation!• What is your timeframe? • Set a due date• Prioritize by importance• Track your progress
Doing Without A Little Now…. Can Gain A Lot More Later On …. • Lunch: $6/day $243,741 • Smoking: $5/day $257,157 • Manicures: $8/week $59,023 • 6-pack a week: $20/mon $147,552 • Based upon taking the money for 30 • years and investing at 9%13
Things to AvoidMusic/Book ClubsWork At Home SchemesRent-To-Own Furniture/AppliancesLarge Whole Life InsuranceExtended WarrantiesHaving the best of everything for thebaby
Things to AvoidConsumer Scams Social Security Scams Child Genius Scams Modeling & Photography Scams
Things To Do Before and After Baby Arrives...- Create or Update Your Wills (Update DD93/SGLI)- Re-Examine Your Health & Life Insurance Needs- Change Bad Habits Before Baby Arrives- Emergency Fund!!!- Get Social Security Number
Prepare for the Unexpected KEEP AN EMERGENCY FUND• What Is an Emergency?• How Much Should You Keep on Hand?• Emergency Money Needs to Be EasilyAccessible • Savings Account • Money Market Accounts
Looking Ahead to College: • Saving for your own retirement is more important than saving for college • The sooner you start saving the better • You don’t have to save the entire cost of four years of college18
Avoid Scams Create Goals Make a Budget Enjoy Becoming a Parent!