Parenthood: Joys and Expenses

Parenthood can be both wonderfully rewarding and frighteningly challenging. Children give gifts only a parent can understand, from sticky-finger hugs to heartfelt pleas to tag along on Saturday morning errands. You raise them with a clear goal that you simultaneously dread—that someday they will be grown, independent and ready to move out on their own, and your work will be complete.

As you raise them to make sure they get a good, strong start in life, one thing is obvious: children are expensive! Fortunately, you can take steps to prepare.

Reassess your budget.

As your family grows, you may need to make changes to your budget. Many living expenses will increase, including grocery, clothing, transportation, healthcare, insurance and housing costs. You will probably also need to account for new expenses, such as childcare, or adjust your budget to account for a decrease in your income, if you decide to become a stay-at-home parent. Your budget may also need to expand to include new financial goals, such as saving for college or buying a home.

Review your life insurance coverage.

Life insurance is an effective way to protect your family from the uncertainty of premature death. It can help assure that money will be on hand to replace your income and help your family maintain their standard of living. With life insurance, you can select an amount that will help your family meet living expenses, pay the mortgage and even provide a college fund for your children. Keep in mind that the cost and availability of life insurance will depend on factors such as age, health and the type of insurance purchased.

Start building a college fund early.

According to the College Board, for the 2018/2019 school year, the average total cost of one year at a four-year public college is $25,890 (for in-state students), while the average cost for one year at a four-year private college is $52,500. That cost really adds up for a four-year degree!

College costs may seem daunting, especially if you’re still paying off your own college loans, but you have about 18 years before your newborn will be a college freshman. By starting today, you can help your children become debt-free college grads. The secret is to save a little each month, take advantage of compound interest and have a sum waiting for you when your child is ready for college.

The following chart shows how much money might be available for college when your child turns 18, if you save a certain amount each month.

Child’s Age Now	$100/month	$200/month	$300/month	$400/month
Newborn	$38,735	$77,471	$116,208	$154,941
4	$26,231	$52,462	$78,693	$104,924
8	$16,388	$32,776	$49,164	$65,552
10	$12,283	$24,566	$36,849	$49,132
14	$5,410	$10,820	$16,230	$21,640
16	$2,543	$5,086	$7,629	$10,172

Table assumes an after-tax return of 6%, compounded monthly. This is a hypothetical example and is not intended to reflect the actual performance of any investment. All investing involves risk, including the possible loss of principal, and there can be no guarantee that any investment strategy will be successful.

Prioritize saving for retirement.

Many well-intentioned parents put saving for retirement on hold while they save for their children’s college education. But if you do so, you’re potentially sacrificing your own financial well-being. If you postpone saving for retirement, you might miss out on years of tax-deferred growth, and it may be hard to catch up later.

Ideally, you’ll want to save regularly for both goals. but if you have limited funds, prioritize saving for retirement. Your child may receive financial aid to pay for college, but there’s no such option for your retirement.

Questions? Contact a CFS Financial Advisor.

Grow has contracted with CUSO Financial Services, L.P. (CFS) to provide investment services, and your CFS Financial Advisor will help you build a plan that meets your needs. The advisor will look at your current spending, saving and investing, learn about your goals and priorities, make objective recommendations and support your efforts moving forward through the implementation and management of your plan.

Schedule a Complimentary Consultation

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members. For specific tax advice, please consult a qualified tax professional.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.

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