According to the latest United States Department of Agriculture in their latest release last month of “The Cost of Raising a Child'”, they note that it will cost on average between $12,350 – $13,900 a year to raise a child born in 2015. When you add that up, it’s a whopping $233,610 from birth to 17 years of age. If you are in a higher income bracket, that cost might sky rocket to $372,210 per child. If you have kids, did I clear up why it’s so hard to save for retirement?
We have three kids and my oldest is 13. Over those 13 years it’s been both a battle of paying off debt, properly raising our children and taking our best crack at putting away some money into a retirement fund, but it hasn’t been easy. Then after you raise your children, then there is college which is expensive and then they get married which is expensive as well. How will we ever pay for it all? The way to start paying for it is to plan for it now.
Here are our steps for paying for it all:
“Bucket” our Money
Take a look at how we “bucket” our money to see one aspect of what we do. Every month we automatically put away a certain amount for weddings because we know we have 2 girls and a boy who will eventually find Mr. or Mrs. Right. You may say Drew, your crazy… It’s going to be another decade before any of your children think about getting married. I will tell you I know and that’s the point. I won’t have to take a loan or dip into our retirement to fund this grand celebration, the money will just be there to support it. No stress!
If I save $75 out of every paycheck (Twice a month) into a interest bearing account, I will have well over $18,000 ready to go before my oldest even thinks about taking that first step into marriage. Or I can just wait and figure out how to get almost $19well ,000 10 years from now. Which way would you go?
College 529 Plan
We also invest per child into a 529 Plan for College. This is the Ohio plan since we live in Ohio, and you don’t need to live in Ohio to take advantage of it. However, I completely understand if you would prefer to take advantage of what your state has to offer first. We started out with just $50 per month per child and to our surprise over the time we have had this going, it has emassed quite a little egg for each one of our kids for college.
The benefit of a 529 plan is that you can invest your money in mutual funds and it grows completely free of state and federal income tax. When your kids are ready to go to college, the funds can be withdrawn without any penalty or tax assessed which is where the benefit is.
Do you have any other creative ideas to save money for retirement while raising kids? Share your ideas…