Having a baby is fun, crazy and a little bit scary. Smart planning can help you cope more easily with the day-to-day costs, while setting your family up for a bright future.
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We know there’s a lot on your plate right now, from painting the nursery to stockpiling diapers, but there’s one more must-do item: a college savings strategy.
Having a baby is expensive. So how are you going to find an extra $50 or $100 each month to sock away for college? It may seem like a long way away, but it’ll be here before you know it. Starting early is key to getting the most out of a college savings account like a 529 savings plan. As a new parent, you’re in a great position to really get ahead of the game.
Your phone is one of your best budgeting friends. Use apps to find the lowest prices on big-ticket items, as well as essentials. You could even clip digital coupons and lower the cost of household basics with automatic reorder and delivery.
If you're getting a hefty tax refund each year, you and/or your partner may be having too much withheld from your paycheck. Ask a financial professional about adjusting your tax withholding to increase your take-home pay. Then consider setting up an automatic transfer to put that "extra" money toward a 529 savings plan.
Credit cards offer rewards and rebate programs that could help you save a little extra to put in the college fund. Use online spending trackers to see where and how you spend, then look for a card that offers cash back on those areas. For instance, if you spend $80 a week on groceries, a card with 5% cash rebates can earn you $200 a year. That's another chunk of change that can go to your 529 savings plan. Every little bit helps!
To make a budget, you need to know how much you spend. Keep track of all your expenses, including every coffee, subscription service, etc. Then organize it by category: groceries, utilities, entertainment. Next, create a budget that tracks how your expenses measure up to your income, and start looking for ways to cut back.
Check your health insurance to make sure it covers as much as possible. Comprehensive coverage can save a bundle on ultrasounds, checkups and the delivery room. Consider raising your deductible on things like car insurance to lower your monthly premiums. Raising your deductible from $250 to $1,000, for instance, could save you 15% or more off your premium. You can contribute a portion of monthly savings to a 529 savings plan.
Skip the plush talking giraffes and state-of-the-art bottle warmers in favor of basics that will see you through baby’s first year: diapers, burp cloths, bottles. Did we mention diapers? You can always borrow, swap or buy secondhand baby clothes and gear from friends and family.
Once you’ve found ways to save a little extra, remember to set up a system for depositing it into a 529 savings plan. If you leave it in your checking account, you’re likely to spend it. Setting up automatic transfers is a good way to make saving simple and quick.
Ready to create a detailed plan?
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