Have a newborn that is a few weeks old you start to already think about the future, like do I start saving now to pay for college? Should I start putting money away to pay for her future wedding? Or if she doesn’t get married by a certain time, do I allow her to use for a down payment for a house? It seems odd to think about things like this after only being home from the hospital a little over a month, but I think it is the responsible thing to do, wanting the best for my child, and if we only have one, I feel like we should do our best to financially provide for everything she needs, but what is too much?
Both my wife and I paid for our own college, in fact we finally just paid off our loans after being out for nearly a decade, which could be good or bad, depending on how you look at it, but at least we are free and clear. It’s not that our parents refused, but they just couldn’t afford it, so we did what most do and had student loans and started paying a little after we finished, gradually increasing and finally paying off. When it came for our wedding, we paid for that as well for the most part, although we did have generous contributions from each family which definitely helped. We worked hard to get where we are at, and would we have done the same if our parents paid for our school and wedding, even hearing about some parents that give down payment support on a house as well. I personally rented an apartment for a few years (which looking back now, was not smart), and my wife lived at home until we were married. Would we have gotten as far as we did if our parents gave us everything? I would like to think so, but who can be sure, so that is why I wonder about saving for my daughter’s future.
I think it is important that my wife and I are financially in line to be set for the future first, making sure that we are contributing enough to have funds to live off of in our retirement years. Next, you should ensure that debt is paid off, so that you are not sending your money to other priorities while you are paying interest each month. After that, it is important if I do decide to start saving for her, that we do it now because the earlier the better, and every month that goes by will take more of a contribution going forward to catch up.
With a 529 college savings plan or an Education Savings Account available, it is a good way to contribute to now at a little each month that over the next eighteen years it can grow after taxes, tax free, and at least triple or quadruple what I am putting in by the time she goes to college will hopefully have an enough or at least a majority, based on inflation, or if she chooses to go away to school with room and board charges.
Life experiences is the next piece that I can choose to save for my baby’s future, which in addition to the expected clothes, trips, could include a wedding that typically the father of the bride pays for, or at least a large portion of it. The tricky part is, what if she decides to wait for marriage, should that money just sit there, or should it go towards a down payment to a house instead of renting an apartment after she is out of college and wants to move out? Since savings account rates are so low, a great way to save that grows over time much like a college savings plan, is a brokerage account, that I can start contributing low payments each month towards, that over the next twenty-five years or so will easily have enough money to pay for a wedding or home of her dreams.
While parents are everyone’s preference, I am choosing to fund my child’s future, and that may look to be spoiling rotten, but I also think it is financially responsible to help her out with college so that student loan debt will not loom her for years. Beyond that, I’d like to start saving for a wedding now so it will be less of a $40,000 burden when it comes. As far as home ownership, being able to save is a life lesson and one to be taught, so the jury is still out on that one.