Planning For A $300,000 Investment

Have you ever wondered about the financial commitment of raising a child? According to a 2022 study from the Brookings Institute, the estimated cost is $310,605 before college. For new parents, understanding the costs of raising children is a critical yet triggering proposal.

The first step is to understand where your money is currently going and why. I call this a Spending Audit. Several times a year I sit down and look at my own credit card statements to ask myself, "where is this item now," and "is this purchase serving me?"

This makes step 2, Mindful Spending, much easier. Now that we are prioritizing needs over wants, we can make better decisions going forward. Mindfulness takes the emotion out of our spending so we can look at our habits in a more practical way.

Step 3 is to become aware of the tools available to help new parents with rising costs. Chief among them is the 529 College Savings Plan which allows you to build a tax-free investment portfolio for college expenses. If plans change and you don't need the money for college, you can rollover $35k into a Roth IRA for the child.

Raising a child is undoubtedly a significant financial commitment, but planning can help navigate these expenses. Crafting a budget, living modestly, and saving diligently are key steps to managing the costs of parenthood.