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Making the Most of Your Money in the First Years

expecting first months with baby Oct 25, 2023

Kids are expensive! The first few years of parenting are a constant state of change, new and changing expenses. 

Below is Part 2 of the highlights of our conversation with Jamie Hanson, a seasoned behavioral financial advisor at Akamai Advisors and mother of two, where we discussed strategies for setting a strong financial foundation, with tips parents can leverage early on and continue adapting through college & retirement years. Read Part 1 here, and check out the full conversation from our events page.

Making the Most of your Money in the First Years

How do you make the most of your money (and save some!) as you’re getting a handle on all the new kiddo-related expenses?

In Jamie's experience helping others, many express uncertainty about where to start. However, through careful examination, she's uncovered hundreds of dollars in overlooked expenses or items that were not being utilized. People often underestimate their spending on certain items, and setting realistic goals based on accurate figures can be a game-changer. 

1. Review Subscriptions Regularly

At least a couple times/year, review the subscriptions you have and ask yourself (*cough* each other): are we getting the value for our money?

Are we using it? Did we sign up for a free trial to watch one show and forget to cancel? Have our kids grown out of a particular service?
For subscriptions we are using (internet, dish, cell plans, insurance) - is there a deal we can call and ask for? Jamie recommends shopping around every two years to uncover better deals.

2. Set up parental controls to avoid “oops”

For any device your little one touches, turn off in-app purchases!
And for your Alexa, set up parental controls/turn off voice purchasing - my kids definitely cost their Nana unexpected money by requesting the Trolls song on Amazon music instead of her free Pandora or Spotify…

These seemingly small oversights can quickly impact your budget without you realizing it.

3. Consider Budget Billing for Utilities

Budget Billing for utilities allows you to level out your payments throughout the year, preventing the strain of hefty winter bills and freeing up unexpected funds.
It can take you a bit of time to set this up, but is a practical way to even out your cash flow throughout the year.

4. Groceries, Dining & Gas

You don’t have to give up dining out or the convenience of takeout altogether - but check that you’re balancing it in the full picture of your finances and values.

Being organized about your shopping & meal planning can help reduce food waste (saving you money) and reduce stress (what are we doing for dinner tonight??).

Jamie also highlighted looking at where you shop - what’s close (saving you gas and time)? How does that balance with the store with the selection that works for your family food values?

5. Address Debt.

Despite the current higher interest rate environment, debt consolidation or a home equity line of credit if you own a home is likely still more favorable than most credit card interest rates.
Talk with a financial advisor on specific ways that you can ensure more of your money goes towards reducing the principal amount rather than paying out interest.

6. Review your Employer Benefits

This is a BIG ONE. Are you taking advantage of everything your employer offers?

Some common benefits to look at & learn about:

  • Health Savings Accounts - Depending on the plan, you often can roll money over year to year. Many come with employer contributions. And, you can start small - $20/month is still $240/year and can create a nice reserve fund for future orthodontics or buffer against the unexpected urgent care visit fee.
  • Dependent Care Savings Accounts - save $1,500 annually!!
  • 401(k) - contributing is a must, especially with an employer match—free money!
  • Some employers pay for services like discounted legal assistance or debt consolidation. You can use these to save on tasks like setting up powers of attorney or guardianship for your kids.

Many people underestimate what's available. Spending some time navigating your HR website or having a conversation with an HR representative can be a wise investment in your financial well-being.

Where to Put Your Savings

Okay. So now that we've saved all this money - Where's the best place to put it while we have young kids? 

Some suggest using a Roth IRA if your child has a job, but this might not be applicable for younger children unless they have a modeling career (my kids jobs of "clean your room" and "please start the dishwasher" are not Roth-eligible). Others consider saving in a regular bank account, CDs, or high yield savings funds.

Jamie recommends your state-sponsored 529 plan, such as Edvest as the best option. Unlike blackberries in my fridge, money in your 529 doesn’t go bad. 

Key benefits: 529 Edvest College Savings Accounts

  • Allows you to use up to $10,000 annually for private school education from elementary through high school.
  • Use up to $10,000 to pay off student loan debt.
  • Up to $35,000 can be transferred to a Roth IRA, which opens up the possibility of utilizing these funds for retirement if your child secures an academic, athletic, or artistic scholarship.
  • You can shift who it's for - if your child doesn't require it, you can transfer the account into someone else's name (like a grandchild, godchild, niece, etc).

Pro Tips:

  • Ask others to contribute money as birthday or holiday gifts; or, have others buy the birthday toys so that you contribute to the 529. (Your 1 year old won’t notice now and will appreciate it later).
  • For the really proactive out there: You can set up an Edvest account before having a child and contribute for years before your child is born, transferring the account to their name once they have a social security number. 
  • Tomorrow's Scholar is another 529 option, but your financial advisor will take a commission for every dollar you invest. Signing up for Edvest means no extra fees.

Learn more about the WI 529 plan: www.edvest.com

Jamie’s Best Practice: Delayed Gratification

Some delayed gratification is a good approach for a strong financial foundation - both for us, and our kids.

Some pro mom tips:

  • When your kids ask for something at the store, take a picture of it. Add it to a holiday or birthday list. This helps instill the concept of delayed satisfaction and prevents impulse purchases...as well as allows for reflection and reconsideration. 
  • Make the act of buying something special. Jamie's oldest knows to bring her own money, and she usually chooses not to spend her money unless it's truly something she wants.

Ultimately, it's about distracting your kids (and ourselves...) from the immediate desire and encouraging them to think about the bigger picture. Whether it's putting items on a wish list for upcoming celebrations or revisiting toys at home, it's a matter of redirecting their focus. Raising kids involves navigating their emotional landscape and finding ways to help them manage their desires without succumbing to impulsive behavior.

Reflecting on our own actions is crucial too. Are we buying something in the moment due to convenience or to avoid dealing with a situation? Understanding our own feelings can help us better guide our children through the complex world of wants and needs.

Is this really important to me? 

Your brain tells you.

So listen to that, listen to what's most important to you as a person, and also for your family.

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