Surviving the Cost of Kids
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It is hard to save money when you have kids. The cost of full-time childcare so that both parents can work is astronomical. Adding to those fixed costs are all the extra expenses like activities, camp, baby supplies, toys, birthday parties and even an extra seat on the airplane while travelling. Having kids is expensive!

Once children get into public school, the big spending goes down. However, if you have more than one child full-time childcare expenses could endure for nearly a decade. These are supposed to be your prime earning years but all that extra cash was supposed to go to saving for college and retirement, not babysitting.

So how can you survive and save while your children are young?  Here are my Top Four Action Items to get you saving during the cash crunch years of early childhood:

  1. Find Cost Effective Childcare. The need for childcare varies widely depending on whether both parents work full-time and how much flexibility you have at work. A full-time nanny may cost $2,500 per month, while full-time pre-school will run you $1,900 per month. Co-ops are a cost effective option at a few hundred dollars per month. Figure out how much you can spend and what is right for your family. A nanny share is a great way to get the personalized care of a nanny at half the cost.
  2. Break the Spending Cycle. Stop buying new toys and adding non-essentials to your online purchases of diapers and supplies. Check eBay for the same toys you would buy new. Also, establish a “one toy in, one toy out” policy. This will prevent your house from being overrun with toys and help your child appreciate the new toy. Consign, donate, sell or swap toys your child no longer uses.
  3. Prioritize your spending on your children. If you try to do it all, you will be in the poor house. Pick 1-2 activities per year, one family membership to a museum or club, and set a $15 limit for birthday presents. These discretionary items add up quickly.
  4. Set a goal for education savings (as long as you are already maximizing retirement savings). On average, you need to be saving close to $10,000 per year per child to fully fund public college. If your child is under 10 years old, focus the savings on aggressive allocations in a well-ranked 529 Plan.

Take a look around your children’s rooms and really look at all the stuff they have. I recently spent the summer away from home, and although we brought toys with us, I was amazed by the sheer volume of toys in boxes and bins when we got home. The kids did not miss any of that stuff. Now it is my job to purge those items and keep our lives de-cluttered. My goal is no toys until the holidays, and even then, I am determined to limit this year’s Christmas spending to $25 per child. The money I save will go directly to college savings for the year.

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