Thursday, November 21, 2013

Our Greatest Kid-cost Savings Come Between Ages 2 and 4

Kids can be costly, but they don’t always have to be as expensive as they’re made out to be.  Sure, things can happen -- health issues or childcare situations -- that can indeed raise the price of having kids, but sometimes there are significant savings to be had as well when it comes to kid costs.

As a parent of two kids myself, and as a work-at-home dad, I’ve begun to realize that after the birthing process and all those initial baby costs are covered, our greatest kid-cost savings come between ages two and four.

Ditching those pricey baby needs
A article notes that, “According to a 2010 USDA report, the average middle-income family will spend roughly $12,000 on child-related expenses in their baby’s first year of life. By age two, parents are up to more than $12,500 per year.”

Thankfully, our costs were nowhere near this high; however, they were still significant.  And while there are many one-time costs involved with having a baby, there are certain expenses like diapers, wipes, formula, and food that can keep the costs coming.  That same article when on to say, “Parents can count on spending close to $50 per week ($2,448 per year) on diapers, formula and baby food alone.”

We don’t spend quite that much since we buy store brand products which are often 25-50 percent below the name brand prices; however, once we get past the potty training phase and our child starts moving away from formula into solid foods, our costs drop dramatically.  This is why I tend to make a push to start such transitions earlier rather than later. 

Cutting out diapers, wipes and formula alone will put about an extra $80 to $100 into our pockets each month.

They’re smart enough, but not too smart
By age two, many kids are starting to catch on to things pretty quickly.  I like to call ages two to four the “perfect” years.  Kids are hitting that point where they are smart enough to listen and obey, but they’re not smart enough to care too much about what they wear or don’t wear, what brands they eat or use, and where we shop.

This means that it can be a great money-saving period.  During this age timeframe, we shop for most of our clothing needs at resale locations and garage sales.  Since at this age range our kids aren’t in school yet, they don’t need to have the latest trends or what everybody else has.  We can accept hand-me-downs, and we don’t have to have name brand foods from the store.  In these ways, we’re able to keep our clothing costs for a family of four around $300 a year, and food and entertainment costs around $300 a month.

Fun is free! (or at least cheap)
An article in The Florida Times-Union notes, “Informal surveys show that in recent years, on average, parents spend $200 to $400 on birthday parties. And some wealthy families may spend up to $5,000 or more, said Heather Downs, a professor of sociology at Jacksonville University.”

After that first birthday party though when it’s often more about the parents and family than the child, we’ve found that such costs aren’t always necessary between ages two and four.  The kids are often fine without hugely expensive birthday parties and they’re just happy being with friends and family whether it’s at the local park or playground, a McDonald’s playland, or even grandma and grandpa’s house.

A trip to the library, the zoo, parks, and playlands can act as perfect entertainment (and great ways for the kids to burn energy) at low cost levels.  And the best part is that the kids are often just as happy as if you’d spent hundreds or even thousands of dollars on entertaining them.

So the next time you’re thinking that the costs involved in raising a baby won’t ever ease, just remember, there may be opportunities right around the corner for cutting those expenses dramatically.



The author is not a licensed financial or parenting professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Sunday, November 10, 2013

Saving or Spending, these Calculators are Key

Whether you’re planning to save money for a particular financial goal such as a vacation, new car, a home, or retirement, or spending money to fund an investment, pay off student loan debt or reduce consumer debt, there are certain financial calculations that can come in handy.  You don’t necessarily have to be a mathematics wizard or financial analyst to harness the power of these financial tools though.

While I had the benefit of a financial education, with the Internet as a tool these days, even someone with a basic understanding of personal finances can make use of certain calculators, which whether saving or spending can end up resulting in huge financial ramifications.

Determining future values
If I invest $1,000 each year at a 3 percent annual return, how much will it be worth in 5 years?  10 years?  30 years?  What if I change that rate of return to only 2 percent?  Or maybe increase it to 5 percent?

Knowing how to put a lasso around these numbers and being able to harness them to my advantage is critical to understanding how my money can grow, or conversely how debt could grow as well.  Future value calculators can be incredibly important tools used to forecast a variety of investment situations such as returns on certificates of deposit, savings bonds, savings accounts, and money market funds, or determine how to best pay down or pay off debt.

Payment calculations (savings installments)
Ever wonder how much you would have to invest each month at a certain percent interest to save a million dollars?  Even if it’s not a realistic goal to shoot for, you may have considered it or at least something like it. 

Well, by taking that future value equation and swapping it around so that you’re starting with an end goal in mind -- say, a million dollars -- and attaching an associated timeline and interest rate, you can find out.  For example, let’s say you want to save $500,000 for retirement over the next 30 years and are sure that you can get a guaranteed rate of return of 3 percent compounded annually on your savings or investments.  A payment savings installment calculator would reveal that about $10,509 a year -- or around $875 a month -- would need to be saved. 

If nothing else, its kind of fun to play around with the numbers to see what is possible.

How to amortize a loan
But life isn’t always about saving money; and for many of us, more often than not it’s about spending money and taking on debt.  However, understanding how that debt is to be repaid can make a big difference in the amounts we put toward that debt and under what kinds of timeframes.

Figuring out what our payments will look like over time on things like a mortgage, student loans, or vehicle loan by way of an amortization schedule calculator can help us decide things like how much money to put down up front, how long of a loan to take on, and how much principal we’ll be paying on a loan compared to interest. 

With the use of such online calculators and calculations, financial issues that might seem rather befuddling can become clear quite easily and with the input of just a few numbers.  Taking advantage of these tools can end up saving thousand of dollars and clearing up some of the confusion that can accompany making certain financial decisions.


The author is not a licensed financial professional.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Calculations have not been verified by a professional.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.