With children comes a great responsibility, and you should plan for your and their future carefully, so that your family does not have to face financial problems later.
Parents must start saving when they are young to get best results out of their investment program. Although saving is a difficult regimen to follow, it is essential for young parents to incorporate this practice into their lifestyle at an early stage to gain optimum benefits. Once you start, and the investments begin to bring in returns and dividends, reinvesting these returns is also important. After a while, this will begin to add a substantial amount to your nest egg, much more than you can actually add from your disposable income.
Having some basic knowledge of what you invest in is also critical. Pay special attention to charges and fees with investments like mutual funds and ETFs, and make sure your gains are still reasonably good when these costs are factored in. Never follow expert advice blindly without understanding the reasoning behind predictions or suggestions.
Set saving goals
Young parents must save both for retirement and children’s education. Both of these are high priority areas and require substantial funds. When saving for these future needs, it is necessary to keep tax planning in mind. You should opt for the maximum investment in tax saving vehicles like 401Ks, where employer contributions also add to your nest egg.
While considering a 529 investment, which is aimed at education savings, some care needs to be taken, as some colleges reduce the amount of aid if you have investments in this plan.
How much to save
You should save as much as you can, especially where you get tax advantages. However, even if you cannot manage to save a lot, some amount of savings consistently accrued should be a good start.
When to save
The current financial climate where the economy is still subdued is an ideal time to save. As the economic conditions are likely to see an uptrend over the long term, you will see your investments multiply over a period of 4-5 years or more. Investing in a diversified portfolio for the long term right now is a sound idea considering that prices are on the rebound but haven’t yet approached peak levels. You can also invest some money in stable vehicles like government guaranteed CDs.