Never mind saving for the children's college education. If you have children, or expect to have them, you've got a few other
expenses to think about first, like a hospital birth, diapers, child care, braces and Air Jordans.
The hospital birth may run about $1,500 for a one-day stay. Medical checkups, which are not always covered by employee insurance programs, could set you back $1,000 for the first two years. Count on $1,500 in medical costs until each child is 14 or 15 and has had all the necessary immunizations, plus the flu, broken bones and jammed fingers.
Budget the cost of diapers at $1,500 for about two years -- if you're lucky with toilet training. Full-time private day care can cost more than $7,800 a year. Braces may take a $2,000 bite out of your savings -- no discount for twins.
And the Air Jordans? Figure $125 for a pair of size nines.
Then there's the college education, with a tab of $10,000 to $20,000 a year in today's dollars.
After contemplating the costs of children, childless couples may decide to go to the theater instead of the bedroom. It's much less expensive in the long run.
But you don't have to be intimidated by the cost of rearing and educating children, says Paul Nastasi, a principal with A. J. Perry Co., a financial consulting firm in Baltimore.
You just have to think realistically about your children's future -- and save as much as possible.
"Tuition is really the big expense," says Mr. Nastasi. "But when they're 2, you don't know if, or when, they're going to college. Just start saving whatever you can. It's easier to save money over a long period of time than to try to do it in a year or two."
Fran Smith of the American Financial Services Association in Washington says it is important to start saving when your children are very young. "Early on, if you start putting money away with interest compounding, it can be worth an incredible amount more than if you started 10 years later."
Mutual funds are an ideal way for young families to save money for children's emergencies and necessities, private schools and college tuition, says Malin Jennings, public information officer for the Investment Company Institute in Washington.
"If [parents] have money in a passbook savings account at 5 percent, it's every bit as liquid in a money-market mutual fund that brings in a higher rate of return," she says. "If it's put in a tax-exempt mutual fund, there are even more advantages.
"Passbook savings are federally insured, and money-markets are not," Ms. Jennings acknowledges. "But no one has ever lost a dime on a money-market fund."
Some mutual funds are good for parents who need access to their money not provided by more rigid investments, such as long-term certificates of deposit, Mr. Nastasi says.
"Most parents go about saving by putting money in a bank where they have a lot of peace of mind," he says. "If your child is 16 and you're trying to save a vast amount of money in a hurry, you've got to do safe investments like that.
"But if you're dealing with a younger child and a small amount of money, look a little harder at stock mutual funds, particularly no-load mutual funds, where you can buy a little piece of 75 or 100 different stocks."
(No-load mutual funds don't charge fees when you buy into the fund or take out money. But every fund charges an "expense ratio." Mr. Nastasi says the average stock fund has an expense ratio of about 1 percent of the value of the fund investment.)
"Some money-market mutual funds, such as the Twentieth Century group, require as little as $1 to open," Mr. Nastasi says.
"You lose some choices with these funds, and they are a little more aggressive" with the money than a bank would be, he says. "But often that's appropriate."
Some people buy universal or whole life insurance policies to create another kind of savings fund for children's needs. Parents can borrow against the cash value of their
policy and pay back the loan, usually at low interest, to keep the policy current. Or, if a parent dies, part of the policy proceeds can be used to pay children's expenses.
Most young couples with babies are struggling to come up with the rent and the grocery money, let alone a few thousand dollars to invest. But Ms. Jennings says any amount saved helps.
"It is real useful to do an automatic deduction from your paycheck, even if it's just $25," she suggests. That money might be set aside, tax-deferred, in an investment or retirement account set up by your employer. But if you might need the money for child care or medical expenses, make sure you're aware of the withdrawal restrictions.
"For a 1-year-old child, $520 saved per year in a 6 percent money-market account at a bank for 18 years is almost $17,000," Mr. Nastasi says.
"That's a year and a half's worth of tuition. And when you add in things like financial aid, loans or having the student work, [college] begins to look more realistic."
Young parents who need help budgeting for their future needs can get it from a number of sources. Stockbrokers, bankers, mutual fund companies and financial consultants can help families build their savings plans.
"You could even go to your accountant or lawyer and ask them to refer you to someone, or they may do it themselves," Mr. Nastasi says.
"You should look for a place that will offer both saving strategies and products," not just a company with investment products to sell, he cautions. "Financial products are not the solution to all financial questions. Sometimes what's preferable is a strategy solution."
Like the strategy offered by mothers to their newly married sons and daughters: Think positive -- you're never too poor to have children.
Adriane Miller is a free-lance writer who often covers business issues for The Sun.