The most famous baby in the world right now is Prince George of
Britain. But despite his fame and royal lineage, this young man
will probably go through many of the same growing pains as other
children over the years: teething, awkward growth spurts, acne,
anxiety over who to ask to the prom (well, perhaps the royal ball
in the prince's case) and so on.
However, one thing the new prince and his parents won't have to
worry about is money. The royal family is estimated to be worth
over a billion dollars, and this particular young man already has a
pretty good job lined up -- the British monarch gets a salary that
would satisfy most Fortune 500 CEOs.
In contrast, for typical families the joy of a new child is
accompanied by a series of new financial responsibilities. These
responsibilities can be extremely burdensome if you don't save up
in advance -- if possible, starting from the time you first decide
to have children. Here are some of the most prominent financial
burdens parents may encounter.
Of all the financial emergencies which can befall young
families, perhaps the most challenging is the loss of a job. Since
providing food, clothing and shelter is a parent's most fundamental
responsibility, you need to have a financial contingency plan in
case you lose your job. The Bureau of Labor Statistics estimates
that as of mid-2013, the median duration of unemployment was about
16 weeks, so you would do well to set aside enough savings to meet
16 weeks of expenses.
Many experts suggest
or money market accounts for emergency funds because they allow
immediate access, but since
certificate of deposit
rates can be much higher than savings account rates and the chances
of tapping into the fund is small, you might do better with a CD
and simply paying the penalty for early withdrawal if
At around $5,000, this is a major expense for many growing kids,
and one often not fully covered by medical and dental plans. See if
you can augment your health care insurance by participating in a
health savings account through your employer.
3. First car
In this situation, your child should learn by sharing the
financial responsibility. When you
open a bank account with your child
for this purpose, it is an opportunity to teach about shopping for
the best savings account interest rates and how to monitor the
account. A savings or money market account may be the best choice
for this, since the money is likely to accumulate slowly over
According to The Economist, average tuition reached 38 percent
of the median annual income in the U.S. in 2010, up from 23 percent
in 2001. To afford this without smothering your child in debt,
start saving early and consider a Section 529 plan to get tax
advantages for education saving.
Whether you are William and Kate or a typical American parent,
new parents soon realize that the biggest change having a child
brings is the constant responsibility -- every hour of the day,
every day of the year. If you recognize that by saving for your
child's needs continuously, you will be better prepared to meet the
financial responsibilities of parenthood as they arrive.