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Why That Stroller Strains So Many Parents’ Budgets

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Miami mom Stephanie Viney, 28, says she chose a pricey UPPAbaby stroller for its many features and sturdiness. Baby strollers come in a variety of styles and price points, from $20 to more than $1,000. (Photo courtesy of Viney.)

No one needs to tell a new parent that raising a child in America is a pricey endeavor.

New parents can expect to spend about $233,610 on a child’s basic needs through age 17, excluding savings for higher education, according to the U.S. Department of Agriculture.

One of the first purchases you’re likely to make as a new parent is a stroller. When it came time for Brooklyn resident JiaYao Liu, 23, and her baby’s father to buy a stroller for their baby boy, now 3, they walked into Babies R Us expecting to spend about $80-$100. They were sorely mistaken.

“I didn’t expect it to be that expensive until I went and I looked,” Liu says.“You just want to carry your child from Point A to Point B, and there are some strollers with a whole bunch of toys on them, and I don’t think it’s necessary.”

The couple ultimately purchased the most-affordable stroller they could find. Liu says it was a store brand and the practical choice, based on her needs. Still, at around $130, it was a little outside their price range.

New Orleans resident Demetra Pinckney, 29, had a similar experience when she and her husband picked out a stroller for their baby registry.

“They have some strollers that are $500, $600,” Pinckney says. “I’m thinking: ‘Oh my goodness. No, I have to live. They have good strollers that don’t have to cost you a whole paycheck.’”

The stroller she picked out and ultimately received as a gift cost about $400.

Over the past few decades the baby stroller has gone from a practical parenting necessity to a luxury item for some, says Paul Hope, senior home editor at Consumer Reports. While you can still find a budget-friendly stroller, an increasing number of new premium models are priced north of $1,000.

“What I think has happened is that we have really seen the emergence of a lot of premium brands and they have become sort of a status symbol,” says Hope.

Why are baby strollers so expensive?

Marketers and manufacturers have capitalized on a ripe market, says David Katzner, president of The National Parenting Center, a parent advocacy organization, explaining why more high-priced strollers have entered the market. The organization has reviewed parenting products since 1990 and this year reviewed its first $1,300 stroller.

“For parents, our testers, the sticker shock is remarkable,” Katzner tells MagnifyMoney. He says the high prices prompt some parents to jokingly ask if the stroller is magical — for the money, can it educate the children, or even change a diaper?

Some parents are willing to spend top dollar even for products that will only be used until their little ones are able to walk on their own.

Miami mom Stephanie Viney, 28, says an expensive stroller is worth it if you have the money to spend.

When she and her husband were getting ready to have their first child, Finn, now 23 months old, they picked out an upscale traditional stroller: the UPPAbaby Cruz stroller, car seat and accessories totalling $1,100 for their baby registry.

“It is definitely expensive once you get everything you need; what sold me on it was the big, easy-access basket underneath,” says Viney. The stay-at-home mother and hairdresser says the stroller has held up well and is practical for her on-the-go lifestyle. “The UPPAs are sturdy strong strollers. You get what you pay for.”

A year after they received their first stroller, the couple shelled out $1,200 to upgrade to an UPPAbaby Vista stroller, large enough to hold both Finn and his four-month-old baby brother.

What you’re getting for the money

The most expensive strollers may be made with premium materials like leather upholstery, have some extra padding in the seat area, larger wheels that absorb shock, cupholders or extra basket space underneath. Viney’s UPPAbaby Vista even incorporates a “piggyback” attachment, which will allow one child to stand and ride along when they’re big enough. She and her husband are both tall, so she says it helps they can adjust the handlebar up and down, too.

“With very premium priced strollers, you might get premium materials and construction [or] the brand name, but there are very few categories of anything we test where paying more gets you more in the way of reliability or performance or even longevity,” says Hope.

How to make an informed stroller purchase

Even for Katzner, who has been reviewing parenting products for over a decade, navigating the stroller industry is at times “very, very confusing.”

“Worst of all is walking a trade show floor when they are all just filled with all the same product,” says Katzner, whose position requires he often attend trade shows where manufacturers display new strollers, car seats, feeding and nursing systems and other baby products.

“In many cases the person in the booth is struggling to show how their stroller is different from the guy next to them,” he says. “You might find as a parent you are in the exact same place. You might say, ‘what’s the difference?’”

Compare and test drive

A stroller is not an insignificant purchase. You’ll need to purchase one just like you would need to purchase a car seat or any other baby items and you will likely use it for a number of years. With many options to consider, your decision may depend on myriad factors.

Whatever you do, don’t let peer pressure be one of them, says Katzner. He advises parents not to simply choose what’s popular or has the best ratings online.

He recommends parents to some online research, take notes, then go test out strollers in person before they settle on a pick.

If you feel pressured to keep up with your peers, keep in mind, Consumer Reports has not found any reason to buy a stroller that costs more than $1,000, says Hope.

While you’re at the store, try any of these shopping tips to help make your decision.

Consider your lifestyle

Stroller options can be categorized into three main families: traditional, jogger, and umbrella. (Though you can find strollers with mixed features.)

What you ultimately choose will depend on how you plan you use the stroller.

If you are very active and plan to exercise with the stroller or take it along with you on tough terrains, you may want to consider a jogger. On the other hand, if you will need to lift the stroller often, you may choose, instead, an umbrella stroller.

“Umbrella strollers are really fabulous for collapsing on the subway or in transit going to the airport,” Hope says.

After her son turned 2, Liu supplemented her first stroller purchase with a $20 umbrella stroller from Target.

“It was difficult because of the subway stations,” she says of her first stroller. “Every time I had to fold the stroller and carry my bags, my son and his bags up the stairs.”

However, many jogging and umbrella strollers can’t be used with children less than 6 months old, because they don’t always accept car seats. That’s why Liu bought the big, chunky stroller, first. Hope says most people opt for the traditional stroller, as it suits most needs.

“Traditional strollers that accept an infant car seat or are compatible are typically the best value,” says Hope. “You’re guaranteed that the stroller will be safe to use with a baby that is under six months.”

Test for ease of use

Put the stroller through a comprehensive test when you’re shopping to test how easy it is for you to use. After all, you’re the one who will be spending the most time with the stroller. Katzner recommends you choose something that makes your life easier.

Everyone will have different determining factors. In general, Hope suggests shoppers check for how it feels to do things like lift the stroller, strap in the child, adjust the backrest or lock the wheel brakes.

In addition, he advises shoppers to take the stroller for a ride to test how easy it is to navigate. Hope suggests going with a small child if you already have one — or ask a friend or family member if you can take their youngster for a test drive — to simulate real-life situations like making tight turns and encountering curbs.

Liu says her first stroller weighed about 10 to 15 pounds, and she could fold and carry it with one hand when traveling in the city. She says a basket underneath also came in handy when she went out grocery shopping or had her son with her and had to bring along a bunch of his things.

On the other hand, the Pinckneys have a pickup truck, which makes it easy to load and unload a bulkier stroller. They also live in a suburban area, where they are less likely to need to lift or fold the stroller.

Look for the JPMA logo

“There is not a whole lot you can look for as a consumer in the way of safety,” says Hope. But, organizations like the Juvenile Product Manufacturers Association (JPMA) regulate strollers and they test for a whole host of safety factors, so you don’t have to. Look for the JPMA logo on the stroller box to feel confident the stroller you put your baby in meets today’s safety standards.

Some strollers and online retailers like Amazon.com may display the National Parenting Center’s seal of approval, too. The organization has real parents test and review children’s products on many features, so you can get a sense of what it’s like to actually use the stroller. Although the strollers the NPC reviews are generally already JCMA-approved, the organization notes that its seal of approval does not imply or guarantee product safety.

Question the salesperson

The salesperson’s job is to make sales, but your job is to be a responsible consumer. If you get to the store with one stroller in mind, but the salesperson pushes you toward a different pick, ask why, says Katzner.

“Of course the salesman is going to try to sell you the $600 stroller,” says Katzner. “Put them to the test and ask why. What does it do? What’s the difference?”

In the end, you’ll walk out more confident in your choice having asked all your questions, instead of feeling as if you were coerced into choosing a stroller with features you weren’t interested in, or may not ever use.

Think ahead

Hope says most traditional strollers that carry an infant car seat can be used from when the baby is born until they are about four or five years old; traditional strollers commonly adjust to accept a child that weighs up to about 50 to 60 pounds.

If you plan to have more children, you’ll need to do some forward thinking when choosing your first baby stroller. A durable stroller can go a long way. And, as long as safety standards don’t drastically change, it could serve you for more than one child.

When they had their second child, Viney ran into an issue. She now needed a double stroller, but her UPPAbaby Cruz couldn’t be converted into one.

“Once I realized I got the wrong UPPAbaby I was very upset,” Viney says. Because they already had $500 worth of seats and accessories, they decided to stay with the same brand and get a UPPAbaby Vista — the new stroller and a second seat cost about $1,200.

“The sales guy should have definitely asked if we were going to plan for more kids because when spending this kind of money you want to have it for long,” says Viney.

The bottom line: Don’t follow the crowd

Asked if she would have chosen a more expensive stroller, were money no object, Liu says no.

“If at the time I had more money or wasn’t strapped for cash I would have gone with the same thing. It was practical. It was fine. I have no complaints about it,” says Liu.

Pinckney, on the other hand, says she would choose a more expensive stroller if it had features her current stroller is missing like a tray up top, for parents, or cupholders.

It all comes down to personal preference. Choose the stroller that best fits your lifestyle at the best price point for your budget. Most importantly, pick a stroller that will make your life as a parent that much easier.

“Do not go beyond your means,” says Katzner. “Do not get something that is going to be unwieldy and make your life more difficult.”

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Brittney Laryea
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Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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5 Alternative Gift Ideas that Don’t Come from a Toy Store

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holiday gift ideas
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Parents spent an average of $422 per child on holiday presents in 2016, according to a survey by T. Rowe Price. An estimated 56 percent of parents with children ages 8 to 14 use credit to purchase gifts, which are bound to include gadgets that’ll be old news by New Year’s but not paid off until months after that. 

Indeed, the holiday season — the most wonderful time of the year, as it’s known to some — may be far from wonderful for budgets as some parents try to fulfill every child’s every wish. 

2016 Experian holiday shopping survey found:  

  • 56 percent of people said they spend too much money during the holidays. 
  • 55 percent admitted that they feel stressed about their finances during the holidays. 
  • 43 percent said the extra expense makes the holidays hard to enjoy.  

Some parents overload their children with “stuff” that will quite possibly be obsolete or bested in popularity by the next big thing just in time for the next holiday season. No great mystery that the U.S. has 3.1 percent of the world’s children, but consumes 40 percent of the world’s toys. 

“We are a materialistic society, and often our rituals and celebrations reflect this,” says Dr. Mary Gresham, an Atlanta-based psychologist who specializes in financial and clinical psychology. “Many parents get caught up in this and start to believe that the right toy will bring happiness to their child.”  

Here are five gifts to give your little ones besides presents this year. Your overflowing closets and pockets may thank you for considering other gift options.  

The gift of a financial head start

You could get them a $50 toy that they’ll lose or break in a matter of weeks … or you could open an online investment account in your child’s name and teach them the beauty of investing.

And don’t worry if you’re not an expert.  

Brendan Mullooly, an investment adviser for an asset management firm in Wall Township, N.J., suggests that novice investors interested in making a financial gift to a young person should use a service like Stockpile, an online company that simplifies the process of gifting stocks to minors.  Check out our review here

“You can purchase gift cards of individual stocks and some index ETFs to give as a gift,” says Mullooly.

And Stockpile allows you to buy fractional shares, so the gift cards can be for small amounts.  Mullooly recommends setting up view-only access to these custodial accounts so your young investor can check on how the investments are doing.  

“This offers a great way to give a gift that’s interesting, has monetary value, and also offers an educational aspect,” he says. 

The gift of giving

For children, the holiday season can be a “gimme” time of year. But it’s also the time when we often hear that it’s better to give than receive.  

Jayne Pearl, a family business and financial parenting expert and co-author of “Kids, Wealth and Consequences: Ensuring a Responsible Financial Future for the Next Generation, says it’s not hard to nurture a child’s giving spirit. She suggests combating the “gimmes” with the “givvies.”

Put part of your holiday budget toward giving to the less fortunate, perhaps through a charitable organization. For example, you could give a gift in your child’s name to an organization such as Unicef or the American Red Cross, or to an area animal shelter or humane society.  

“Giving kids the tools and the consciousness to try to help people is extremely empowering,” Pearl says.  

Her recommendation is to sit down with your children and find out what bothers them about the world, help them figure out how they can help, and make this part of your holiday celebration. Use the holidays as a time to teach your kids that “we have values and our values are not just ‘stuff,’ ” Pearl says.

The gift of membership

You can’t go wrong with season passes to a favorite destination like a local museum, an amusement park or the zoo. You can use them over and over throughout the year, which could ultimately help your family spend less on entertainment. 

Also, check out memberships to national organizations, like the Baseball Hall of Fame for the sports enthusiast. 

Or get a pass that’s fun for the whole family, like the $80 America the Beautiful Annual Pass, which pays for itself in as few as five visits to national parks. The pass covers entry to over 2,000 parks for a full year, and nearly 100 percent of sale proceeds goes toward improving and enhancing federal recreation sites.
 

The gift of travel

Pool the money you would spend on toys and trinkets and knock a destination off your family bucket list. You could time the trip to coincide with the holiday season or breaks during the school year.  

Erica Steed, 37, allowed her children to choose something they wanted to experience together in Christmas 2016. 

Ellison, who was 10, wanted to see the Statue of Liberty. Elian, 7, wanted to see snow, which doesn’t often happen in Georgia. They took a family trip to New York for the holidays, and although it didn’t snow, “we had such a great time that it made up for it,” says Steed, who lives in Roswell, Ga.

When you factor in the cost of airline tickets and lodging in New York City for a family of four during the holidays, this gift option didn’t save the Steeds the money they would’ve spent on presents.

But by planning, creating a budget and sticking to it, the family spent the holidays doing something they could all enjoy and remember for a lifetime. And this, Steed says, amounted to money well spent.  

The gift of learning

You know your children better than anyone. And every one of them is unique, with his/her own set of interests, so give a gift that helps a child develop existing or new skills. 

Sign them up for classes that help them take their passion or hobby to the next level.  

Consider coding camp for your computer whiz or cooking classes for your foodie. You can find classes offered by educational institutions, community organizations, companies or individuals. 

You could also take a look at online classes like these from MasterClass, which can help your child hone a craft with a celebrity idol without leaving home. 

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KaToya Fleming
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KaToya Fleming is a writer at MagnifyMoney. You can email KaToya here

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Best of, Personal Loans

Best Options for Covering the Cost of Adoption

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adoption

Updated November 03, 2017
You probably can’t put a price on the value of your child, but for couples who wish to adopt, the entire process can be quite costly. According to AdoptionHelp.org, it can cost anywhere from $0 to $1000 to adopt a child from a county foster program and anywhere from $10,000 to $25,000 to adopt a newborn through a non-profit agency.

Also, adoption attorneys for newborns general run anywhere from $20,000 to $30,000. The adoption process may vary from state-to-state but if you go through a private agency, costs usually include agency fees, legal expenses, hospital documentation and retrieval of medical records, and disruption rates just to name a few.

If you feel that you are ready to start or grow your family through adoption but don’t have the funds to cover all the fees and expenses, you may consider an adoption loan.

What is an Adoption Loan?

An adoption loan is basically a personal loan that you can take out to use for adoption-related costs. There are many personal loans on the market so you shouldn’t limit your options as long as the loans you are considering are low-interest, have no or low fees, and flexible repayment terms.

If you search online for the term ‘adoption loans’ you may find a few offers, but it’s best to search for personal loans to broaden your search at first and help you locate the best loan option for you. We will feature some of the best personal loans to use for adoption below to help you get started.

What to Watch Out For

Before you choose a loan for adoption costs, there are a few things you need to watch out for. Consider a realistic amount of how much you need. You may be able to cover some of the costs on your own but some lenders who offer personal loans for adoption might encourage you to take out more than you need.

When taking out a loan, only you know how much you truly need so it’s important to research the process thoroughly and formulate a realistic amount of expenses you can’t cover from your savings.

Another thing to watch out for is how some lenders may prey on couples’ vulnerability and eagerness to adopt with this loan. Companies who send out messages like “your child’s life is worth any costs” should be examined with caution.

Heartfelt promotional messages, catchphrases, and unrealistic promises should not be an effective way to market a loan to a consumer. When you take out a personal loan, you should always look at how affordable it will be. Is the interest rate low? Is there an origination fee or any hidden fees? How short or long are the terms? Is there a prepayment penalty?

Ask yourself all of these questions and make sure you are positive about the answers and comfortable with them before you take out a loan. Like with any loan, you’ll ideally want something low interest, with no fees and no prepayment penalties.

Be wary of lenders promising affordable loans for people with bad credit as this is almost never possible. In order to secure a low interest rate for your loan, you need to have good credit.

Affordable Adoption Loan Requirements

Lightstream allows you to borrow anywhere from $5,000 to $100,000 with fixed APRs that range from 5.99% (with autopay) to 16.19%. Terms range from 24-84 months and the shorter your term is, the lower your rate may be. However, the lowest rates are reserved for borrowers with excellent credit. There is no origination fee and the minimum credit score you need to apply is 680. There will be a hard pull of your credit report upon applying.

America’s Christian Credit Union specializes in adoption loans and lend up to $50,000 which should be more than enough to cover adoption expenses. APR rates start at 5.99% but can range from 8.90% to 10.90% for most borrowers. Borrowers have up to 84 months to pay back their loan and the loan is good for domestic and international adoptions. This lender also offers home equity loans with no closing costs or annual fees to use for adoption costs which includes a quarterly adjustable HELOC with a current starting APR of 3.5% and an annual adjustable HELOC with a current starting APR of 4%.

SoFi is a popular lender offering a variety of personal loans at competitive rate and terms. Borrowers can receive anywhere from $5,000 to $100,000 with fixed APRs ranging from 5.49% to 14.24% and variable APRs ranging from 5.29% to 11.44% as long as borrowers sign up with auto pay. Terms go all the way up to 7 years and there are no fees or minimum credit score required as long as your accounts are all in good standing.

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Upstart offers quick and easy approvals for loans up to $50,000 with APR rates ranging from 9.56% – 29.99%. Borrowers need at least a minimum credit score of 640 to qualify. Loan terms are 3 and 5 years and there is no early repayment fee. There is however, an origination fee of 3.655%-8% to keep in mind.

Other option for adoption: Grants

Before you look into loan options, you should to see if you qualify for any grants to help fund the costs of adoption. An adoption grant can help provide you with partial funding throughout the adoption process to ease the financial burden.

There are quite a few adoption grants available, but most have specific criteria. For example, in order to qualify for a specific grant, you may need to adopt through a licensed agency or adopt within the country.

National Adoption Foundation – This organization has very few strict requirements and even considers single adults who wish to adopt. The program has no exclusions as to race, ethnicity, gender, age, sexual orientation and income and awards grants ranging from $500 to $2000 depending on the needs of the family and the circumstances surrounding the adoption.

HelpUsAdopt.org– This organization has awarded $920,000 in adopting grants since 2007. They award grants to needing couples, singles, and LGBT applicants who are U.S. citizens and wish to adopt. Recipients can use the funds for private, agency, or domestic adoption and award amounts range from $500 to $15,000. The organization awards grants in February, June, and October each year.

A Child Waits Foundation – If you are adopting internationally and your annual household income falls below $120,000, you may qualify for an adoption grant from this agency as long as you are a U.S. or Canadian citizen. Applicants can apply for a grant no sooner than 3-4 months prior to when their family makes their final adoption trip. There is a $20 application fee and grant amounts equal up to $5,000.

If you need funding to help you adopt a child, its best to consider all your options and try to obtain a grant along with a low interest loan to help cover the rest of your financial needs. You can compare more personal loan options for adoption all in one chart with our comparison tool.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Chonce Maddox
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Chonce Maddox is a writer at MagnifyMoney. You can email Chonce at chonce@magnifymoney.com

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I’m a Single Mom With a 6-Figure Business. Here Are the 3 Rules I Live By Every Day.

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Emma Johnson and her two children. ( Courtesy of Emma Johnson)

Emma Johnson thrived, both financially and professionally, after enduring a complex, costly and painful divorce in 2009.

Johnson, now 40, a journalist and founder of WealthySingleMommy.com, an online community of professional single mothers, was at that time pregnant with her second child, working just 12 hours a week and living paycheck to paycheck. The fear of not being able to support her children on her own drove her to juggle multiple jobs and painstakingly manage her finances.   

Today she’s an entrepreneur with a successful digital marketing business, which includes her blog and podcast targeting professional single mothers, along with a new book, “The Kickass Single Mom: Be Financially Independent, Discover Your Sexiest Self, and Raise Fabulous, Happy Children.” In the book, which debuted Tuesday, Oct. 17, Johnson tells her personal journey as an entrepreneur and mom. She also maps out financial management strategies she hopes other single mothers can use, both to improve their finances and to establish a career they love.  

“Money is power and money is control,” Johnson tells MagnifyMoney. “Men have been very comfortable with that since a long time. And women are never going to have equality in the world, we’ll never have control of our life individually … until we have our money and just as much as men.” 

We spoke with Johnson about the three mantras of her daily life.  

1.Create a lifestyle that you can afford now.

Johnson lived a comfortable life, largely dependent on her ex-husband’s income and benefits while she worked part time. She found that separating from her husband also meant learning to recalibrate her money mindset. 

Legal expenses from the divorce quickly piled up, and she decided to return to full-time freelance work, which meant shelling out $2,000 a month for child care. She knew she had to live frugally in order to make ends meet. Some of the immediate changes she made: Stop buying new clothing for herself. And find as many useful secondhand items for her children as she could. 

“You absolutely have to go frugal,” she says. “I don’t care how rich you were before you were divorced or your kids’s dad is. … Your lifestyle is determined by how much money you have coming in the bank right now.” 

For other single mothers looking to cut spending, she has suggestions both big and small — downsizing to a smaller home, for instance, or just getting rid of unnecessary expenses like a cable subscription or a rarely used gym membership. 

When you are successfully living beneath your means, especially as a breadwinning single mother, Johnson says you can finally start to feel as though you’ve got control over your life again. “You have no control of your life,” she says, “if you are worrying about paying your rent.”   

2. Focus on earning more — unapologetically.

Single mothers shouldn’t just focus on saving more. They should also be unashamed about taking steps to earn more, Johnson says.   

The median income for families led by a single mother in 2014 was about $24,000, far below the $88,000 median for married-parent families in which Mom was the higher earner and the $84,500 median for households where Dad was the principal earner, according to a Pew Research Center report. 

Emma Johnson

The surprising upside of her divorce, Johnson found, was that she realized she had unintentionally suppressed her own financial and professional goals during her marriage to preserve the status quo. 

“Our society definitely values monogamous partnerships and marriage, and women genuinely do want that, but it often comes at a price for reaching our own potential,” she says. 

For Johnson, embracing her ambition wasn’t just a matter of choice. She was granted only one year of child support from her ex-husband, and the clock was ticking. She set about beefing up her income from freelance assignments, taking on everything from corporate blog posts to journalistic articles.  

By the time child support ended, she felt financially stable enough to refinance the the apartment in Queens, N.Y., that she and her ex-husband had bought in her own name. Roughly half a year later, she says, she had lined up enough consistent writing work to confidently support her family independently for the first time.   

Something else happened when she re-entered the labor force full time. She found she had bigger career ambitions than simply writing. She started WealthySingleMommy.com in 2012 as a hobby and slowly grew a loyal audience. (She reports 100,000 unique monthly visitors and 190,000 monthly page views.) 

A few years later, she experimented with monetizing the effort, snagging a mix of brand partnerships, speaking engagements and eventually, a book deal. While she worked on building the WSM brand, she continued to work as a freelancer (her primary income source).  

Finally, in 2016, Johnson says, she made an “internal shift” to focus on her business full time because she saw in it a better financial opportunity.  

“I really feel like it was an important internal shift I had to make because all the freelance writers I knew were [complaining] about not making money,” she says.  

This year, she expects to bring in $400,000 in revenue.  

3. Outsource labor — time is money.

Efficiency is the centerpiece of Johnson’s finance management philosophy. She quickly learned the value of paying professionals to take on some tasks in order to free up hours she could use to work, spend time with her children or focus on her personal needs.  

“You have to be very diligent with how you use all of these things — your time, your money, your energy, your headspace and your emotions,” she says.  

Johnson says that over the years she has invested heavily in child care, housekeeping and outsourcing chores (like laundry) that that take time away from work and her children and aren’t enjoyable. In her book, she writes that she has a handyman on call.  

To be sure, not all single mothers earn enough to outsource, a fact Johnson acknowledges. But she still encourages women not to feel guilt over delegating some household duties in pursuit of that extra quality time. She argues that it’s a worthy investment for peace of mind and efficiency. 

The bottom line: ‘You have to go bigger’

An advocate for gender equality, Johnson says her ultimate goal with the new book is to empower women across society — not just single mothers — to pursue their passions and become role models for a next generation with increasingly abundant resources and opportunities available. 

She hopes single moms will stop taking pity on themselves or viewing their situations as detrimental. “I want women to start seeing themselves as more than they are, and that their family status can be an an asset,” she says. 

For women living in small communities, Johnson’s advice is that maybe they should consider relocating for better job opportunities or finding work that they could be doing virtually.  

The fear of being on one’s own, Johnson says, can become the biggest motivator for pursuing a big goal, be it starting a business or returning to school. And she is convinced that the risks women take and sacrifices they make along the way will eventually pay off. 

“You have to go bigger,” she says. “You have to go bigger because there is less security.” 

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Featured

How to Raise a Kid You Won’t Have to Cut Off in 20 Years

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Source: iStock

Today’s young people are more likely than previous generations to live with their parents, according to a 2017 analysis from the Pew Research Center. In 2016, 15 percent of 25- to 35-year-olds lived in their parents’ home, compared to 10 percent of Gen Xers in 2000.

Even when kids move out, it’s not uncommon for them to receive financial support from their parents. In fact, 62 percent of Americans age 50 and older gave a relative money in the last five years, with the largest sums often going to adult children, according to a 2017 Merrill Lynch retirement study.

Parents may not find those statistics encouraging, but the good news is there are ways to teach kids how to be financially responsible, and it involves raising the bar by asking kids to do more in the way of financial responsibilities. Studies have shown that when more is expected of a child (or anyone), they actually perform to that level of expectation. The same can be said of how they deal with money.

Don Roork, a Certified Financial Planner at AssetDynamics Wealth Management, has noticed a pattern with kids, adults and money. “Kids learn good money habits from just watching and being around their parents,” says Roork.

Roork also points out that money lessons aren’t always explicit verbal lectures on finance. “Kids watch mom and dad making good financial decisions, and voilà — the kids’ money behavior matches their parents’,” says Roork.

So when it comes to raising financially independent adults, it becomes clear that it’s important to start when they are kids. Here are some ways personal finance experts recommend easing your children — gently and kindly — into financial adulthood by weaning them from the family wallet.

Set expectations

As soon as your child begins asking for things like toys, restaurant meals or trips to the movie theater, they are ready to learn about the money it takes to support these wants. When a child expresses a desire for something beyond the basics, start the conversation then and there about how they’ll soon be responsible for these “luxury items.”

Of course, you don’t have to start charging them rent (not a bad idea, though), but you will want to follow up your expectations with actions.

For example, if your family goes out to eat, your child can pay for their meal or contribute to a portion of the bill. These expenses can be age appropriate and should increase over time as your child earns more money. They can start with things like snacks at the movies and move up to cellphone bills and car insurance.

Financial adviser Jamie Pomeroy of Financial Gusto says this should all start with communication: “Sitting down with your child and having a clear and frank conversation about who’s paying for what, can pay huge dividends.”

Another good exercise would be to show them prices on things they’ll need as adults, like a home or a car. Molding their expectations around what it takes to live will only help them down the road.

To drive this point home, Pomeroy suggests laying out a real plan designed to increase financial responsibility. “Make sure that you and your child are on the same page about what expenses they are responsible for, what you’ll continue to pay for (for now), and then introduce them to a budget to help them manage those expenses,” he says.

Create a reward system

Get-out-of-debt guru Dave Ramsey warns against giving kids an allowance and instead recommends that money given to a child should be tied to actions, like completing chores or other household projects. The idea is to get kids ready for the real world by emulating it with a system of compensation tied to work.

CFP Jeff Rose of Good Financial Cents says, “One of the first steps in teaching your kids financial independence is giving them responsibilities around the home that are both paid and unpaid.”

Ramsey is also a proponent of giving children the opportunity to earn more money in “commissions” when they find extra things to do or take initiative in solving problems around the house.

Teach them personal finance

Many kids are shocked when they get into the real world and finally begin grasping the finite nature of money. Mom and Dad spring for everything, so why would money ever run out?

Clint Haynes, CFP of NextGen Wealth, says there’s a fix for this. “Make it a point to sit down with your kids and show them what your budget looks like, how it works, and why it truly is the foundation to personal finance,” he says.

When your child asks for candy at the store, don’t deflect them with, “We don’t have the money.” Instead, let them know that the money you have available isn’t earmarked for candy, showing them how a budget works in real life.

Other lessons you can teach early on include those around saving, compound interest and even giving.

Brian Hanks, a CFP out of Idaho, has an experiment he urges his clients to conduct with their children once they are high school seniors. He suggests parents hand over their checkbook and have their kid cover all the family’s expenses for the entire school year.

“Paying a family’s bills is eye-opening, and your teen starts to develop new money habits,” Hanks says.

Let them earn real money

You can start by giving your kids an allowance that is tied to performance: completing chores, excelling in school, and having a good attitude can factor into their “compensation.” Be sure to enforce the association between what they do and how they are compensated. Once they can work legally, you can taper off their allowance.

Ed Snyder, CFP at Oaktree Financial Advisors, says children who have jobs will be more thoughtful about their spending and better with money in general. “Working will help them think through their spending and hopefully be more responsible,” he says.

Keep in mind kids don’t always have to wait until they are 16 to get a job. They can start a business or participate in gigs that allow kids under 16 to work with a permit, like modeling or acting.

Challenge them

Not only should your kids be responsible for expenses and make their own money, Eric Jansen of AspenCross Wealth Management says kids should be challenged in their money habits.

“Set up 90-day savings and spending challenges as a fun way to help them better understand and manage the trade-offs between spending money on what they want and what they need,” Jansen says.

No-spend or savings challenges are great ways to teach lessons about money while showing your child what they are capable of if they focus on their goals.

You can even create competitions among siblings, like seeing who can save the most money.

Trust the process

Sound like a lot of work? It is! Financial independence doesn’t happen overnight.

“Some of these [money] lessons may click sooner in some kids than in others — even within the same family,” says Snyder. “Don’t give up hope. … Just keep showing them good examples and teaching them good old-fashioned financial lessons.”

Be patient, be kind, and be confident that the lessons you are teaching them will serve them well into adulthood.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Aja McClanahan
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Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Featured, Strategies to Save

What Your Teen Should Do With Their Summer Earnings

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Source: iStock

According to a 2017 survey released by the National Financial Educators Council, 54% of respondents (all 18 years and older) said a course in money management in high school would benefit their lives. Another survey — the most recent from the Program for International Student Assessment — reports that only about 10% of U.S. 15-year-olds are proficient in personal finance matters, falling in the middle among the 15 countries studied. The message is clear: Young Americans need to learn more about money and managing it wisely. One way to start them off is giving them hands-on experience with their own money. Enter the summer job.

Having a summer job can be a good introduction to adulthood for many reasons: The discipline, submission to management, team work, and a regular paycheck are just a few of the things a teenager will get used to with their first summer job.

It’s also a good way to introduce kids to the real world of money. Though the money your teen earns is technically theirs, as a parent, you should use summer job earnings as an opportunity to help your kids form good habits with money. There’s no better time to show them the value of money than in the crucial years before they’ll be saddled with obligations like student loans, car notes, and mortgages.

Here are a few ways to make sure your teen will get the most out of their money-making experience that will keep them money savvy for years to come.

Pay their fair share

Once your teen begins making money, you’ll to want consider how they can begin to cover certain expenses. You’ll be tempted, no doubt, to let your teen keep their hard-earned money for themselves. Trust this process. If the goal is to raise money-smart kids who become even savvier adults, there will have to be simulations of the real world that include actually paying for things

If your teen uses the car, consider having them cover a portion or all of their car insurance bill. Another option is to have them contribute to their cellphone bill or even some of the Wi-Fi they use.

Having expenses is a real part of life, so it’s better to help them understand that now rather than later when ignorance isn’t so blissful.

If the thought of making your child pay for expenses bothers you, consider a different approach: Teach them about the costs of everyday life by asking them to cover their portion of a bill, but take that money and put it away for them. You can save up all that money and, as a nice gesture, give it to them when they need it most, like when they go away to college or finally leave the nest to launch out into the real world.

Open bank accounts

Source: iStock

While many families do not have access to or elect not to participate in the traditional banking system — it’s estimated that 27% of U.S. households are unbanked or underbanked — you’d ideally want to get your teen familiar with banks and how they work. Though check use has been on the decline since the mid-1990s, it’s still important for teens to learn how to write a check, along with keeping a checkbook register. Sure, this practice probably won’t last long, as electronic payments and money management apps continue to grow, but this approach gives your kids the gist of how to keep track of their cash flow.

While your teen has a bank account, you’ll also get them used to understanding how a debit card works. They’ll get familiar with how easy it is to swipe for things they want, yet how difficult it can be to replenish their account with the money they’re making at their job.

Finally, you’ll want to make sure that your teen opens a savings account. In most states, a person can open a bank account when they become 18. For younger teens, many banks have special teen or kid accounts that a child can share with their parents. Co-owned checking accounts can be opened as young as 13, while custodial savings accounts can be opened at any age.

Developing good habits around saving and managing money takes time and some getting used to. So using their summer earnings would be a perfect opportunity to get into the groove of budgeting for expenses and managing money through a bank account.

Set money goals

Once money starts to flow into your kid’s hands, seize the moment and get them to see the bigger picture. Summer money is great, but paying for life will take much more than what your teen earns from a few hours of work in a bike shop. Begin to show them the cost of things like college, cars, homes, and luxuries like vacations or hobbies.

Once you compare the costs with their summer job earnings, it should help them come to conclusions about how money works: The more you have, the more you can do. The idea is to inspire them to increase their earning potential with tools like education or savings to invest in income-producing assets.

Another result of these conversations could be your teen realizing they’ll want to start saving up for life sooner than later. They may decide to put away money for the purpose of paying for school or their first condo.

Ron Lieber, New York Times financial columnist and author of the book The Opposite of Spoiled, says parents should prompt their kids with an immediate goal like having a college fund. “The best thing to do is to use any earnings to begin a conversation with parents about college, if your teen plans on going,” Lieber says.

Lieber suggests questions to guide the conversation:

  • How much of your college expenses will be covered by parents versus the child?
  • How much have the parents saved for the child’s college expenses?
  • How much are kids/parents willing to borrow or spend out of their current income?

According to Lieber, “The answers to these questions may cause a teen to save everything, if they think it will help them avoid debt in their effort to attend their dream college.”

No matter how temporary their summer job is, you’d do well to use it as a springboard for more conversations about money. Whatever their long-term money goals are, it’s never a bad idea to start working toward them early on.

Learn compound interest

While your teen is making all of those big money goals, you could drive the point home with a lesson in compound interest. Using a compound interest calculator, you can show your teenager many scenarios where interest can either work for or against them.

Run scenarios around savings for big-ticket items versus financing them. The math will speak volumes:

*Example APRs are used. APR will vary on factors like individual credit score, loan amount, and bank requirements.

In the above scenario, you’d end up paying a total of $226,815 in interest. That same amount ($226,815) invested for 30 years with a moderate 3.5% return yields over $636,000!

Seeing these numbers in action should motivate your teen to start a savings habit that they will maintain throughout adulthood.

If they are really excited about the prospects of compound interest working on their behalf, encourage them to open their own IRA to begin investing themselves. This way, they’ll not only understand the theory of investing but also get hands-on experience with it. After all, the time value of money works even better when you’ve got more time. Investing as a teen could set the stage for copious returns later on in life.

Create a budget

Making money can be the fun, somewhat easy part of a summer job. Figuring out how to spend it can be difficult. Make your teen prioritize needs and wants by learning to create a budget. A good practice would be to have your teen make a list of things they’ll spend money on versus how much money they will bring in. You could also introduce them to a money-management app — here are some of the best ones.

This will help them understand the finite nature of money and how their current cash flow stacks up against their current earnings.

Have fun

According to Brian Hanks, a certified financial planner in Salt Lake City, “Don’t be concerned if your teen ‘blows’ a portion of their earnings on things you consider to be worthless.” Hanks goes on to say that it’s better to make money mistakes as a youngster: “Everyone needs to learn tough money lessons in life, and learning them as a teen when the consequences are relatively small can save bigger heartache down the road.”

A summer job should be fun and low-stress, but it can also be used as a learning experience that prepares your teen for the real world. If your teen turns out to be a terrible budgeter or extreme spendthrift, give them more than a summer to learn better ways. Remember, they’ll have the rest of their lives to continue grasping and mastering money concepts.

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Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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News, Retirement, Strategies to Save

7 Money Moves New Empty Nesters Should Make Now

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Raising one child to age 17 costs a middle-income married couple on average $233,610, according to the U.S. Department of Agriculture.

Once your kids leave the nest, all of the money you spent feeding, clothing, and entertaining them is suddenly up for grabs. But if empty nesters don’t earmark their newfound savings for specific goals, it’s easy to fall into the so-called “lifestyle creep” trap — when your lifestyle suddenly becomes more expensive as soon as your discretionary income increases.

A 2016 study by Boston College’s Center for Retirement Research found that a couple collectively earning $100,000 per year should be able to put an additional 12% toward their retirement savings after their children fly the coop. But in reality, researchers found that same couple would only increase their 401(k) contribution by 0.3 to 0.7 percent.

Covington, La.- based certified financial planner, Lauren Lindsay encourages empty nesters to put their extra pocket money to work.

“In general, when people have money ‘available’ they tend to spend it and not even be conscious about how they’re spending it,” Lindsay told MagnifyMoney. “I think it’s really important to refocus our goals now that we are in a different stage and, hopefully, on that home stretch towards retirement.”

Lindsay says the empty-nester stage is a really good time to circle back and revisit your budget to focus and make a plan for your financial goals. “Depending on where you are in the scale of retirement, you could use the extra funds to pay off a car, pay down the mortgage, save towards a trip, fund the emergency fund, or other goals,” she says.

As a new empty nester, there’s likely an endless list of purchases and lifestyle upgrades your newfound savings could go toward. You may even think you deserve a new car or boat, or to go on a luxury vacation every year after 18 or more years of child-rearing.

You can certainly treat yourself if you’d like, but you should make sure to get your financial house back in order before celebrating your freedom.

Here are a few things you can do to make sure your empty-nest savings go to the right places.

Put a number on what you’re saving now that the kids are gone

You may not be aware of exactly how much money you are really saving now that there are fewer mouths to feed at home. Creating or revising your budget gives you an opportunity to see the numbers behind the decrease and adjust your spending to maximize potential savings.

Peachtree City, Ga.-based certified financial planner Carol Berger suggests new empty nesters take the opportunity to complete a cash flow analysis — either on your own or with a financial adviser.

“This will allow you to identify how much discretionary income you have and then develop a plan on how to use it,” says Berger. Tally up the reduction in your spending to get an idea of how much potential cash you could be diverting to your own financial goals.

Shrink your lifestyle

If you’ve spent decades shopping for a family of three or more, it’s hard to break that habit right away. You might still be shopping for more groceries than you really need, for example, and wasting money in the process.

It might be time to take an even bigger step toward minimizing your housing costs — downsizing. Not only could this reduce your overall housing costs, but it’ll give you an opportunity to shop around for a home that better fits your needs as you age or to consider a residence in an active adult community with homes and amenities designed specifically for those ages 55 and older.

Check out what you’re paying for utilities, too. While you may have needed the tricked-out cable package when your kids were living at home full time, you may not care about paying for premium channels any longer. Call your provider and negotiate a less-expensive package. Try using a service like BillFixers or Trim to renegotiate or cancel bills and features you may no longer have use for.

Review your insurance policies

The same goes for your insurance policies like car and health insurance. Under the current health care law, kids can stay on their parents’ health insurance plan until they turn 26. But if your adult child already has employer-provided insurance, you don’t need to pay for their coverage anymore.

Contact your employer’s human resources department to discuss removing members from your family plan, or switching to a lower-cost individual plan when you’re on your own. The same goes for any vision or dental insurance plans you may still be paying the family price for.

If you’re still paying for your child’s life insurance policy, you may want to speak with them about transferring the plan into their name or canceling the plan if they have access to a better one through an employer.

It couldn’t hurt to ask for a discount on your car insurance or switch to lower-cost coverage because the kids aren’t there to drive your car.

Put your newfound money toward any outstanding debts

Saving for retirement is important and paying off your outstanding debts should be your top priority. The interest rates on unsecured debts like credit cards are generally higher than any returns you’d receive on potential savings. So if you pay off your debts first, you’ll actually save yourself more money in the long run.

According to a 2017 Consumer Financial Protection Bureau report, the number of Americans 60 and older with student loan debt rose from 700,000 to 2.8 million individuals between 2005 and 2015. The average amount of student debt owed by older borrowers almost doubled during that time, from $12,000 to $23,500.

One of the worst things you can do for retirement planning is ignore past-due debts. If debts go unpaid for too long, you could see your wages or even your future Social Security benefits garnished. The same CFPB report shows the number of retirees who had their benefits cut to repay a federal loan rose from about 8,700 to 40,000 borrowers over the 10-year period.

Don’t sacrifice your retirement goals to pay for college

College has never been more expensive. But remember: Your kids can take out a loan for school and pay it off as their income grows. You can’t necessarily take out a loan for your retirement.

That’s why financial planners often advise parents not to put themselves at financial risk by sacrificing their nest egg to pay for their child’s college education — unless they can afford to take the hit.

“Many people believe that they must send their kids to college, and they pay a hefty sum for that — sometimes at the expense of their retirement,” says Oak Brook, Ill.-based certified financial planner Elizabeth Buffardi.

If you’ve covered your debts and have room to save more, you still have plenty of time to contribute to your retirement funds.

Let’s say a married couple has $200,000 already saved for retirement with 15 years left to go. They collectively earn $100,000 per year, and they have diligently been saving 15% of their monthly pre-tax income for retirement. If they double their savings to 30% — putting away $2,500 each month — and their investment grows at an average annual rate of 6%, they could have well over $1 million saved by retirement.

Plan for long-term health care needs

A couple retiring today will spend an estimated $260,000 on health care needs in retirement, according to Fidelity.

Think of what other health care needs you could have in retirement. Buffardi says she always asks clients if they are worried about needing long-term care in the future. While most workers will qualify for Medicare once they turn 65, Medicare does not cover all long-term care needs. If you know you have a family history of dementia or other age-related illnesses that may require long-term care, this may be a concern for you. You may consider taking out a long-term care insurance policy or setting aside funds in a regular savings account.

Learn to say NO

Even after your kids move out, they can still treat you like the Bank of Mom and Dad. They may come to you for a wedding loan or to ask you to co-sign something they can’t afford, like a mortgage. Even though their pleas may pull at your heartstrings, consider your own financial needs first.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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College Students and Recent Grads, Life Events

3 Big Money Mistakes Your Freshman is Likely to Make

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3 Big Money Mistakes Your Freshman is Likely to Make

College is a time for adventure, growth and learning, but it can also be a time for silly financial mistakes if your freshman isn’t careful. This will likely be the first time your kid is out in the world on her own, so it makes sense that she’ll want to try new things. But her actions might come with some serious and long-lasting financial consequences unless you can help point her in the right direction first.

Here are three mistakes college freshmen often make when it comes to their finances — and how you can help your child avoid them.

1. They choose a college without considering the price tag

While it’s true that going to a good college is important these days, that doesn’t necessarily mean that your kid needs to go to the most expensive college to score his dream job after school. If your kid has always dreamed of going to a specific, but expensive, school, sit down with him at least a year or two out of applying to talk about how he’ll pay for it. The U.S. government recently launched the College Scorecard, where you can easily search for a school and see how its students fare financially after graduation. It might change his mind if he sees most students graduate from his dream school with tons of student loan debt. If your kid is willing to be a little flexible, you might want to point him towards one of these 20 most rewarding colleges for student loan borrowers, which ranks the best schools for generating the highest income after accounting for loan expenses.

2. They apply for credit cards before they learn how to use them

Luckily it’s gotten much harder for banks and credit card companies to market credit cards to students on college campuses. But the temptation to apply for credit will still be there. The second your kid applies for a credit card, she starts building a credit history that will follow her for at least the next seven years. A smart way to give her experience with some supervision is to add her as an authorized user on your credit card account. You can keep track of her spending habits and she can start building credit while she’s still in school. But don’t just pay the bill off each month without question. Talk to her about her credit score, what a credit report is for and how interest works. If you think it’s a good idea for your kid to dip her toe into the credit card world independently, consider starting her out with one of these best credit card options for college students. 

3. They never learn how to budget

The road to financial security starts with one simple building block: a budget. Unfortunately, budgeting isn’t something that comes naturally to everyone — especially for college freshman who may be trying to balance a job, classes, parties, and outings with friends. While your college kid probably won’t have a ton of disposable income to work with, it’s still a good idea to talk to him ahead of time about how to set up a budget, even when it’s just a limited amount of money he’ll be dealing with. If they can stick to a budget, they can also avoid costly mistakes like overdrawing their bank account, which can lead to all kinds of painful fees. During that conversation you can discuss the importance of an emergency savings account (because even college kids need an emergency savings account), how to divvy up income into necessary expenses and fun money, as well as how, once he graduates, he’ll likely need to put some extra money aside for retirement savings, as well.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Cheryl Lock
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Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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Life Events

The Hidden Costs of Raising a Toddler

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Toddler mess

It may not seem like it when you’re in the middle of another long, sleepless night, but your precious newborn will soon be an energetic toddler. And as any parent who’s gone before you will attest, toddlerhood brings with it a whole new set of challenges – and a whole new set of costs. While the challenges will likely come as no surprise (though that won’t make them any easier), the costs might catch you off guard. For while plenty is written about how much your newborn will cost and how to prepare for it, far less is written about preparing for the considerable costs associated with toddlerhood. With that in mind, here’s a rundown of some of the costs you can expect, as well as a handful of strategies for keeping them in check.

The big expenses

Extra living space

If you’re a relatively new parent, chances are you’ve been warned at some point or another that once your little infant starts walking, it’s all over. That’s true on so many levels, including, in some instances, your ability to “make it work” in your tiny apartment. A child on the go is a child in need of space. (And that’s to say nothing of how often said child becomes a big brother or big sister at some point during toddlerhood.) Assess the needs of your family, and be honest about whether you can truly make it work in your current living space once you have a toddler on the move. If you can’t, the time to start budgeting and saving for that extra living space is now.

Daycare and Preschool

If preschool or daycare is a cost you’ll be incurring for the first time during toddlerhood, it’s one you’ll need to meticulously plan and budget for right away. Daycare is expensive. Preschool is expensive. Period. There’s no way around it. The ballooning cost of daycare is well documented, and the cost of preschool isn’t far behind. Estimates vary depending on where you live, but it’s safe to assume you’ll be looking at somewhere in the neighborhood of $1,000 a month (or more) in added expenses.

Updating many of your child’s belongings

Toddlers outgrow things like crazy. Their clothes, their toys, their infant car seats, their cribs, and just about anything else designed for infants. In other words, there’s a whole lot of new coming into your life in the not-distant-future. And new is not free.

The hidden costs

None of what we’ve outlined so far should really shock you. But a bigger living space, enrollment in preschool, and a collection of new clothes and toys are really just the tip of the toddler-cost iceberg. A host of additional costs hover beneath the surface, including:

Medical Expenses

A not-so-funny thing happens when your toddler starts hobnobbing with other toddlers on a regular basis: They get sick. A lot. Whether it’s through co-pays or prescriptions, or lost pay on account of missed work, the costs can add up quickly.

Food

Most toddlers tend to have ravenous appetites. Don’t underestimate just how ravenous either. You’ll need to stock the fridge with more food – and restock it more often – than you ever have in the past. Prepare for a higher grocery bill – 20 percent higher and up is not out of the question.

Cleaning and Repairs

Toddlers’ appetite for food is matched only by their appetite for destruction. They don’t call it the terrible twos for no reason. Toddler proof your home and car all you want, but if they can get a hold of it (and they will), they will break it, or spill it, or stain it – or all of the above and then some. After a while, the cost of all the professional carpet cleanings, interior car washes, and replacement plates adds up.

Entertainment

If you handed a toddler a new toy when you started reading this article, chances are she’s already bored with it. Toddlers need infinitely more attention and entertainment than babies, and sometimes (most of the time), the toys in the house just aren’t enough. You’ll need to budget for memberships and activities – such as zoo and museum memberships – to keep your toddler occupied and yourself sane.

Keep costs in check with these steps

The good news is there are many steps you can take to keep the costs of toddlerhood in check, including:

Budget and save now: Don’t assume you won’t be hit with these costs. You will. It’s the cycle of life. Prepare now, and be glad you did later.

Buy food in bulk: Toddlers may eat a lot, but they’re not exactly foodies. In fact, most toddlers tend to eat the same thing over and over. Use that to your advantage by buying their favorite non-perishables in bulk to drive down your grocery bill.

Accept hand-me-downs: There are few guarantees in life, but here’s one of them: If you know parents just getting through toddlerhood, then you know parents who cannot wait to give away all the stuff they no longer use. Toys, clothes, double strollers – you name it. Take advantage. It’s free to you and it’s new to your child. That’s a win-win, folks.

Call the doctor first: Nowadays, most doctors will gladly talk to you over the phone and tell you if it’s really necessary to come in on account of that sniffle. And more often than not, it isn’t. So, make the call first, and save the time, the gas, and the co-pay. As often as toddlers get sick, the savings will add up quickly.

Eat as a family: Don’t make the mistake of thinking you’ll cook for your kid first, put him to bed, and then cook for yourself. You won’t. You’ll get exhausted, you’ll order in, and you’ll repeat that routine until you’re spending more money on takeout than you did before you had kids. Cook once, eat as a family, and enjoy the savings.

Enjoy the great (and free) outdoors: The wonderful thing about toddlers is they don’t know the difference between Disneyland and your neighborhood playground. Being outside is joyous for them, and it’s free for you. What did I say earlier about a win-win?

Look, toddlerhood is a period marked by chaos (and lots and lots of love, too). But, as with anything else, through proactive planning and smart budgeting, you can keep the financial chaos to a minimum. So, start planning now and the terrible twos won’t be so terrible on your wallet.

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Life Events

New Parents Guide: Financially Preparing for a Baby

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Financially Preparing for a Baby

Getting ready for your first child will be one of the most exciting – and potentially stressful – times of your life. But before even starting to get into the nitty gritty financial details of what you’ll need to have prepared before your little bundle of joy arrives, take a second to rejoice.

You’re having a baby – congrats!

Then, once the initial giddiness has worn off, you’ll probably have about a thousand questions all at once:

  • Will I stay at work?
  • What do I need to buy?
  • When should I start saving for college?
  • Will my health insurance cover everything I need?

We’ll help walk you through each of the major important financial phases of having a baby, so when Junior arrives, you’ll hopefully be feeling calm and prepared.

Ready? Let’s take a walk down Baby Lane …

Step 1: Figure out your health insurance coverage

It should come as no surprise to you that having a baby requires lots of doctor’s appointments. From ultrasounds and glucose tests to genetic testing options and general checkups, over the next nine-plus months you can expect to become very familiar with your obstetrician.

So — just how much can you expect to pay for the joy of bringing your little one into the world? According to WebMD, without health insurance you can expect to pay about $2,000 for prenatal care (which doesn’t even include delivery and hospital stays), although remember that this number can vary drastically.

To gear up for prenatal and delivery costs, your first step before visiting the doctor (if you don’t already have one through your insurance) should be to check with your health insurance carrier for your options. They will be able to help you figure out which providers in your area are in-network (meaning you’ll be covered for visits with them and won’t have to pay additional out-of-pocket expenses), as well as which tests, check-ups and procedures are covered under your plan. Some things to remember:

  • Keep in mind that certain procedures tend not to be covered by most insurance plans (mostly optional tests, like genetic testing, for example), and they can cost a pretty penny if you plan to pay for them out-of-pocket, so get all the financial details up front before having anything
  • This extends to your hospital stay and delivery, as well. For example, the anesthesiologist in your hospital may not be covered under your health insurance plan, even if your doctor and everything else is. Again, always check with your insurance provider ahead of time so you can be prepared for any additional expenses that might come your way. No question is a silly question when you’re pregnant!

After you find out your maximum out-of-pocket expenses (aka the absolute highest amount of money you should have to pay for covered procedures and services performed by in-network doctors), you can budget accordingly so there are no big surprises come bill-paying time. Of course, sometimes surprises still come up, but if you think negotiating or haggling over your pregnancy medical bills might be in your future (which could be especially true if you don’t have coverage right now), it’s best to discuss that ahead of time with your doctor and figure out a plan. Along those lines, check out this piece for any additional specific pregnancy billing questions you might have.

Once you’ve figured out your own health insurance coverage, don’t forget that Baby will need insurance of her own once she’s born. If you or your significant other can provide it for her through your employer, get the specifics of that policy as soon as possible, or else check out your options through the healthcare marketplace.

  • If you’re uninsured: Keep in mind that if you’re currently uninsured, pregnancy does not qualify as a ‘change of life’ situation that would allow you to sign up for a healthcare plan outside of the open enrollment period, which starts again on November 1 and will run through January 31, 2017. Having a baby, however, does. If you’re outside of the open enrollment period and find yourself pregnant without health insurance, you do have a few options, including checking into your Medicaid eligibility, potential COBRA coverage if you recently left a job, or you may even be able to still get coverage under your parents’ plan, depending on your age and their policy.

Step 2: Take control of your budgeting and spending

If you listen to everything everyone says about how expensive it is to have a baby, you’ll most likely decide to never have one. In fact, according the recent USDA findings, the average cost of raising a child today is over $245,000, which doesn’t cover college or inflation.

Before you have a panic attack, consider some of the things these types of findings do cover, like housing expenses (which you’re most likely already paying, although you may need a larger space, depending on your circumstances), food and transportation expenses (which, again, you’ll already be paying some money towards, anyway) and miscellaneous items like personal care, entertainment and reading materials, which can vary widely.

In other words — take a step back from studies like this and reassess, because it will be okay … as long as you budget. In truth, you will be spending more on food and transportation once Baby arrives, and if you need a new car or a bigger space to live you’ll need to add those additions into your current budget. (We’ll talk about childcare in its own section.) To get ahead of the curve before Baby arrives, consider taking the following steps:

  1. Revisit your current budget: Sit down with your significant other and assess your current living situation, including where you might need upgrades, like with a second car or a bigger house. Determine how much extra you can afford to put towards these upgraded things each month so you can put together a new, baby-friendly budget to work with.
  2. Cut back where possible: Try to consider areas in your current budget where you can scale back, at least for a while, to make room for your new expenses. For example, perhaps monthly subscription services can take a backseat for now, since you’ll likely have little time for them in the beginning months anyway. (Learn how to get rid of your subscription services without feeling the burn here.)
  3. Open a new, baby-only savings account, and start saving now: If you can, it’s not a bad idea to start funneling away some additional money each paycheck towards a new savings account geared specifically for Baby. For as much planning as you do, it’s always best to be prepared for any additional, surprise expenses that come up, and having a little cushion to help cover these things will help you feel better during stressful times.

Step 3: Gear up on baby goods

Here’s one area where new parents have the potential to go a little crazy — buying all kinds of new stuff for Baby. That’s where a baby shower can really help though, and if you’re lucky enough to have someone offer to throw you one, you should absolutely take her up on it, and then be strategic about the items you put on your baby registry.

A couple things to keep in mind:

  • Heading out with someone you trust and who’s already a mom is always a good idea for the feedback and knowhow.
  • Remember that just because a product looks cute or promises to work wonders for your kid doesn’t mean it’s actually necessary. In fact, you might want to check out this piece for five things to reconsider putting on your registry. Not all babies love bouncy swings, for example, so it might be worth borrowing one from a friend for a bit to see if your kid even takes to the swing before dishing out (or having someone else dish out) for a brand new one.
  • Babies won’t need a ton of stuff in the beginning, so if you’re worried about space, it’s okay to scale back at first. Stock up on a car seat and stroller, diapers and wipes, a monitor, onesies and a bassinet or Pack ‘n Play to keep the baby in your room for a while, if that’s your plan (you can always get a crib later). Plus, if you’ll be breastfeeding, remember your pump could be free through health insurance, so check into that. Once you meet your little one and get to know him better, you can decide later if additional things would be necessary or helpful, like extra swings or activity sets, fancy products like a jogging stroller or bottle and wipes warmers, etc.
  • Remember, most places offer discounts for items left on your registry that you want to purchase once your shower is over, so if there’s something you really want but you worry about putting it on your registry because it’s too much, you should still do so. That way, even if someone else doesn’t get it for you, you’ll still be eligible for the discount. Sign up for email newsletters and follow your favorite brands on social media, too, where they’ll be likely to share coupons and additional discounts with their customers.

Step 4: Consider your work options

Ah, work. Especially for women, there’s so much to consider when it comes to having a baby and a career. There are essentially two main things that you’ll need to figure out heading into parenthood when it comes to your job and your baby:

  1. How much maternity leave do you have? Unfortunately the U.S. is one of the few developed nations that hasn’t quite come around to fair and practical maternity leave policies — in other words, we have no set policies. For the most part, it’s up to each individual company to decide how to handle maternity (and paternity) leave with employees. What we do have is the Family and Medical Leave Act, which entitles all eligible employees to take up to 12 work weeks within a 12-month period of unpaid, job-protected leave for specified family and medical reasons (like the birth of a child) with continuation of group health insurance coverage under the same terms as if he or she had not taken leave. Find out if you’re eligible for FMLA here. Outside of that, it’ll be essential to sit down with your employer or HR rep to discuss how much additional paid leave you’re entitled to, and whether or not you can use saved vacation or personal days for maternity leave. Figuring out how much income you and your partner will have coming in during maternity leave will help you potentially budget for the length of time you’ll be able to take and how much additional money you should have saved up before baby comes, too.
  2. What are your plans for returning to work? For many women there is no real option — they simply can’t afford to not go back to work. For women with a little more wiggle room with their choices, though, there is a lot to consider before leaving a job to be a full-time mom. Childcare costs (which we talk about below) are often a big factor that comes into play when most women are deciding whether going back to work is even worth it, financially at least. If you’ve determined that you can afford to stay home financially, you’ll still need to consider:
    1. Where your health insurance will come from (can a spouse provide it for both you and the Baby?)
    2. How will you continue to save for retirement (you can read more about that, here)
    3. How to keep your foot in the door for your career should you decide to go back some day. If you plan to take classes or enroll in continuing education to do so, you should consider factoring those additional expenses into your budget.

Step 5: Take a look at childcare costs

If you’ll be heading back to work after baby (or you’re trying to determine whether it’s financially necessary to do so), it’ll be essential to take a look at your potential childcare costs. To help determine average costs in your area, check out the interactive map on ChildcareAware.org for specifics. In Colorado, for example (my home state), a married couple can expect infant, center-based care costs to average around $13,154 annually (or approximately $23,036 when you factor in a second child).

So, how can you potentially lower the costs of childcare? Here are some suggestions:

  1. Tag in Grandma and Grandpa (or any other friends and family willing to help): If you’re lucky enough to live in an area near family — and especially retired family, or family with flexible work schedules — it’s worth seeing if you can work out some kind of care situation whereby they look after your little one, even if only for a day or two a week. You’ll need to check with your primary caregiving source if you want to go this route, though, as some require payment for full weeks, months or even a year, regardless of whether your child is there every day of the week or not.
  2. Trim back additional costs: If your nursery or daycare charges extra for additional services like providing a meal or late pickup options, find out what those are up front and do everything you can to avoid paying for them.
  3. Check your FSA: A Flexible Spending Account is a special savings account sometimes offered through employee benefit packages. If you or your spouse has access to one, you may be able to save up to $5,000 per year, tax-free, which you can then use to cover daycare costs. (Learn more about an FSA here.)
  4. Consider alternative care options: While daycares and nannies are the most popular childcare options, there are other choices. For example, you could host an Au Pair at your house whose job would be to watch your kids in exchange for room and board, or you could consider a nanny share, where multiple families share one nanny and split the cost.

Step 6: Get additional paperwork in order 

When you’re about to become a parent, there are all kinds of ‘grown up’ documents you’ll now need to have on your radar. Here are some of the most important ones to consider putting together right away:

A life insurance policy: Even if your employer offers one, it’s worth searching around to see if an outside provider might offer a broader range of coverage for competitive pricing. Remember that when it comes to life insurance, your main goal is to provide your family with the funds necessary to continue on with their lives should something happen to you (they might need money, for example, to pay off a house, put the kid through college, and just pay the day-to-day bills). There are many calculators online that can help you get an idea for how much estimated life insurance you might want to get coverage for, and about how much that might cost you per month but remember that how much you actually pay will be determined by a number of factors, including your overall health and lifestyle factors.

A will: When you don’t have a will, the fate of all your possessions and property will be left up to the law when you die, which is never something you’d want to have happen, but especially not when there are children involved. While there are plenty of DIY methods available to create your will, this isn’t necessarily an area where you want to skimp, and it’s best to make sure that everything is done properly and legally, so using an estate attorney is your best option. If that’s too costly, a legal online site (like LegalZoom) could be a backup, but those sites are really only helpful if your will is going to be simple and straightforward (as in you’re leaving everything to one person).

Another important aspect of your will is including guardians for your children. Ideally these will be people with whom you’ve discussed the arrangement ahead of time. Keep in mind you can also name two different types of guardians for your children — a guardian for their finances and one to actually look after their care — should you feel that’s necessary.

Short-term (and potentially long-term) disability coverage: Remember that you’re much more likely to fall ill or suffer from an injury that keeps you out of work for a while, so signing up for short-term disability coverage to keep those bills getting paid while you’re laid up is a good idea. Check with your employer to see what they offer, and read this piece for more on the different options available.

Step 7: Start looking at college savings options

While it might seem crazy to start thinking about saving for college before Baby is even born (and it certainly shouldn’t be your top priority, above everything else on this list), it never hurts to get a jump start thinking about this financial aspect, since it could be a hefty sum you’ll need or want to have saved.

College savings will be a personal thing you and your significant other will have to discuss — all parents must decide for themselves whether or not they want to pay for any, some or all college expenses for their kids, or if there will be some kind of limit they’ll put on their contributions, etc. Also keep in mind that most experts would recommend that saving the maximum amount you can for your own retirement plans should always come before socking away for your kid to go to college. As the old saying goes, you (or your kid) can always take out loans for school … you can’t do the same for retirement.

Having these discussions sooner rather than later will also help dictate exactly when and how much you start saving, since obviously the longer you invest, the more opportunity you have for your funds to grow.

  • When it comes to actually saving, a 529 is the most traditional way that most parents decide to save (if you’re interested in sorting through your own 529 options, check out this piece about the five best 529 options), but that’s certainly not the only way to save. Some additional options include Coverdell Accounts, UGMA or UTMA Accounts and even Roth IRAs. (We covered each of these in length here.)
  • After you’ve done your research and come up with a general idea of how much you’d like to save, and what vehicle (or vehicles) you’d like to save in, you’ll have a better idea of the timeline you’re looking at to start. Remember, additional products can help you save even more on the side, too (like the Upromise MasterCard by SallieMae, for example, or the Fidelity Rewards Visa Signature Card, which allows users to deposit rewards directly into their Fidelity managed 529 College Savings plan).

Of course this isn’t an exhaustive list of things you’ll need to have prepared for Baby (although it may feel exhaustive to read it), but prepping these items before the arrival of your bundle of joy will certainly help you feel more financially ready once she does get here.

Plus, if looking at this list scares you off, remember — you’ll have nine long months to get everything in order, which is plenty of time. Take it one day at a time, and you’ll be more than ready — both financially and emotionally — when Baby arrives.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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