Do you ever have one of those moments in life where you stop dead in your tracks, smack yourself in the forehead, and say “what was I thinking!”

I’m sure we’ve all had moments like that, I think it’s just part of being human. I’ve actually been having that thought more often lately, and it’s all because of a decision my lovely wife made 20 years ago.

Three’s Company

My wife is from a family of three kids and ever since she was a teenager, she’s known that someday she wanted three kids of her own.  I knew this when I married her but I always said we shouldn’t rush into anything. I wanted to take it one kid at a time and see how things went – why commit to three kids when you don’t know if you can handle one, right?

So after having our second kid several years ago, it was decision time.  Could we handle another one?  Did it make sense for us?

After a lot of discussion, debate, and spreadsheets we finally decided that we were cut out to be a three kid family. 

Kids are Sooooo Expensive

Deciding to have that third kid was a big financial decision for us because it really pushed our boundaries in a number of ways. In addition to adding the standard costs of raising a kid (and even more kids costs), we’d also need to get a bigger house and a bigger car to fit our clan.

It would be an understatement to say that we put a lot of time into planning and preparing to grow our family. We’ve basically spent the last two years getting ready – saving money for a new car, selling our house, buying a bigger house, buying a bigger car…..  and now the big day is only a few months away.

Although we’re really excited to meet our little girl, there are times (when our two kids are acting like little heathens) that we look at each other and ask “what were we thinking”? 

Beating Cold Feet

So like any major life decision that’s already been made, we’re occasionally a little apprehensive about the hand we’re holding and how it will play out.  At times like those it’s nice to be able to look back at the reasons why you made your decision (write them down) and the plan you made for making it work (write this down too).

We spent enough time debating our decision and planning out our options that we know exactly why we chose to have another kid and that we can handle it. 

Giving Thanks for Family

This Thanksgiving we’re very thankful for the opportunity to be able to grow our family and that our little bun in the oven is cooking along just like she should!

We’ve started a tradition with our kids called the “Thankful Tree” where we tape a brown paper tree trunk to the side of our fridge at this time of year.  Every night we each write one thing we’re thankful for on a construction paper leaf and tape it to the trunk. 

Watching our kids learn to appreciate life and put their favorite things into words is a great reminder for me of why it’s so awesome to be a parent and makes me very thankful to have kids and to be a part of a family.

I hope that you have a chance to spend time with your family over the holiday (unless they drive you crazy, in which case I hope you get to spend it relaxing in the peace and quiet of your own home).

Happy Thanksgiving!

The Denning’s lifestyle fascinates me not only because they’ve figured out how to manage 5 kids on the road for months at a time but also because they’ve figured out how to make it work financially.  Neither Rachel or Greg have “day jobs” – how could they, their family spends months at a time on the road.

Rachel and Greg have to make adjustments to be able to afford the lifestyle their family enjoys, I had a few questions about how they manage money and Rachel took the time to answer them.

1) When you’re living on such a variable income, how do decide when (and if) to splurge?

We live very frugally and simply for the most part. In the past, when we made a lot of money, I would feel ‘poor’ if I felt I couldn’t spend money on something (like if my kids asked for a new pair of shoes, etc.) Now I’ve changed my view of things, and I realize that I don’t want to buy more things for myself or my children, unless it is really going to add value to our life, i.e. they really need a new pair of shoes, or what we’re buying is going to make our life simpler, easier or more enjoyable.

I feel that my purchasing decisions are more logically, instead of emotionally based. I purchase because of actual need or deep desire, not of emotional attachment or infatuation with some ‘doo-dad’. When we do spend money, I feel that we can splurge because 1) we’re buying something we need, and 2) it needs to be quality and last a long time.

2) What are your best health insurance tips for a traveling family w/out an employer’s insurance plan?

Our family personally follows a 3 Part Health Care Plan, that focuses on:

1. Prevention of illness through proper diet and exercise
2. Personal care of minor illness and injury through education of treatments and  (this is our unconventional first aid kit)
3. Use professional medical care when necessary – for example, when we were in a car accident and our three year old broke her femur.

When we our outside of the country, medical care is often free or inexpensive. We prefer to pay for these costs out of pocket, rather than to ‘be in debt’ to an insurance company each month ‘just in case’ something happens. This is the approach that works for us, though not for everyone.

3) What do you do when you run out (or are close to running out) of money?

In the past, we’ve returned to the United States to look for employment. Now we have an online business (selling a course on Family Lifestyle Design), so when the coffers are low, we’ll take a few days or weeks to focus on marketing and sales.

4) Do you give your kids allowance to spend on your travels?

Our children have the opportunity of earning money by completing their ‘job chart’ – essentially it’s a list of the activities they need to complete throughout the day – brush teeth, make up bed, grooming, education time, etc.

The aim is to teach personally responsibility. If they remember to do their jobs, or do them when mom or dad ask, and they remember to mark their charts (an app on our iPhone), then they can earn money on payday for every completed activity. Their memory for being responsible improves when they find something they want to spend their money on

Otherwise, we don’t buy anything for them. But we do buy things for ourselves, which sometimes includes something they will enjoy. I’ll buy a coloring book and crayons of animals in the Southwest – but it’s mom’s coloring book and crayons, that she bought with her money that she earned. They can borrow it, as long as they take good care of it and return it when they’re done.

I’ve found that this results in better care of the belongings we do have. My children still have toys that were given to them as gifts, but they don’t take very good care of them, because they didn’t earn it themselves.

5) What are the biggest financial obstacles to what you’re doing and how does your guide “Family Lifestyle Design” help people overcome them?

The biggest financial obstacles are finding a way to earn money to pay for living abroad or being nomadic. The way to accomplish this is as diverse as the individuals that are seeking the answers. Some create online business (whether blogging or online stores), others become freelance writers/contract workers. Some take jobs abroad (with non-profits or NGO, with the foreign service, etc.)

Our course will discuss all the of the options (and give concrete examples and resources) that we have personally used or seen used by the countless families we’ve encountered in our travels around the world.

Thanks to Rachel for sharing how they can afford to be “travel nomads”!  If you think your family might want to try something similar someday check out their guide, Family Lifestyle Design.

Although divorce is the probably the last thing on your mind when you get engaged and get married there a few things to keep in mind before you start merging your finances with your new husband or wife.  Since almost half of marriages in this country end in a divorce (many of them due to problems or fights over money) it’s worth your time to think these money issues through.  Obviously I’m not a lawyer so this isn’t legal advice, just a few things to be aware of before you get married or if you find yourself contemplating divorce.

Prenuptial Agreements
Prenuptial Agreements are a step some people consider before getting married. They tend to only protect what you come into a marriage with–so anything earned during the marriage likely will still be subject to marital division. However, since each jurisdiction likely has different laws and regulations, you should seek an appropriate expert in your jurisdiction. Many people find prenuptial agreements somewhat unsavory and some might be insulted if you ask them to sign one. I think the obvious reason is that people probably don’t want to start a marriage already contemplating the possibility of divorce.

Debt
When you get married it’s best to have a plan as to how you will pay your individual debts. Some people will decide that the debt they enter a marriage with should never become a joint responsibility. Others will jump right in and commingle their debt. It’s really a potential problem, however, when there exists a great disparity in each party to the marriage’s debt load. The same goes for money brought into a marriage. Sometimes it can be easiest to get married when you’re both young and poor : )

If you’re not careful, you might end up like my friend who’s wife brought 50K of credit card debt into their marriage, convinced him to pay it off with a second mortgage in his name, then left him shortly after.

Inheritance, Gifts, Family Money
This is another issue that can cause problems in a marriage or during a divorce. Do you decide to commingle your inheritance or do you intend keep it separate to perhaps protect it in the event of a marital breakdown? When your parents put the down payment on a house are they still alright with that arrangement if your marriage doesn’t work out?

Wills
What about your will? Have you made sure you have kept it up to date both when you get married and afterwards in the event that you divorce?

Paperwork
Are you both familiar with how the bills are paid, the state of your finances, and how to access the money? People tend to get hostile or suspicious during a divorce. You’re both going to want to know where the marital funds have been kept and that neither party is hiding money from the other.

Attitude
I have an acquittance who’s a divorce lawyer and he says the most costly thing in a divorce is the parties dislike of each other. He’s seen clients waste a lot of money rather then settling–and they pay out of their anger. Having a great attitude and trying to stay friends even after a divorce can make both parenting and your finances easier to deal with post-separation.

Divorce and Money
Divorce is a difficult subject to write about, and I know it’s not the most fun topic to read about either. However, I’ve seen friends go through a divorce and think it’s important that anyone who is married or contemplating marriage at least know some of the issues that could come in to play if later on the marriage doesn’t work out.

Everyone says “that would never happen to me,” and I hope it doesn’t, but it may save both of you a ton of time and money in divorce legal fees if you have an idea of these types of considerations even when your marriage is going great. I should mention again that I’m no expert in law so I’d suggest getting expert/legal advice if you’re facing a divorce.

That said, I hope this will help you understand some of the issues in this oftentimes sad but still important part of personal finance. What are your thoughts and experiences on money and divorce?  Did you/would you ask for a pre-nup?

Clariity doesn’t give you stock but it does let you contribute money to help your friends or family towards their financial goals.  A concept kind of like Upromise, where you’re contributing to their college savings – except Clariity isn’t limited to just college and the money is a gift from you.

I chatted over email with the man with the vision, Scott Amyx, who’s the driving force behind Clariity.  It turns out that his team has built some pretty powerful financial planning tools for Clariity members – financial modeling and “what if” features that allow you to set your goals and then test out various ways you can reach them.

The site has a big focus on family finances so I sent him 6 questions about Clariity in regards to financial questions or challenges we’ve run into in our family.  My questions and his answers are below:

1) If I provide all the investment options in my 401k and my wife’s 403b, can Clariity make a recommendation on what mix of investments to choose?

Yes, our Investing and Retirement Accumulation modules will be available later in the year. As you probably know, there are a number of model portfolios, strategic model portfolio for household assets, model portfolio for retirement, model portfolio for college and so forth.

First, a few disclaimers, since we are more than a comprehensive financial planning platform, we are subject to compliance under SEC, FINRA & USA (Uniform Securities Act).

Here are the compliance issues you should be aware of in regards to your question:

1) You’d need Durable Power of Attorney between spouses to derive at a household accounts for the purpose of dispensing advice.

2) Limitations on issuing advice on only assets managed (unless we are the qualified plan administrator or the client has authorized us to dispense advice for which we are compensated through an asset-based fee).

Getting back to your question, the best way to do it is to setup a model portfolio for a retirement account.  Here are the steps for setting up a Clariity retirement account model.

 
2) We bought a house 6 months ago and were running the numbers on a 15 year mortgage vs a 30 year mortgage and what made the most sense for us. Does Clariity offer any tools for mortgage comparison or analysis?

This is built into the Clariity Home Purchase module. The system automatically calculates affordable mortgage and estimated monthly payments.

3) Fortunately, we don’t have any credit card debt but many families struggle to keep their balances paid off on their credit cards. Can Clariity help families plan their spending to prevent accumulating consumer debt?

Later this year with the rollout of account aggregation, we will have basic budgeting capabilities. They will allow users to set targets by spending categories. When it exceeds the target, an alert will be triggered and messaging sent to the user.

For those in debt, we’re planning on having our Debt Reduction module ready later this year. The capabilities include ability to project debt-free in months using a myriad of strategies, including debt consolidation through HELOC or credit card transfer or if that option is not available then the roll down strategy to pay off highest interest card first.

In addition to tool capability, we will have helpful tips and content that encourages those in debt to negotiate their debt terms. We’re also working on an accountability group feature to get friends and family involved in staying vigilante about spending and following through with their debt reduction goal.

4) Many people were up in the air about how to handle the Roth IRA conversion last year. Does Clariity help people compare the Roth IRA and traditional IRA options?

This is a fairly standard Roth IRA conversion calculator put out by most institutions. It’s not in our short term plans but could become part of our Retirement Accumulation and Distribution modules.

5) If my wife and I don’t agree on a big spending or investment decision, are there features in Clariity that will let us do “what-if” analysis to look at the implications of both decisions?

The latest version of Clariity has a catch-all Major Purchase module. It very simply shows you based on your goal amount and what you an afford to save, how many months or years it will take to reach your goal. In other words, it helps rationalize the decision-making process through the notion of immediate vs. deferred consumption.

As for investments and other goal decisions, what if is inherently built into the major goal modules. In the case of Retirement Accumulation, what if and modeling can show the affect of inflation, market volatility, disability, and premature death on your retirement plan.

For the Retirement Distribution/ Income module that’s in development we model the affect of longevity risk, inflation risk, LTC, death of spouse, and market volatility on their retirement income needs.

6) Almost four years ago I wrote an apology letter to our few month old son.  Basically I told him college tuition costs have gone wild and that we probably wouldn’t be able to pay for all his schooling.  We want to help him and his siblings as much as we can, can Clariity help in that college planning process?

At Clariity we believe that there is an inherent difference between head knowledge vs. actionable advice. Most people are not in a position to save some $10,000 a year towards a $300,000 college tuition goal, especially if they have more than one child. Rather, it’s about doing something vs. nothing.

In our College Savings module, we ask users what is a realistic & achievable amount that they can commit to on a monthly basis? Even $100/ month can accumulate to some $15-20K in the future which helps offset a portion of the tuition cost.

How To Setup a College Savings Module in Clariity

1) College savings video primer and transcription are available for those needing an introduction.

2) Assess what the user can realistically save each month. Immediate feedback on projection of those dollars on the same page.

3) Based on their zip code, we then immediately display 529 plans for their state.

4) Using sort, filter & selection features, users can quickly search our database of Savings Plans & PrePaid Plans.

5) Users can also compare side-by-side plans to evaluate performance, tax benefits, costs and read user reviews.

6) After they selected a 529 plan, the user is directed to complete an online application. By completing our application, you in effect can apply to any of the 100 plus 529 plans in the country.

7) If you opt to allow us to help you with your application, we mail you the completed application with stamped & self-addressed envelope with instructions to the user. The user completes any other necessary documentation such as payroll deduction, attachment of voided check and include a check or ACH order and sends the package in to the 529 plan institution.

8 ) Using account aggregation, the user can then track the performance of the 529 plan on our dashboard.

9) Additionally, with the group gifting feature available soon, users can invite friends and family to gift towards their child’s education fund. The next time they have a birthday party for Johnny, in eVite, email invitation or Facebook, the user can request gifting towards Johnny’s college fund in lieu of novel, short-term presents.

Thanks to Scott for taking the time to go into detail on some of these questions!  If Clariity sounds like something you or your family could use, be sure to check it out.

We didn’t actually set out to save money on the party, our house is on the market so our main concern was keeping it clean over the weekend.  However, some of the things we did as a result ended up saving us money!

Birthday Party Location

1) Don’t Pay to Party

We knew we didn’t want to host the birthday party at our house so we could keep it clean, however, the cost of renting a place to have a party was more than we wanted to pay.  We ended up going to a local park, keeping the messy kids fingers off the furniture & windows but not having to pay to rent a birthday spot.

One thing to keep in mind if you have birthday party at the park is to pick a park or a spot in the park that’s close to cover in case it rains and has some nice trees to shade the kids and parents from the hot sun.  Another plus is a spot that’s close to a parking area so you don’t have to lug your stuff too far.

Birthday Party Food

2) Don’t Buy a Cake

The birthday cake is usually at the center of a child’s birthday, what’s a party without cake & icing right?  However, the cost of cake can also eat up a big part of your kid’s birthday budget.  Baking your own cake can save you some money, it’s definitely cheaper than buying it from the store.  If your kid wants a fancy themed cake that’s beyond your icing skill level, one option is to buy some themed decorations from a site like Etsy and use those on top of the cake.

3) Celebrate with Cupcakes

Another tip that can save you a little more is to make birthday cupcakes instead of a full cake. This means you don’t have to buy plates and utensils for the kids since they can just eat the cupcakes with their hands.  We did this since we were going to be at the park and it meant less stuff to carry, but it also saved us some money as well.

4) Serve Snacks, Not a Meal

 Your food costs will also be impacted by the timing of your child’s birthday party.  If you schedule the party for dinner time you’ll spend a lot more on pizza, burgers, or whatever you buy or cook up.  Set the party for after lunch and before dinner time and you’ll save money on birthday party food.

5) Buy Food in Bulk

When you’re buying for a big group you can usually save money if you buy in bulk.  We used our Costco membership discount to buy water, soda, and Capri Sun’s for drinks and a variety of snack foods.

Birthday Party Supplies

6) Save on Balloons

For our boy’s birthday party, it wasn’t really a party in his mind until there were balloons.  If you buy the themed balloons (with their favorite Disney character) those can get pretty expensive.  Instead, we stuck with solid colors and let him pick the colors of the balloons he wanted. 

We decided he could get as many balloons as years he was old; four big helium balloons from the supermarket flower store only set us back $5.  If you don’t want to spend the money on helium balloons, for the same price you could also buy several packages of regular balloons and blow them up yourself.

7) Avoid Party Store Prices

Another way you can save on birthday party decorations is to buy them from other crafty parents instead of party stores.  We found some cool and cheap star wars decorations for his party on Etsy.

Birthday Party Games

8 ) Make Your Own Party Games

Rather than buying games to keep the kids busy you can come up with your own birthday party games.  For example, instead of spending money on the classic “Pin the Tail on the Donkey”, my wife made her own “Pin the Light Saber on Yoda” game.

Neither of us are great artists but she found instructions online on how to draw Yoda, a character from the Star Wars movies.  Trying to draw something like that from scratch probably wouldn’t have turned out very well but the website she found gave detailed step-by-step instructions on how to draw each part of little Jedi.

She got out a big blank piece of paper and after about 15–20 minutes she had drawn a life-sized Yoda. Then we cut light sabers from green construction paper, one for each kid.

Yoda was was taller than all the kids at the party, we taped him to the top of a card table, leaned it up against a tree, and the kids played “Pin the Light Saber on Yoda”.

Birthday Party Favors

9) Make Your Own Party Gifts

We spent money on putting together birthday gift bags for the kids but it turns out we didn’t really need to thanks to a cool Star Wars party gift idea my wife found on the web. 

We bought foam noodles, cut them in half, wrapped the bottom in duct tape and each kid had their own foam light saber.  There were several different colors to pick from, each kid got to choose which color they wanted and we wrote their name on it with marker.

The light sabers were a huge hit, they kept the kids entertained the whole party, chasing each other all around the park.

Not only that the kids got to take them home to play with after the party; we later found out that one little girl liked it so much she wanted to take her light saber to bed with her that night.

10) Make Your Own Thank You Card

You don’t have to buy thank you cards to send out after the birthday party.  We had our son make the cards himself, not only did it cost less it was a little more personal.  He can’t write yet so he just colored on some paper and my wife wrote a little note on the inside. 

Saving money on a birthday party doesn’t mean that it won’t be fun for your kid.  It might be a little more work for you but they’ll have just as much fun and you’ll have a smaller credit card bill.  Obviously some of these tips will save more than others but all together they can save you a lot of money on your kids birthday party.  Enjoy the party!

Lending money to people you know is always tricky, a loan can wreak havoc on a relationship. Add family dynamics in on top of that and borrowing money from family members can cause tensions for years down the road.  However, as I mentioned at first, family bonds are an important part of our society so I wanted to look a little at why it is we sometimes borrow money from our brothers and sisters.

Money Skills
Everyone in your family has different skills; some people are skilled carpenters, talented teachers, knowledgeable doctors, brilliant attorneys, computer geeks, etc.

Some of us are really good at managing our money and others never did learn the skill. It’s like learning to play the piano, two siblings can take lessons together. One might get really good and go on to play for the rest of their life while the other isn’t interested and can’t even put a few notes together.

Of course, the difference is that money management is a vital skill that can make your life much easier, or harder, depending on how well you learn it.  So you can certainly argue that everyone SHOULD learn best money practices but the fact is that not everyone does.

So while it doesn’t matter much 15 years down the road if your sister is a much better piano player than you, it obviously makes a huge difference in your daily life if your money skills are much weaker.

Swapping Skills
Often times in families we’ll share our skills with each other. We may ask our dad to fix a lamp, our father-in-law to help build a patio, or our brother to fix our computer.

For example, I’m not the best fixer-upper and really appreciate it if my dad or father-in-law can fix something around the house for us.  My area of expertise is writing computer software, so if they need help with their computer, email, or something along those lines I’m happy to help.

So if your brother can come work on your deck or your cousin will come fix you computer why can’t you go help a family member in need to manage their money?  In some relationships this will work but in others it probably wouldn’t fly. This is because money is a sensitive subject and there are a HUGE number of emotional triggers tied to it.  You can read the book “Why Smart People Make Big Money Mistakes” to help understand why you and your family make the money decisions that they do.

Swapping skills to help your family manage their money may work in some cases but if family members won’t let you see inside their financial bubble then your money skills won’t do them much good.  However, since you do know how to manage your money you’ll likely have some saved up so your parents or siblings may come to you and ask to borrow money.

Money Advice
Even if your brother or cousin does give you a peek at their finances, it doesn’t mean that they’ll listen to any advice you have to give.

For example, my dad is a family practice physician and has given out his fair share of medical advice to our family over the years.  Recently he talked to me about how I should lose some weight and even helped me calculate a plan on how many calories to eliminate per day.  I know he’s right and he gave me the information I need to drop some weight but I have yet to implement it.  It certainly isn’t the first time he’s given medical tips to his family that were heard but not followed.

The same goes with money, you can explain savings, budgets, and debt until you’re blue in the face but if they don’t listen and take action there’s not much you can do.  Of course, since you know so much about money, you may be one of the first people they turn to when they’re looking to borrow money.

Lending Money to Family
So if your brother or sister has horrible money skills and won’t take your advice, what can you do?  Unfortunately, there’s no good answer; we’re torn between helping our family and letting them learn their lesson and hoping they’ll change their ways as a result.

If you do decide to lend money to family, it’s often best to make it a formal contract by using a peer to peer lending service like Lending Club or Prosper to facilitate the loan.  You can read more about those options and some other things to consider when lending money to family.

Budgeting and Planning

Whether your child is five or 16 years old, they typically receive money from allowance, part-time job or as gifts for special occasions. This is a great opportunity to teach your children about budgeting and planning for the future. Yes, your child should be able to spend this money on what they want (to a point), but it should also teach them about spending responsibly. Instead of allowing your children to blow all of this money, require your child to use a certain amount of their money to pay for some of their own expenses. For a teenager, this may mean requiring them to pay for one tank of gas for their car each month. For a younger child, it may mean that they have to put 10% of it in their piggy bank to save for a rainy day.

Household Budget

It’s also important to teach your children that money is limited. A great way to illustrate this is with money jars labeled with the family monthly expenses. Using real money or play money, start out with a pile of money that includes the monthly income of your household. Go through the list of bills and expenses for the family each month, removing the expense amount from the pile of money and dropping it in to the appropriately labeled jar. Continue this until all of the expenses are paid. If there is money left over, explain to children that this is spending money. If there isn’t any money left over then explain that there isn’t any money left after bills are paid for any extras.

Live within Your Means

It’s also time to instill the need over want mentality in your children to teach them how to live within their means. Danny Kofke, father of two young daughters (5 and 2) drives this point home by paying an allowance in exchange for chores completed. Allowance money isn’t used solely for spending. Ava (5) is required to split her earnings between three jars–give away, savings and spending (in that order). If Ava sees something she wants, Danny and his wife Tracy tell her she has to see if her spending jar holds enough to buy it, or Ava can dip into her savings for items that may cost a little more. Ava uses the give away jar money to buy presents for others and donate to organizations.

Financial Contracts

Teach children about contracts and financial obligations by acting as a lender from time to time. When your child wants to buy an item, “finance” it for them. You can form on agreement (on paper, if you wish) with the child where you fund the purchase of the item but they are required to pay you back with their own money until the “loan” is paid off. This will prepare your children later in life when it’s time for them to take out a loan or mortgage with a real lender.

No Bailouts Available Here

You may be teaching your child a more valuable lesson by not bailing them out every time they hit a financial snag. Financial snafus are opportunities for your child to learn ways to better manage their money or create a strategy to come up with the money they need to get out of trouble on their own–take on a job, get a second job or create a budget to manage their spending, so this won’t happen. If you do bail them out, then require them to pay you back.

Investing Today for Tomorrow

Take a trip to the bank with your child to open their very own savings account or take it a step further and open an investment account. Require them to deposit a certain amount of their money into this account on a regular basis. Sit with your child and review the statement for their account(s) each month so they can see how their money grows over time. It may seem like a basic concept but it teaches your child how putting money away today grows it for the future.

Bills of the Future

While your child may not have any expenses now, they will in the future. A good way to teach them what kind of expenses they’ll have in the future is to make a list and go over it with them. Teach kids about some of the bills they will be responsible for paying as adults. Again, this drives home the value of money, the need to budget and to cover necessities before being able to splurge on their wants.

Parents that teach children about managing money and finances tend to have responsible adult children. Take your opportunity to instill good financial habits in your children while they are young so they know how to manage their money later in life too.

My Grandmother’s Apartment

My kids and I paid an evening visit to my grandmother this week, just so they could spend a few hours hanging out with her.  The memory of my grandfather, who passed away last year, still fills her relatively new apartment.  She moved into the independent living community after he died and as I walked in the front door I realized how people know when “the future” has arrived.

The place she’s living is wonderful. They have a computer room, a chapel, a game room, a workout room, a movie theatre, shuttles to drive the residents around town, a great dining facility, and most importantly… a nice community.  The people that live there congregate for meals, movies, games, worship, and just to visit.

The Future is Now

Of course all of these amenities aren’t cheap but it’s okay because “the future” that my grandfather saved for all those years has arrived.  As I mentioned in my memorial to him, my grandfather was tight with money, and proud of it.  Now all that saving and investing is paying off. Providing for his wife when he’s not there to care for her is EXACTLY what that money was meant for. 

He probably couldn’t visualize exactly how the money would be spent at the time of earning and saving it but he knew he was investing in the security of his family.  He didn’t know what the future held but he knew that it would eventually come and that he wanted to be ready when it did.

Condolences

One of the reasons I wanted to write this was because of Jason over at Frugal Dad who sadly lost his mother last Sunday. My visit to my grandma and his loss of his mom really got me thinking about where my parents and someday my wife and I will end up. 

I don’t know when that future will be. I don’t know what it will look like. But I’m glad that my parents and my wife and I are saving for the day when it arrives so that we can provide the rest of our family the security that we won’t be there to give.

Childcare

Childcare can be really expensive. It depends on a variety of things such as the age of your kid(s), how many children you have, how many days you need childcare, how many providers are watching over your kids, the activities they do, etc.

We are happy using an in home daycare that is cheaper than the chains like Kinder Care / La Petite and is very flexible with scheduling but the fees still add up pretty quickly. I have co-workers with 2 kids that have day care expenses of several hundred dollars a week.

Laundry

Kids are always getting their clothes, blankets, and sheets dirty. Whether it’s dirt, food, or bodily fluids children can’t seem to go a few hours without getting something on their clothes.  Of course, if it’s a little dirt or a food smudge you can let it go but if they’re covered in mud or dripping in urine then you have little choice other than soaking the clothes in the sink and putting on another outfit.  Before you know it the laundry basket is full, their drawer is empty, and it’s time for another load of wash.

Insurance

I talked about medical bills and co-pays last time but I forgot to mention insurance premiums. Each time we have a kid it costs us more in monthly insurance premiums to add them to our coverage. 

Of course you can lower your premiums by raising your deductibles but that’s quite a balancing act of guessing how sick or hurt your kids will get in the year ahead and picking your deductibles.

Activities

We enrolled our son in soccer lessons for the first time this year.  It was also our first time paying “activity fees” for our kids.  It was $80 for 8 sessions so it wasn’t outrageous but it was $80 that we weren’t spending a year ago.  As kids get older and get into more activities the budget for stuff like this will have to increase.  I have co-workers whose kids are involved in multiple sports and different activies that are always moaning about all the fees.

One of the activities we like to do that isn’t expensive is take a picnic to the park.  Another one our son loves that is free is taking an afternoon trip to the public library.

Babysitters

For a good night away from the kids you’re going to need at least 3–4 hours to grab dinner and see a movie or some other fun event.  The more kids you have and the longer you’re away, the more you have to pay the babysitter.  You also have to make sure there’s food for the babysitter to eat for dinner. So on top of the money you spend on dinner and a movie you’re also shelling out cash for someone to watch your kids.

As I mentioned yesterday, the joys of parenthood are certainly worth the added expenses but they can add up quickly so make sure to budget for them.

Health Care

Medicine

It seems kids, at least young ones, are always getting sick.  I’m sure part of it is that they’re often running around other little kids with runny noses and stomach bugs.  It doesn’t help that they like to put everything in their mouth, never want to wash their hands, don’t cover their mouth when they cough, and are too small to understand the concept of germs.

For example, when our son was younger he kept getting some kind of eye goop from the kids at daycare where his eyes would crust shut.  The doctor gave us a prescription for a tiny little bottle of drops that cost us $50. At $50 a pop, I would dread every time I saw the goop start to accumulate in his eyes. 

Then, I’d catch it from him and have watery, crusty eyes as well but the doctor said not to share the bottle of drops.  They wanted me to go to my doctor and get a prescription and get my own bottle.  Dreading another co-pay and spending another $50 on a teeny tiny bottle I didn’t listen and borrowed his drops. Luckily my goop went away.

Co-pays

Of course, anytime your kid gets a cold you have to worry if they’re going to get an ear infection.  You don’t really know if they have one or not but if they’re acting fussy and crying a lot you start to wonder if the cold caused an ear infection.  So you take them in to see the pediatrician which means you have a co-pay. 

Sometimes they have the ear infection, sometimes they don’t; but you pay for the doctor’s visit no matter what.  The thing is, you love your kid and don’t want them to be in pain.  So whether it’s a suspected ear infection or some other ailment, when something seems wrong with your kid you worry about them and call up the pediatrician. All those doctor’s visits add up over time.

Time Off

When your son or daughter is sick, someone has to stay home with them and that means taking a sick day or vacation day.  If you’ve worked at a job for many years you may have a surplus of days accumulated, but if not then each one of those days is pretty valuable.

It’s not just sick kids that will eat up your vacation days.  For example, last week our daughter got kicked out of daycare because she wouldn’t take a bottle from the babysitter.  My wife went to pick her up and our baby sitter said she couldn’t come back the next day since she was refusing to eat from a bottle.  With little notice to find an alternate, I ended up having to take a day of vacation to stay home with her.

Destruction

Usually kids don’t mean to be destructive but due to their youth and ignorance they destroy things unknowingly or accidentally.  For example, maybe they’ll pick up something fragile (cell phone, camera, decoration, etc) and drop it as they walk across the floor.

Or they’ll be potty training and have an accident and get pee stains all over the furniture or the carpet. 

Maybe they’ll be washing their hands and plug up the sink and overflow water all over the bathroom.

They can also be destructive towards their own bodies.  A big cut or a big fall can lead to a an expensive and day-consuming trip to the emergency room.

I’m sure the list is endless, there are many different ways kids can destroy things.

Babies

Babies cause so many expenses that they’re in a whole cost category of their own.  Cribs, strollers, diapers, and formula aren’t cheap.  Then there’s the process of being pregnant and actually delivering the baby.  Doctor visits and hospital stays keep the medical bills flowing in for a while.  Depending on the mother, you might also drop a bunch of money getting the baby room ready, which can mean new furniture and decorating.

Toys / Clothes

You can certainly save money on toys and clothes by buying them at garage sales or discount stores but those costs still add up.  Your kids will either destroy or grow out of the clothes and toys that you buy them so every season you’re spending more money.

Cost of Kids

So far, we’ve only experienced the costs of the first few years of life. We haven’t gotten to expenses for school age kids, let alone the costs of college.  I don’t know what the total bill will be but I know it’s going to be MASSIVE.

However, the joy of being a parent and seeing your kids learn and grow is worth more than the large financial cost of raising children.  Although they may deplete your bank account, they’ll fill up your heart and make you happy in ways you didn’t know were possible.  Just make sure you budget for the little money sucking bundles of joy.