Tips for NEW Parents

Congratulations on your baby! Now it’s time to sort out all the new expenses you need to plan for, and choose investments based on when you will need the money. Put money for short-term expenses (one to five years) in safe investments such as savings accounts and certificates of deposit (CDs). These low-interest-rate investments will not grow dramatically, but they will not lose money either. Money you will need beyond five years should have the opportunity to grow – at a risk level you are comfortable with. Combine super-safe savings accounts and more volatile stock and bond mutual funds for flexibility in timing your withdrawals -- this can protect you against having to take losses when you don’t want to.

The earlier the better -- when you let the magic of compound interest work for you, your monthly contributions can be very modest. Start saving when baby is born and $100 a month at 6 percent interest will give you $38,200 when your child turns 18. Start five years later and that drops to $23,400, and waiting until your child enters high school means you’ll have just $5,400. But don’t let these estimates get you down – even if you can’t start right away, save what you can when you can. Every little bit will help when it comes time to pay those college bills.