Raising children is a financial challenge for most people, and you make sacrifices every day to ensure your kids have everything they need. But what happens when it’s time to think about saving for retirement and you are forced to choose between setting up your future and handling parenting expenses? It can be tempting to assume that it is impossible to do both, but with careful planning, you can take care of both your children’s needs and your own future.
The first step is to assess what kind of lifestyle you are leading and consider downsizing. Do you absolutely need to have two car payments every month? Are four flat screen televisions necessary? Maybe even considering going from the five bedroom big mortgage home, down to a three bedroom affordable option will make all of the difference. Many of us live above our means and cutting down on the things we think we need, but really don’t, could free up just enough retirement investment money without forcing the kids to go without.
Speaking of investing, consider putting extra money into a Roth IRA, where you can allow it to grow for your retirement fund, but also utilize the capital for general expenses or even college for your children; the principal funds in this type of account are taxed up front and can be withdrawn for anything without being charged fees. Be careful when withdrawing from a traditional IRA as this can trigger income tax fees, though typically it will not be subject to an early withdrawal penalty if you are using it only to pay for college. While this is not always the best option for everyone, it can really help balance the budget when it comes to paying for kids and saving for retirement.
If your employer offers a 401(k) plan but you didn’t take advantage of it because you weren’t sure how it would benefit you, get ahold of your human resources department right away and sign up! Here’s how it works, a 401(k) plan is literally a plan set up by your employer to help you retire; this allows you to invest some of your paycheck before taxes are taken out, and many employers will match the amount. You can set it up so that it doesn’t impact your overall finances in a negative way, and is rather an “out of sight, out of mind” deduction that will greatly benefit you in the future. In this sense, you can continue to pay for your children’s expenses without feeling like you are having to choose between what they need and what your future holds.
Another important step is asking family and friends for help! Not as a handout, but let them know that when birthdays and holidays come around, you would rather they donate to your kid’s college fund or toward the cost of day care, rather than buying your little one another toy that will soon be ignored. If your children need certain items to get by, you could set up an Amazon wishlist and send it out to your loved ones so they can contribute in that way as well; virtually anything can be added such as snacks, school supplies, clothing, and even gift cards. Asking for help can allow you to put a little more away toward your retirement savings.
As you can see, there are a ton of creative ideas that may allow you to free up money for retirement, all while balancing the expenses needed to raise children. Sitting down and making a plan for what you can actually do to ease the burden is a much better plan than worrying about what you think you cannot do. There is always a way to find balance, sometimes you just need to assess the situation and make changes in your life.