How does having a family change financial planning? Having a family changes your financial planning habits as far as how you spend and save money, especially for college. When you get married, your spouse...
When you get married, your spouse shares the burden. In addition, sometimes your taxation can be a little more favorable when you file jointly as opposed to separately. Now the issue always becomes what is your money type and what is your spouse's money type? Are you a spender and he is a saver or vice versa. Sometimes that can create some conflicts if money types don't match up, if one is a spender and takes on lots of debt and one is more financially responsible. You have to work on coming to a happy medium. Most relationships can get really strained over money more than anything else. So there needs to be some sort of a balance there.
We tell people that if they save money for college, they should generally get started as soon as their children are born or even while they are still in the womb. College costs go up exponentially compared to the rate of inflation. What we suggest for newborns is that generally you want more in stocks as opposed to more conservative investments. Keeping to successful stock investing is to maintain a sort of longer term time frame -- greater than a seven year timeframe -- because time in the market helps create those compound returns. Then you can create a way to have that portfolio have large companies, small companies stocks, and some international. As your child or your children are close the age of 18 and withdrawals are pending, you want to begin moderating the risk of the portfolio you created. It may be less in that exposure to stocks. So maybe at age 18, your child's college fund has less than 20 percent in stock. Parents have their own financial world mapped in their mind. Sometimes the best portfolio balance is really a personal decision to save enough to be comfortable. You have to have agressive allocation for your children, regardless of the time a newborn has before money is actually needed so that it will be enough for college expenses.
