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Financial Benefits of Optimally Spacing Childbirth

January 6, 2022 | Leave a Comment

The average American family has children spaced 2.5 years apart. But is that ideal? What are the financial benefits of optimally spacing childbirth?

Financial Benefits of Optimally Spacing Childbirth

People argue about what is the optimal time between children. Here are some of their arguments for having kids close together and having them four or more years apart.

The Financial Benefits of Having Kids Close Together

Proponents on this side have some good arguments as to why having your children spaced close together is good.

Initial Costs for the Second Child Are Minimal

Because your kids are so close together, you have everything you need for the second child. You don’t need to buy more baby clothes or baby gear because you already have everything you need from the first child.

Parental Careers Are Less Interrupted

If one parent chooses to stay home to care for the children, she doesn’t have to stay home as long if the children are spaced closely together. If your children are only 18 months apart and you want to stay home until they’re both in preschool at age 3, you are only out of the workforce for 4.5 years. However, if you have kids four years apart, in the same scenario, you’re out of the workforce for seven years.

You Get Discounts with Multiple Children

Proponents of having kids close together acknowledge that you may face large expenses at once, such as daycare and college. However, these parents note that you’ll get a discount. When you have two children at the same daycare, you likely get a percentage off the second child. If you have two kids in college at the same time, you’ll receive more financial aid to offset the added expense.

The Financial Benefits of Spacing Kids Four Years Apart

Others argue to reap the financial benefits of optimally spaced childbirth, children should be four years apart. These are some of the benefits you reap with larger spacing.

Only Pay One Large Expense at Once

The best benefit of having kids four years apart is that you pay big expenses one at a time. Some of the largest childhood expenses are daycare, braces, and college. Because your kids are four years apart, by the time your first child finishes daycare, your second begins. The same is true with braces and college. While these expenses remain constant for eight years since you’re paying them back-to-back, you never face the expense of having two in braces at once or two in college at once.

While those who have kids only two years apart argue that there are discounts for daycare and college when you have two children enrolled, you’re still paying more than if you only had one child enrolled. If you space your children four or more years apart, you avoid a few intense years of high expenses that those with kids close together experience.

My Experience

I have three kids. The first two are 4.4 years apart, and the second and third are just 17 months apart. If I look from a strictly financial standpoint, the first two are optimally spaced. The oldest was able to attend preschool while I worked full-time and my husband went to graduate school full-time. However, after we had the last two 17 months apart, we could no longer afford for me to work. The cost of two kids under two in daycare in one of the largest cities in the United States cost almost as much as my salary. I would have been working to pay for my younger two kids to be in daycare.

Likewise, my oldest was out of braces when my middle child started them, so we only had to pay for one child at a time. (Thankfully, my youngest doesn’t need braces!)

Other Factors to Consider When Spacing Children

However, our choices in life are rarely entirely about finances. When determining how to space your children, you also need to consider other factors besides money.

Non-Financial Benefits of Having Kids Two or Fewer Years Apart

Despite the added expense, there are good reasons to have kids two or fewer years apart.

Children Tend to Be Closer

While this isn’t always true, children who are closer in age tend to have a closer relationship. If you want your siblings to rely on one another and be friends, you have a better chance of that happening if your children are closer in age.

They Have Similar Interests

If your children are close in age, they are developmentally at the same stage. If you want to take them to see a movie, your pick is easy because they’re at the same developmental age. This isn’t true if their sibling is four or five years older. In that case, picking an activity that is age-appropriate for the younger child often means the older child is bored because he’s no longer at that developmental stage.

Non-Financial Benefits of Having Kids Four or More Years Apart

In my experience, having children closer together is better from a non-financial standpoint. My younger two have a close relationship. However, my oldest and middle child, who are 4.4 years apart, only recently started developing a closer relationship as the middle one reached her teen years and started to share interests with her brother. My youngest still does not have a close relationship with the oldest.

However, there are some non-financial benefits to spacing kids further apart.

You Have More Time to Recover

When kids are spaced four or more years apart, you have more time to recover from pregnancy and the sleepless newborn days. Honestly, when I had two kids 17 months apart, the first two years are a blur because I was so exhausted. That didn’t happen when my second joined the family.

Easier to Give Each Child Attention

With this age gap, giving each child individual attention is easier. You can read and play with the older child while the younger one naps. You can play with the younger child while the older one plays independently.

Final Thoughts

If you space your kids four years apart, there are financial benefits of optimally spacing childbirth. However, your decision when to add to your family is rarely only a financial one. You should consider all factors to make the best decision for your family.

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Better Ways to Gift Money to Children

September 10, 2021 | Leave a Comment

Children are the future, and one way to invest in them is financially. Gifting money to the children in our lives can help not only this generation but future generations. This generational wealth can cause a positive ripple effect in a person’s family tree. Manage your money correctly, so you can help the next generation. Then they can help the generation after them. However, you must first determine the best ways to gift money to children.

5 Ways to Gift Money to Children

There are five different ways to gift money to children. You might decide on one way or utilize several. Which you choose depends on your goals for the money, the children’s interests, and the children’s ages.

Give Cash

The most basic way to give money to kids is to give them cash.

Pros

Giving cash is desirable for two main reasons. First, it’s easy to do. Second, the child gets instant gratification. I still remember how much I loved getting cash when I was little because there were so many possible ways to spend the money!

Cons

However, there are also cons to giving cash. Because the money isn’t invested, it can’t grow and earn interest as it could if you gifted the child money in an investment vehicle. Second, you don’t want to give the child too much cash at once. A cash gift is usually suitable if it’s a smaller amount, which isn’t helpful if you want to gift more money. Third, most kids like to spend cash, so they may not keep it long term as you might want them to.

Contribute to a 529 College Savings Plan

One of the best ways to gift money to children is through a 529 college savings plan.

Pro

The major pro with this strategy is that the money can grow throughout the child’s entire childhood. Whether you give a lump sum early in the child’s life or give yearly to a 529, with compounding interest, this gift could pay part or all of the child’s college expenses. Also, there’s no limit to how much you can contribute annually to a 529 plan. However, if you gift more than the allowable yearly gift amount (currently $15,000 for 2021), you will need to pay a gift tax.

Con

However, there is one major con to this type of gift. If the child doesn’t go to a private school sometime during kindergarten through 12^th grade or doesn’t go to college, the child can’t withdraw the money tax-free. Instead, he’ll have to pay a tax penalty since the child won’t be using the money for an educational expense.

Contribute to a Roth IRA

For a less traditional gift, consider giving to the child’s retirement. You can do this by contributing to the child’s Roth IRA if the child is employed and making some money yearly.

Pro

Imagine if you had put money in a Roth IRA when you were 16, and it had grown for 50 or 55 years? The pro here is easy to imagine—compounding interest.

Even if you made one lump sum contribution to the child’s account and didn’t contribute anymore, at retirement, the child would still have easily 20x more money than when you made the initial contribution. That’s a gift that keeps on giving.

Cons

There are a few cons to this gift. First, you can only contribute as much as the child makes working. So, if the child only makes $3,000 in a year, that is all you can contribute to their Roth IRA. The second problem is that even if the child makes $10,000 a year, you can only contribute to the maximum yearly contribution limit of $6,000 a year for a person under 50.

Contribute to a UGMA

A more flexible choice is to gift the child money through a UGMA (Uniform Gift to Minors Act) account.

Pros

If you’d like to gift a child a large amount of money, this is a perfect account to do that because it has no limit. In addition, the money is not earmarked for one particular expense such as a 529, which can only be used for educational expenses.

Con

The major con with this type of gift is that you have no control over the money when the child is of age. If he uses the money to buy an expensive sports car, you can’t do anything about that. Also, once you give the gift, it is irrevocable. Make sure you want to gift the money before you do. Finally, as the money is technically the child’s, the account can affect her ability to get financial aid when she goes to college.

Contribute to an ABLE Account

If you have a child or grandchild with special needs, consider contributing to an ABLE account for them. A child can have an ABLE account set up if she was younger than 26 when the disability was diagnosed. She can open and maintain the ABLE account at any age.

Pros

Many kids with disabilities receive government services and funding. While this is a blessing, this funding often comes with strict rules. For instance, once the child is an adult and working, she cannot make more than a certain amount or she loses services and funding. However, relatives can put money in an ABLE account for the child to use. This money does not count against the amount they’re allowed before losing benefits.

Cons

The con is that the child can only receive $15,000 per year in her ABLE account. So, if you’re the grandparent and the child’s parents contribute to her ABLE account, you need to coordinate with them so that the child only receives $15,000 total in a year.

Final Thoughts

Investing in our children is one of the best things we can do for our kids and for our future generations. If you are a parent or grandparent or even an aunt or uncle, you can use one or more of these five ways to gift money to children. Which way you choose depends on the child’s needs and goals.

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Editors Note: If you are investing for your children, you might consider actually teaching them how to invest. A good place to start is a very good article by How Much Is That In Tacos titled “Teach Kids About Early“. Check it out of you have a chance.

Should Your Child Go to College This Year?

May 7, 2020 | Leave a Comment

A year ago, most college seniors first decided if they wanted to go to college or not. If they did, they applied, and sometime in the spring received their acceptance letters and then chose what college they were going to attend. In the fall, they attended that college. In the age of coronavirus, that decision is no longer simple. If you’re a parent of a graduating high school senior, you’re faced with tough choices. Should your child go to college this year, or attend a community college instead, or just take a gap year?

The Case for Not Going to a University

If you want to be safe, the obvious choice is to take a gap year or plan to attend the community college.

Should Your Child Go to College This Year?

Photo by Nathan Dumlao on Unsplash

This spring when cases of COVID-19 started appearing, universities shut down and closed the dormitories. There is a good chance that cases of COVID-19 will continue to increase. How will universities handle that? The trouble is that no university has specified their plan.

For many people, containing the uncertainty is a better option. These people will have their children enroll in the local community college and live at home. Others take a different route and are having their children take a gap year and start college not in the 20-21 school year, but in the 21-22 school year. By then, they figure things will have settled back down to normal either through herd immunity or a vaccine.

Besides mitigating uncertainty, another reason to wait on going to a university is because attending college far from home is expensive. Some students and their parents take out tens of thousands of dollars in student loans or make financial sacrifices to pay for university. Do they really want to pay all of this money for online classes? Then answer is no, which is why they’re opting out of university this year.

The Case for Going to a University

None of us have a crystal ball. Maybe this pandemic will be gone in the fall. Maybe colleges won’t be impacted. Some people are betting on that, or that if their kids do get the virus, they won’t be that sick. Others don’t want to put their education on hold for a variety of reasons.

My friend’s daughter plans to move 12 hours from home to attend university this year. So far, the college plans to open in person, though she did receive a note that the semester would end early—at Thanksgiving break.

Likewise, my nephew, who got into a prestigious school in Japan, opted to start university this year. So far, his classes have been all online and he’s sheltering in place in his dorm room. This isn’t an optimal way to start a university career, but for him, academics are more important than socialization.

Final Thoughts

Should your child go to college this year? Unfortunately, that’s a tough question to answer because so much remains unknown. Luckily, I only have a rising high school junior, so we don’t have to make such tough decisions. If we did, I think I would encourage him to stay closer to home because life as we used to know it doesn’t seem to be coming back anytime soon.

Should You Co-Sign a Loan For Your Children?

March 30, 2016 | Leave a Comment

When I started university the way federal loans were issued in Canada was much different from how it is today. Long story short, I didn’t qualify for any form of student loans because, on paper, my mom made too much money. They didn’t care that she was a single parent, they looked at her income and the fact that my father should have been paying child support. It didn’t take long for them to change the system but it didn’t help me at all for my undergraduate degree.

I wasn’t not going to university so my mom took me to the bank and got me a student line of credit. Given at a decent interest rate (prime plus 1%). Only real downside was that my mom had to co-sign the loan. Student lines of credit (for the most part) are issued with the collateral being, well, my mom.

Should You Co-Sign on a Loan for Your Children?

I have to be honest I’m not sure I would have done the same thing as my mom. I don’t know what I would have done giving the constraints we were under but I don’t think I would ever co-sign a loan for my child.

My mom has nothing to worry about, I’m a good responsible child and despite our differences I would never default on the loan, forcing her to make the payments. Though I very well could do that, I wouldn’t. I also make sure I have the co-signed loans insured so if, God forbid, I die my mom doesn’t become automatically responsible for their repayment.

My best friends parents did something a little different. Rather than taking out student lines of credit in their names (the children), they (the parents) opted to borrow from their home equity (paid off mortgage) in the form of a home equity line of credit. This way the loans were never in the kids names despite the use being for their education. The kids were asked to sign a repayment agreement in the (very) off-chance they decided to skip town and not pay off their responsibilities. Though my friend borrowed over $20,000 for her education, the day she graduated, according to the bank, she was debt free.

I’ve known people who have needed their parents to co-sign mortgages for them. I would NEVER do this. If the bank doesn’t think my child can afford a mortgage based on their own financial situation I am not mixing myself up in it.

Whether or not you should or should not co-sign a loan really depends on the situation and people involved. I have seen seemingly perfect families ripped apart over monetary issues and I’m sure it’s not the last time I will. You need to protect yourself and your assets.

Though I would hope your child (ren) would never deliberately screw you over with a co-signed loan, it happens for millions of different reasons. While my situation worked in the aspect that I’m diligently paying off my loans, some students are unfortunate when it comes to getting a job and it takes years to pay them off, this debt continuing to follow the parents around.

Though I hope I am never in a situation where I would need to consider this, would you or have you co-signed a loan for your kids?

4 (More) Great Part Time Job Options for College Students

February 17, 2016 | Leave a Comment

I had an inspiring conversation with one of my patients lately. She’s a university student, completing her master’s degree in social work and working four different jobs. I was immediately intrigued as to how she was managing so many different jobs, on top of completing a difficult academic workload, and I was impressed with how she set out to find so many different jobs that would accommodate her schedule.

I was pretty lucky with job(s) I held during university for no reason other than the people I worked for were great in understanding my schedule and willing to work around it. Any job I hold, I respect. I make sure I’m a worthy employee and my experience is that when you show up and do your best, keep open communication with your employer, they’re much more willing to work with you when you need time off. Never abuse this regardless of where you’re at in life.

Here are 4 (more) great job options for college or university students that would work well with any schedule.

Proof Read and Edit

This is something I’ve know quite a few people to do. They offer to proof read anything from lab reports to entire thesis papers. The pricing for this can vary so ask around or get on google for an idea to start. I’ve had friends make decent money for full editing of larger papers. Make flyers advertising your services and place them in academic buildings. You could even start a basic webpage advertising your services with testimonial too.

Banqueting

Again I have had many friends who work banquets at local convention centers and hotels on the weekend. The shifts are almost always on the weekend and only for a few hours. Easy to get studying done in the morning and work at night making decent money. Some do waitressing, some do event setup/tear down, it really depends on the venue.

University Library

This was the job to have on campus. They pay well, they’re great with schedules and encourage you to work on homework when there (after you’re done your work). There was everything from working the desk to IT jobs, to research to shelving and cleanup. Some jobs are reserved for educated librarians but most campus libraries hire students for odd jobs (and summer) as well so it’s worth looking into.

Babysitting (Before Class)

There are so many people out there who are looking for someone to watch their kids before school. Many of my friends are nurses. They need to leave home around 6am but their kids don’t leave for school until like 8am, which it too late for their spouse to stay home for their work so they -end up hiring before school care. This is a great job for a university student who’s classes may not start until a bit later. Bonus is that they often have weekend and summer babysitting jobs lines up too!

While in college or university, academics come first but it can be great to hold a job to help offset the costs. The key is to balance the two as best as possible.

Did you have a job while pursuing post secondary? Did it interfere too much with schoolwork?

Should You Save For Post Secondary or Spend it on Experience?

March 11, 2015 | Leave a Comment

I remember years ago reading about a traditionally large family (four or five kids) and how they decided early on in their marriage how many kids they would have and that they wouldn’t save a single penny for their post-secondary education.

Though it sounds like it may be a little irresponsible for a well-educated couple to actively chose to have a large family, demand post-secondary from their kids, but have no system in place to help them with a post-secondary education, but they had good reason.

Spending on Experience

They chose very early on to spend their money on experiences rather than save. Their main idea was to live a very simple farm life, homeschool the children (more freedom) and spend their money with the kids on varying travel and other experiences.

The parents worked from home and mom homeschooled the kids. Rather than just watching a movie, they would travel all over North American experiencing things they read about in their studies allowing them to gain a much better perspective on topics. They would spend time visiting university campuses too in different regions, even when their kids were young as they felt it was important for the kids to picture themselves (and give them motivation) at such an institution.

Whatever they did seemed to work as their oldest was accepted to post-secondary on a scholarship with the younger siblings close behind.

While I don’t think it is a parenting requirement (to pay for post-secondary) I am intrigued by this method.

College Education or World Experience?

There is something to be said for actually experiencing the world beyond your little bubble. When I got into dental hygiene and we studied anatomy on actual cadavers, I remember distinctly my mind being blown when I saw the aorta for the first time. At this point I had studied anatomy in text books during my undergrad, saw many pictures of the heart and all surrounding strictures but until I actually saw one it didn’t occur to me how large it actually was. The gross anatomy class I took that year was without a doubt the most challenging class I’ve ever taken, but one of my best grades because of the lab experiences we had with the class.

I’d love to be able to send my daughter on various trips for her to experience the world in a similar manner but as long we we’re stashing out extra pennies for her potential post-secondary, we can’t. Though we will travel as a family, I like the idea of her being able to capitalize on solo excursions too as she gets older and this story sits at the back of my memory. I’d rather forgo some of the things I want in life so we can save and have the resources for her to be able to if and when the opportunity arises.

I really do believe the more opportunities a child has to truly experience the world the more successful they will be in life in general. If this helps her gain scholarships and not need our savings that’s a bonus for us.

Paying For Your Kids Education

March 5, 2014 | Leave a Comment

I had zero financial help when it came to post secondary and I don’t blame my mom at all. Our children didn’t ask to be born so it is our responsibility as parents to provide for them and make sure their needs are taken care of, as far as I am concerned, it is not the responsibility of the parent to pay for post secondary education. However, if you’re in a financial situation that allows it, you may want to help.

We are currently setting aside a little bit of money each month for our daughter because we’re able to. My mom, though she had a good job, was a single parent and many other financial responsibilities. Though we are setting aside a bit of money for her (including any financial gifts she may get) I will not jeopardize my retirement or other financial goals so she can get a degree debt free.

I know of many people who have remortgaged their house, taken out of their own retirement funds just to ensure their kids have no debt when they graduate. This is crazy to me. Kids who go into post secondary ideally will get a job that allows them to repay any debt they borrowed. Though it will take another three and half years for us to be debt free we are 100% doing it on our own and I have zero resentment to my mom for not helping me. I chose to further my education and opted to do two degrees, not her. At 18 I was making my own decisions.

If you do want to contribute to your kids education, start early. We opened an account for her before she was three months old and continue to contribute monthly. We made it quite clear that, especially when she is young, we didn’t need many gifts for her. We would rather have the money for her savings than another teddy bear. This helps beef up her savings and limiting the clutter in our home! Double win.

It is my hope that like both me and her father, come 16 our daughter will be able to balance a part-time job, school and extracurricular activities (though if she can’t job is first thing to go). It is important that we teach her the importance of saving and plan to match any savings she comes up with on her own (to a max we will decide when the time comes). I think this will encourage good saving behaviour, which hopefully will last a lifetime and allow us to reward her for a good behaviour. Saving money isn’t easy and I’m hopeful this will encourage her.

Though I have no intentions of giving up anything I want in my life her post secondary savings (I would gladly give up anything for something she needed) you’d be surprised how easy it is to find even $25 per month. Over 18 years, while it won’t pay for a degree, it will certainly help offset some post secondary costs and your child will appreciate it!

Do you save for your kids post secondary? Will you pay for all of it no matter what?