Thanks for voting!This is Matt’s first post in our Customer Blogger series. Over the upcoming months, we’ll be following Matt, Alicia, Nancy, T.J., Susan and Alison on their savings adventures.
Matt
Chicago, IL
Age 34
Bio: Youngish, vegetarian, married father of two. Avid gardener and Mr. Handyman. My wife and I don’t make a ton of money, but we want to hold on to as much as we can, so we don’t have to struggle like our parents did.
I’ve got two kids. Daughters. And they’re awesome. I’ve never felt such elation, and such fear, both times I went to the hospital to meet each of them for the first time. They are without a doubt the greatest thing that’s ever happened to me.
They are also EXPENSIVE.
They say that kids aren’t that expensive when you first have them. If you’ve got a lot of friends and family, you’ll get all kinds of stuff and you won’t have to invest that much money. However, that lasts for about 3 months, and then you find out just how much diapers are. Holy moly diapers are expensive.
But all this stuff is a given. My kids are 3 and 7 months, respectively. I won’t say we’ve got the whole thing down pat, but we are REALLY, really good at flying by the seat of our pants. The trick is to only feed them half the amount of what the doctor suggests and to reuse disposable diapers.
I’m kidding.
No, what’s got me worried is the future. Not what’s happening next month future, but FUTURE. Like what are we going to have for these kids when they become adults? What sort of monetary head start can we give them, to use for college or start a business or whatever they want to do when they turn 18?
And then I think back to the great stock debacle of the late 90s, and I am instantly enraged.
I should give you some backstory: When we were kids, my parents bought stock in our local bank for my two younger brothers and myself. You know, as investments in our future. Identical amounts of stock, bought at the same time for each of us.
Being the oldest brother, I cashed in first. My stocks paid for about a semester of college. Plus books! Not bad. It helped alleviate some of the loans I’d pay back for the next year, and it allowed me not to have to work for that first semester.
My middle brother is two years younger than I am. In the two years between when I started college and he started college, the local bank got sold to a larger bank. The stock was suddenly worth a whole lot more. So when he cashed in, it paid for a whopping two years of college. And he went to a much more expensive college than I did. Pretty cool.
Then along comes my youngest brother. Three years after my middle bro, he graduates. In that time, the bank got sold AGAIN. Jackpot. The stock is now worth a ton. How much? Enough to completely pay for school and buy himself a fancy new computer for his freshman year. Meanwhile, I’m saddled with 10 years of student loans and I didn’t buy my first computer until after I got married.
Not that I’m bitter.
So what do I do for my kids? Play Russian Roulette with the market and pray there’s enough for them to pay for books?
I’ve got a better idea. I figured that if I start saving $50 a paycheck for them in an Orange Savings account, they’ll have almost $50,000 to do whatever they want to with when they turn 18. Not too shabby.
Check out the stories from our other Customer Bloggers: Alicia, Nancy, T.J., Susan and Alison.
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Hi Matt.
Good for you for not waiting to get started saving for your children’s college!
A question for you: Have you looked into purchasing TIPS? They can be an excellent way to fund longer-term needs like saving for college 15 or 17 years from now.
They tend to earn higher rates than savings accounts. And like savings accounts, they’re very low-risk (provided that you purchase TIPS of the appropriate maturity–a 20-year TIPS would not be appropriate if you were going to spend the money next year).
Hi Matt,
I’m not quite sure how your back story is an argument against using higher-yield investments to save for college. I don’t think it was Russian Roulette so much as the fact that the longer you leave money in the stock market, the bigger return you will have. Single stocks are far more risky and have much larger swings than mutual funds, so that may have been part of it. The thing to consider with socking away a bit per paycheck is, while clearly better than nothing, is the interest rate even going to keep up with inflation. I mean, $50,000 in 18 years might only be enough for a year’s worth of college!
But how about an Education Savings Account (also called an Education IRA)? It grows tax free like an IRA and can earn more like 10-12% interest over it’s life.
Like IRAs, these also have income limits. If you make too much for an Education Savings Account, you should look into a 529 plan.
Forgot to mention: the ESA can be invested in anything. Invest it in growth stock mutual funds for higher yields than a savings account.
That is exactly what I plan to do when I start saving for kids expenses. I’m almost 24 though so I have a little while to start that. I’m currenty saving for my house, which I plan to have paid off by the time I’m 30. I’ll start saving for the kids before that though obviously. Hopefully start in about 2 years. But I applaud you for not putting all your trust in the markets!
Kids are expensive! I can attest to that. I have two myself. Thanks for sharing your bio with us. I look forward to hearing about the rest of your financial plans. Right now, I am not putting away any money for my kids because I am still trying to get to my retirement savings goal. I had to pay for my college as well…student loans were my first obstacle to overcome, too.
Enjoyed this- I look forward to reading more from you
Assuming you are paid bi-weekly and that you started from birth and that you put in $50 per child in separate accounts, you would need an interest rate above 3.5% in order to achieve $50k. If ING is willing to offer this rate, I’d be more than happy to take them up on it.
You might want to consider a Upromise Credit Card attached to a 529 plan as a supplement to your current intended approach.
Best of luck,
Slug
This is a bad plan and I encourage the author to abandon it.
This plan does not account for inflation. This will eat a huge chunk of your savings over an 18 year span of time. Invest in index funds (through share builder/ING) and you will do much better for your children. There are other investment options besides a savings account and investing in a local bank.
I highly recommend reading Stocks for the Long Run by Jeremy Siegel and the Intelligent Investor by Benjamin Graham.
The fact that this post got through without anyone at ING saying, “Wait a second, that doesn’t make any sense!” is amazing to me.
The reason we’re considering doing something similar to what Matt is doing for our kids (got one on the way!) is because we don’t want to limit them if they don’t want to go to college. With most 529 plans (which is what we would qualify for) they can’t use it if they want to go into business for themselves. I think it’s a great idea but to me that’s a major flaw of the plan because the diversity of a lot of the plans I’ve looked at is limited. Plus if you start with a savings account, you can always transfer money to something that may have a bit more risk & therefore a bit more return to it. The important part is to start saving.
Good luck Matt and looking forward to hear more, especially since I know kids are expensive but haven’t experienced the literal side of that yet. I’m sure that will come before we know it!
Hi Matt,
Congrats to being chosen to share your story. As another customer blogger, I’ve been curious about what everyone else would be like. I think it’s great that you’re planning for your kid’s future. Student loan debt, well not debt is really any fun.
Hey everyone, thanks for all the comments and critiques. I never said it was a good plan, it’s just my plan. The idea is more to have a similar amount for both kids when the time comes to kick them out of my house. It’s not the only savings I have, it’s just the base for them.
Just like my family, this savings plan is a work in progress. We may change things. However, I’d say that for anyone trying to save, the important thing is to do SOMETHING. Whether it’s the best idea or not, you can figure out later.
Thanks everyone!
We’re doing a similar thing for our son ($50 a paycheck into a money market savings account). As far as the cost of diapers go though, I would seriously suggest you check out cloth diapers. They really aren’t that hard to do, and I know that it sounds scary and gross at first, but really it isn’t!! There are how-to videos and websites all over the net, and they REALLY do save you money. We use Indian cotton prefolds (60 prefolds) and Thirsties covers (8 covers) (the gussets on these are awesome!) It might be intimidating at first, but believe me, it’s totally easy AND worth it!
Wow, I just read through some of the other comments, and let me say this. We’re doing pretty much the same thing you’re doing, and it’s actually EXACTLY what my husband’s parents did, and it worked out to pay for his entire bachelor’s and master’s education PLUS he had money left over to put towards a Prius when he got out of school. He did have some scholarship money, but even if he hadn’t it would have been more than enough to cover his college education. (I should probably say that he was an only child (not that that should matter if you’re doing the same per child), and his parents were both paid biweekly, so it ended up about $200 a month.)
It’s true that there are other savings options out there specifically for education, but a lot of them lock you into spending on education specifically, so if your kids end up with full paid scholarships, you’ll take a penalty withdrawing that money for anything non-educational.
I think you’ve got a good thing going, and you’re right that you can always change your plan later on. Don’t let anyone discourage you. You’re being smart with your savings. I think so anyway!
Matt,
I loved the story especially the rewashable diaper story. Good start in the first blog itself. I am glad you are selected (I am not). Thats ok, I blog anyways but not get paid that’s drawback.
As some of other savers commented, its not a great idea but good one to start for few things because I did the same thing for my son 3 years ago and converted to funds last year. I started one more for my going to be born son and will be moving to funds later.
1. It helps to see whether you can manage putting aways this amont every month and manage your budget.
2. It creates an habit of saving for college/kids.
I would recommend thinking about 529 plan or EIRA or both. I have both.
All the best and looking forward for more fun stories.. I have explained my kids education savings in detail in blog http://moneyreallymatters.com/content/time-essence-part-3-kids-education-529-savings
Hi Matt! Did you also look into 529s? I’ve started one for my one-year-old daughter, and while I don’t like everything about them, $50 a month for her college savings that she can use tax-free is a good deal. The fees irk me, but they’re less than what I get taxed on my 1099-INT and over 18 years I should be able to beat inflation. I hope it’s not Russian roulette, or any kind of roulette for that matter.
Also, “My kids are 3 and 7 months, respectively.” is grammatically weird. Since you have two girls, you don’t need “respectively”. And “3 and 7 months” makes it sound like you have a 3 mo old and a 7 mo old. From your photo, I can see that you have a beautiful three-year-old young lady. I can’t wait for mine to start walking and talking so I can figure out what’s going on in her head.
Take care! Good luck!
I liked it when you said, “to use for college or start a business or whatever they want to do when they turn 18.” It’s nice you’re open-minded and giving them options. Maybe it’s something you want to consider — starting a business. I always really wished my parents had owned a business, so I could just go right into it. I was so-so about the college idea, but that’s what my Dad did, so I did it. But I was much more of a ‘just go into the family business’ sort of person, if it had existed.
Hi Matt,
I’m a fellow ING Customer Blogger. Was stoked to see your kids are just about the same ages as mine (3.5 yr old girl and 8-mo-old boy). We too want to provide something for our kids’ education. Family funds helped us start investment accounts for each kid when they were born, and we’ve added small amounts to each as we can. I promise not to give you any financial advice (I am absolutely not qualified). Just a hearty way-to-go for thinking about your kids’ educational futures!
who do you think you are to tell me how to save for my unborn child? how dare you sir, in this time of great uncertainty. i’m doing it the old fashion way gold. That is what Glenn Beck suggests and I do what ever he tells me. I take you are a liberal considering you are a “Vegetarian” go ahead and “save” “money” see what that gets you when the commies take over.
Hey Matt!
Fellow ING Customer blogger Alison here.
I like your plan. As someone who finds herself drawn to “safe” investments, having cash on hand sounds like a good plan. There are a lot of people who will puch you towards investment accounts but I would check out how 529 account holders are faring in the current market. If they did okay, maybe not a bad plan to put funds there. If they DIDN’T do well and totally crashed, then your cash on hand plan may prove to be the wiser choice.
The idea that you would save that money and let them decide what they want to do with it is pretty great- not everyone is ready for college right our of high school and some people would prefer to start that business.
Good luck to you- looking forward to writing next to you here!
Alison
Hi Matt,
I enjoyed reading your story and think you have a good start on planning for the future of your two beautiful daughters. Your parents must be so proud! I am sure they did not want to leave you with 10 years of debt paying back those college loans (are you sure it was that long?) and they probably feel guilty that you were the only one who had to go through that. Maybe they will pay you back in other ways, like helping with their grandchildren’s college or leaving you a share of a river house or something. But trust me, you cannot count on an inheritance to plan your future, so its great that you are thinking ahead and already have a plan. I wonder if your brothers will be as smart?
Hi Matt ( my son s name too! )
I remember I was 29 yrs old with 4 kids 1 job ( wife never worked until last kid was a 2nd grader ) and scraped for first mortgage payments !.I got a part time salesjob IN cable TV. I put all four thru 25 years of private high schools and college and now hav a fortune in stocks. ING Sharebuilder and Bank has really helped A LOT!
Life is wonderful. Work hard-instill it.and invest wisely ! god bless
larry
Matt,
Thanks for the post, It made me want to comment which is quite rare. I have a new born and one in preschool. Diapers are expensive but nothing compared to my preschool and baby sitter costs. I grew up in public schools and daycares so it was unexpected. But nothing like how much kids change your life for the better.
My parents never saved a dime for me so I made promise to save every month for each kid from they day they were born. First it was in ING savings but now it’s moved over to ING/Sharebuilder. If interest rates become attractive again then then i’ll move more over to ING savings. ING thankfully makes it really easy and free to do this.
Since my first kid, I have started to worry about retirement (i’m mid 30s) because I only have about 30 years to acquire enough savings to passively *generate* income that my wife and I can live on. I am starting to realize that I get no ROI from worrying and putting away as much as I can is the best I can do.
It’s easy to get confused about 529’s, IRA’s, 401k’s, ETFs, T-bills etc. In the end I have my no risk (ING savings), my low risk (index funds) and grow risk (individual stocks). If the government gives me tax saving (i.e. SEP IRA) that i feel are worth the restrictions I do it.
Savings and spending less will hopefully make it so I’m not working fastfood at 70 to make ends meet. Anyway that’s my opinion, looking forward to your next post.
Matt,
I do not believe any of these comments are real. They all seem to be copy-written marketing garbage. I appreciate the effort by ING, but this is just a little bit ridiculous. Nobody in my demographic will buy this type of sell. I’m pretty certain this comment of mine will be moderated and not posted to this page since it’s not flowery and supportive of whatever persona ING is looking for on these profile example pages. Oh well. I had a desire to write this only because I like ING myself, am a customer, but don’t like their marketing, particularly this latest batch of BS.
Thanks for listening (or not),
Jon
p.s. Of course I could also be a bit cynical and jaded about the whole social media / marketing agenda. Best of luck to you and your family either way!!
Cheers!
@Jon …cynical and jaded… maybe a bit paranoid and conspiracy theorist too? I don’t see why you would think what you espouse. I certainly don’t think that ING would need to post ‘fake’ comments. I hope you don’t think ING is supporting cloth diapers since that’s part of what I posted to Matt about. I’m really surprised by such a skeptical stance as you’ve taken. I am certainly not a “fake” poster. I know one of the other bloggers, and I find these blogs very interesting, and the comments are an interesting read also. I’m not really sure how well it is as a marketing tactic, but I enjoy reading these, and am not “fake”. Just wanted you to know that.
Jon - Sorry to disappoint you but I’m not “fake” either. I am a customer that likes ING (who else can get away with matching a orange bouncing ball and a lion together). I also think that having blog written by actual customers is a neat idea - made me want to comment.
Full disclosure: @NanaB is my mom.
@larry–tell me your secrets! I want a fortune in stocks too!
@Tony– I agree with you 100%. Savings accts are not my only means of saving money, it’s just what we have set up for the kiddies. I’ve also got an IRA, 401(k), etc. I’ve done the math and I know that a savings account alone is not enough, this is just a little something we’ve decided to do for the kids.
Full disclosure: @Jon is a complete fabrication.
JOKES! He’s as real as everyone else. and thanks for the well-wishes.
I’m Barbara. Worked many years and had various jobs, mostly in advertising,. In the 80s, lost a job making pretty good money, but found another in about 3 months, making almost as much at AAA. Then they decided to move to Florida and I was faced with learing 21 jobs, which I did, but my boss had a good ol’ boy network going, and wanted to hire a crony, so I was given the option to quit or be terminated. It was traumatic. I had accolades about my work from the advertising and finance departments, but my boss was ticked off because I would correctd his grammar on ads. Then went to work for a magazine that was lying about circulation. This lasted about a year. I then went to be advertising manager for an association in Bethesda MD and stayed there 6 years, but they fell upon hard times with declining membership,and again there was a reduction in force. I was getting a complex. After this I went to work for a lady at an association in Fairfax, VA. I was promoted from manager of advertising and exhibits to Director of Advertising after less than a year. I was investing in Mutual Funds - mostly energy, and managed to save a fair amout of money since I was nearly old enough to retire. The association went to an associaton management firm, and since I had a profit center, my magazine was first to be sold off to a Canadian company (which doesn’t have half the ads we had). Now I faced retiremenet and living on about 20k a year. I paid off my condo and car with my investments, and put the balance into ING. It gives me a feeling of security to know they are taking care of my meager savings, and that I’ll have enough to face emergencies, unless Obama decides to ban Social Security. Now I do some part time editing and house-sitting for friends. Don’t make a lot of money, but it’s something to do and I’m still looking for full time.
I’m Barbara. Worked many years and had various jobs, mostly in advertising,. In the 80s, lost a job making pretty good money, but found another in about 3 months, making almost as much at AAA. Then they decided to move to Florida and I was faced with learing 21 jobs, which I did, but my boss had a good ol’ boy network going, and wanted to hire a crony, so I was given the option to quit or be terminated. It was traumatic. I had accolades about my work from the advertising and finance departments, but my boss was ticked off because I would correctd his grammar on ads. Then went to work for a magazine that was lying about circulation. This lasted about a year. I then went to be advertising manager for an association in Bethesda MD and stayed there 6 years, but they fell upon hard times with declining membership,and again there was a reduction in force. I was getting a complex. After this I went to work for a lady at an association in Fairfax, VA. I was promoted from manager of advertising and exhibits to Director of Advertising after less than a year. I was investing in Mutual Funds - mostly energy, and managed to save a fair amout of money since I was nearly old enough to retire. The association went to an associaton management firm, and since I had a profit center, my magazine was first to be sold off to a Canadian company (which doesn’t have half the ads we had). Now I faced retiremenet and living on about 20k a year. I paid off my condo and car with my investments, and put the balance into ING. It gives me a feeling of security to know they are taking care of my meager savings, and that I’ll have enough to face emergencies, unless Obama decides to ban Social Security. Now I do some part time editing and house-sitting for friends. Don’t make a lot of money, but it’s something to do and I’m still looking for full time.
Matt,
I am impressed. I am a mother of 2 children as well. 5 year old boy and 10 month old girl. We are barely scraping by and want to rent or buy a house as soon as we get out of debt. Then we want to start savings accounts for the kids. I have been looking for a plan for that. Thanks for the advice. It helped. I may start something similar soon. I have a regular ING Account, that’s it.
Haha…wow. I really got a laugh, not only out of your post, but also out of some of these comments. People are interesting. I appreciate you sharing your personal savings plan for your children. Whether it is The Best or not, it does give us some ideas and encourage us to be doing something to save for our children’s future. We are expecting our first child, and I have been thinking lately about how to save for his/her future. I don’t think we make enough to set aside $50 a month (we teach in China…not the highest income), but we do want to do whatever we can to prepare for the future. Thanks for the post!
Read your story about saving money and caring for your children. Keep up the good work. My other comment is that I have Fantastic news: A way to become a part of a cause; Eradicating world hunger. Feed a starving child for a week. Save Money! Make Money! Make a Difference! Go to: http://www.tampogo.com/necktieman and join for free, and start making a difference now. Click on the Faith Based tab to see a message from: Bishop Mckinney. At the bottom of the same page, watch a short video of him as well. Let me know what do you think, Thank you very much.
I really enjoyed this Matt. Thanks for sharing - you’re a great writer.
I too am a parent of 2 young kids and it does really feel like we’re scraping by. We just got one out of diapers, so that has helped, but aside from that they eat a ton! I swear it seems like they sometimes eat their weight in food. I sometimes wonder if it was this hard for my parents. Although, they live and raised us in a rural area where the cost of living is substantially less, and I have chosen the city life. My husband and I set up a 529 account when my daughter was born and have been putting $50 a month into it, plus any gifts from the grandparents. She’s 3 now and we have a 1 year old son. We didn’t bump up the savings when he was born because we didn’t feel like we could afford that at the time.
I do like the comments though about other savings options that would allow for more flexibility if they don’t go to college (though I hope they’d at least take Community College classes). It may be worth the penalty to convert it into something else like a Roth at some point. For now though it seems to be doing pretty well and the good thing is they’ve both got time on their side for it to grow. Our broker is really good about checking in and suggesting changes to the funds if something’s not performing well.
I look forward to hearing more about your savings plan!
I-bonds are a MUCH better deal than TIPS. Interest is tax deferred, and you won’t pay taxes if they are cashed in for certain expenses. http://savingsbonds.gov/indiv/research/indepth/ibonds/res_ibonds.htm
@Barbara-Godspeed!
@ Rebecca- Glad you liked the article. Good luck with your debt! It took us a long time to get out of ours, but we did it. Maybe that can be my next blog?
@Ruth- Good luck! My dad always said that when I get paid I should “pay myself first.” It ain’t easy, but it helps.
@dana joy- Thanks!
@Margaret- I cannot WAIT until I can stop buying diapers. I never thought i’d be so close to poop for so long in my adult life. Sometimes I just want to douse my hands in bleach. Your savings plan sounds really good!
@Everyone– Your comments have been awesome. And you’ve convinced the wife and I to at least check out 529 plans. We’ll still keep the savings accounts going for the kidlings, in case they decide to go to culinary school, start a business or bail money (you never know!)
But it would be nice to have our money work a little harder for us. Thanks for your advice!
HEALTHFUL FOODS ARE QUICK EASE TASTEY: WHOLE GRAINS: RICE, FARINIA, RICE PASTA,etc add fruit brown sugar spices…etc;NO CANNED FOODS; SOUPS,ETC. TURN UNWANTED FRUITS TO ICECREAM AND VEG> TO CAKE MIXES AND NUTS/RAISINS COOKIE RECIPE
HEALTHFUL EATS!