How to save for life’s major milestones

by Badgley Phelps | Oct 20, 2021

Depending on the stage of your life, you might be saving for a baby, a new or second home, for college, a wedding, or something else. But how much do you need to save? And what’s the best way to go about it? Here are tips on saving for five of life’s major milestones.

How to save for a baby

Planning for the arrival of a new baby goes beyond picking out colors for the nursery. It’s important to take some financial steps to ensure you’re not caught unaware when the bundle of joy arrives.

According to the latest data from the United States Department of Agriculture (USDA), it costs, on average, $233,610 to raise a child through the age of 17, with the most expensive portion of that cost going to housing at 29 percent, followed closely by food at 18 percent. Here are some steps to take to prepare for those expenses:

Review your insurance and know what is covered—and not. Save enough to cover medical expenses for prenatal, postnatal, and birth-related care. The most recent data from a study by University of Michigan estimates that the average cost of giving birth with insurance, including pregnancy, labor and delivery, and three months of postpartum care, was $4,500, but some banks recommend having $20,000 tucked away. 

We offer these additional tips for preparing for a new baby:

  • Confirm your employer benefits, including maternity and paternity leaves
  • Review your budget, and anticipate new costs such as childcare after the baby has arrived
  • Increase your emergency fund to account for additional expenses
  • Research in-network pediatricians to maximize insurance coverage
  • Review and adjust beneficiaries on your retirement accounts as necessary
  • Consider increasing your life insurance
  • Discuss guardianship for your minor child, and adjust your will and estate plan accordingly
  • Open a college savings account as soon as possible, and spread the word as family can begin contributing as well

How to save for college

College is expensive; planning should start as early as possible. In fact, contributing to a college fund is a great way for friends and family to celebrate your child on birthdays or holidays. Consider establishing a 529 plan. Also known as a Qualified Tuition Program, a 529 plan is a tax-advantaged way to save for your child’s future college expenses. It’s sponsored by a state, state agency, or educational institution. There are plans available in all 50 states and the District of Columbia—but you can use any state’s 529 and funds may be used at almost any school in the country. Read more about 529 plans >

The New York Times says to deal with debt before you start saving for college, and to prioritize retirement savings for you over college savings for them, if needed. It’s “akin to the advice given on an airplane: put your oxygen mask on first, before your child.”

How to save for a wedding

The weddings are coming! According to The New York Times, “It’s been long predicted that 2022 will be a huge year for weddings, thanks to new and rescheduled events, as well as our collective desire to celebrate love after so much loss and hardship.” If you’re planning a wedding yourself, it’s important to know the costs and start saving as early as possible.

Wedding resource The Knot’s annual survey says the estimated total cost of a wedding as of 2021 is $22,500. Costs went down in 2020 due to many couples saving on venue rental fees and getting married virtually or with much smaller ceremonies, but in coming years, we may see a resurgence in pre-pandemic costs, approaching an average closer to $28,000 as was the case in 2019.

One of the best ways to save for a wedding is to create your budget early—even before the engagement, if possible—and divide it by the months you have left, setting aside as much as is reasonable each month into a dedicated account. If you’re not planning to draw a lot from your wedding savings account until close to the big day, consider a high-yield savings account or a money market account that could yield interest earnings.

Saving for a wedding also has a lot to do with sticking to your budget. WeddingWire says 74 percent of couples end up going over budget. Look for ways to save money during the planning process by:

  • Booking an “all inclusive” venue. People often think they’re saving money by booking a less expensive venue but layering on rentals and catering can end up costing more.
  • Making versus renting or buying decorations
  • Using fare trackers to book honeymoon travel
  • Factoring in things like vendors tips and alterations—small costs can add up!
  • Asking the wedding party to wear their own clothing in coordinating colors versus renting or buying new outfits
  • Opting for virtual invitations to wedding events like showers and wedding-related parties

How to save for a home—or second home

The housing market hasn’t been kind to buyers lately—but it may be poised to change. As quoted in a Zillow article, Terry Loebs, founder of Pulsenomics, says “Across the U.S., home value appreciation rates and annual rent price increases are at historically high levels, and home price expectations are now the highest we’ve recorded in the 12-year history of this survey. The silver lining for aspiring homeowners is that the worst of the housing supply crunch looks to finally be behind us, and most experts believe that the past year’s rapid price boil has begun to simmer down.”

If you’re saving for a home, or second home, it’s important to work with your financial planner to create a roadmap for saving for this large expense. Creating a plan that’s customized to your unique situation will help you get there faster.

Some other ways to save include:

  • Sticking to your budget
  • Creating automatic bank transfers to a savings account
  • Creating short-term savings goals that can contribute to your larger, loftier goals
  • When you receive a bonus, raise or windfall carefully consider your current savings scorecard and immediately plan to save or invest at least half of the money. Whatever is left over, enjoy!
  • Abiding by the 24-hour rule for purchases to evaluate whether you really want something before you buy it
  • Cutting any nonessential expenses
  • Setting your bills to auto-pay so you’ll never incur late charges
  • Taking advantage of discounts offered by your employer and other sources
  • Keeping up with preventative healthcare so that you incur fewer, costlier health surprises later

Already own a home and thinking of paying off your mortgage early? Read about the pros and cons.

How to save for retirement

It’s important to save and invest in retirement as soon as you can. By starting early, you will establish good financial habits and build up a nest egg that will grow over time and weather the ups and downs of the market. According to a May 2021 survey by the Federal Reserve, three-fourths of non-retired adults have at least some money saved for retirement, but only 36 percent of those with savings felt they were on track.

“Among those with retirement savings, these savings were most frequently in defined contribution plans, such as a 401(k) or 403(b), with 54 percent of non-retired adults having money in such a plan. These accounts were more than twice as common as traditional defined benefit plans such as pensions, which 21 percent of non-retirees held. Forty-eight percent of non-retirees had retirement savings outside of formal retirement accounts.”

Many people are unsure about how much they need to retire. A quick way to estimate that number is to multiply your current expenses by 25. For example, if your current expenses are $70,000 annually, you’ll need to save $1.75 million for retirement.

One of the best ways to save for retirement is to invest wisely. With the help of a trusted advisor, invest with a diversified portfolio that best supports your timeframe, goals, and risk tolerance. Don’t forget to keep an emergency fund available so you don’t need to draw from your investments. And take steps to protect yourself and your family from identity theft—which can end up costing thousands.

Finally, work with your advisor to identify ways to reduce taxes. Some ways to do this are contributing to a retirement account or health savings account and making charitable contributions.

Saving for one of these or another milestone? Our financial planners can help. Contact us today.


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