Your Children: A New Financial Challenge Chapter 5

Working Mothers More than 60% of mothers with at least one child under 6 years old are in the workforce, as are more than three-quarters of mothers with older children. By age 40, women in the work force average 12.1 years of experience compared with 16.4 for men according to the Employment Policy Foundation

Working or Not Working? Once you have children, it’s a whole new ballgame, with new obligations, new experiences, new demands on your time, and a new degree if interdependency with your spouse/partner Your marriage is a partnership having parity in the decision making progress is very important

Working or Not Working? Every women will have to assess her family situation and personal preferences, and some sort of compromise may be in order. But when the dust settles, you will have to decide whether to work or not to work-- and each decision has financial consequences

To Work Earn extra income for your family Enjoy some degree of financial independence Your biggest financial concern is often how to pay for expensive day care

Not to Work Financial Challenges Avoid becoming totally dependent on your spouse or partner Can we afford to live off one paycheck? Take on the the responsibility of the day to day financial matters of the family

Raising Kids on On Paycheck More parental job satisfaction--less in the way of material goods Don’t splurge Shy away from debt

Pare Your Expenses Some expenses will decrease if you chose to stay at home Work wardrobe, dry cleaning, lunches out, commuting costs, child care, or take-out dinners Some expenses will increase Utilities, groceries, health insurance

Borrow With Discretion Home-Equity loans and lines of credit usually have the most attractive rates, and most people will be able to deduct the interest. But apply before you lose your second income.

Tap Your Assets, But Address Reality Some families withdraw money from their IRAs, they lean on their credit cards, and skimp of financial safety nets These may have no short term pain but be careful the long-term risk increases over time

Take Advantage of Family-Friendly Tax Breaks The Child Credit Available for each child under 17- $1000 The Child-Care Credit This tax break is based on what you pay for the care of dependent children under age 13 The Size of the credit depends on 2 things How much you pay for child care What your adjusted gross income is

Take Advantage of Family-Friendly Tax Breaks Child-Care Reimbursement Plans With these accounts, you can allocate a certain amount of your salary, up to $5,000 a year, to cover child-care costs This money is exempt from federal income, Social Security, and Medicare taxes, and generally from state income taxes as well

Getting Help With The College Bills State-Sponsored College Savings Plans 529 Plans Not only do earnings grow tax-deferred, but they are tax-free when the money is used for qualified college expenses There are no income restrictions that shut out high earners

Getting Help with the College Bills Coverdell Education Savings Accounts Limit to how much you can contribute each year-- $2,000 per child You can invest in any stock, bond, or mutual fund you wish You can use this plan not only for college bills but to pay for private elementary or high school or even for other educational expenses, such as camp or a computer

Getting Help with the College Bills Prepaid College Tuition Plans - PACT These plans allow parents of children who are three or more years away from attending college to lock in today’s tuition for the future by paying a lump sum or by setting up a monthly payment program

Getting Help with the College Bills Roth IRAs You can withdraw your contributions at any time, for any purpose, without having to pay income taxes or penalty. You can also withdraw earnings on a Roth to pay college bills without incurring a penalty if you are certain age.

Special Issues for Single Parents It’s tough on your own especially if there’s an ex-spouse or absentee parent in the picture who sometimes seems to be undermining our efforts rather than supporting them

Teaching Kids about Money Six Money Skills Kids Must Master How to manage a cash allowance How to manage a checking account How to save for a goal How to compare prices How to figure the time value of money How to get out of debt

Don’t Stop Now! Revisit your financial plan if you’re thinking of having a baby, and increase your savings now to give you the financial flexibility you may want later Don’t take an all-or-nothing approach to work.

Don’t Stop Now! Call your benefits department for information about child-care reimbursement plans and be sure to claim any tax credits available to you after the baby comes Pass along to your daughter and sons the financial knowledge and sense of personal responsibility you’ve gained. Sit down and talk with your spouse to find common ground in you differ in your expectations for your children regarding money