When it comes to investing, there are three phases: before you have kids, when you have kids, and after your kids have moved out. Okay, that’s not what the phases are really called, but it makes a lot of sense.
Before you have kids, you can really focus on mass accumulation of wealth – think front loading your life. When your kids are born, your priorities change a bit and it becomes harder to save as much – plus you’re thinking about saving for college and more. Finally, when your kids move out, you can refocus on your retirement, and then figure out how to draw down on all the wealth you’ve accumulated.
Today, let’s focus on what investing before you have kids should look like.
Take Advantage of the Time
If you don’t have kids yet, it’s prime time to stash away as much as possible! Kids are expensive – there are enough stats and facts out there to prove that. But what it really means is that you have to take advantage of this pre-kid time to get your financial house in order.
Before you have kids, try to max out your IRAs, max out your 401k or 403b, and save as much as possible. If you don’t have an emergency fund, now’s the time to build one up – a kid can drain that pretty quickly with a broken arm and a trip to the ER if you’re not prepared.
It Doesn’t Mean Neglect The Future
It’s important to realize that loading up now is NOT neglecting the future. You’re doing all of this because you want to be prepared for the future. Can you imagine having to build an emergency fund and save for a house when you also have to pay for kids sports and activities, and don’t want to have to move school districts.
Front loading is more than just saving money, it’s preparing for your life later. The time to prepare for the future is before the future happens!
What If Kids Aren’t in the Plans?
Now, you may be asking – what if kids aren’t in the plans. And I can throw back at you that accidents happen – but let’s hope you’re more careful than that!
But even if kids aren’t in the plan, it’s typically easier to save earlier than it is to save later. Once you have other obligations later in life, it just becomes that much harder to commit to savings. Plus, the power of compound interest will benefit you so much more if you just start a little earlier.
What are your thoughts about investing before you have kids? Do you think it’s easier to save earlier in life or later?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.