How should new parents think about personal finance?

Question: How should new parents think about personal finance?


Carrie Schwab: The same discipline, the same practicalities apply to young parents. The sooner you start saving for your child’s college education, the less amount you have to save to achieve your goal.

The first thing a parent needs to do when they have their child is to apply for social security number. And then consider opening a 529 plan. A 529 plan allows you to save a couple $100,000 in one year, if you like. But you can save in it whatever amount you can save.

The 529 plan typically will invest similar to a target fund. In other words, it will invest appropriately in a mutual fund knowing that in 18 years you will need that money for college.

There is a lot of tax benefits; it grows tax free. Then when you use it when your child is 18 and you take or withdraw it for college, there are no taxes as well. It is a wonderful benefit for parents, because if you don’t have to pay taxes along the way, your money grows even faster. And of course then when you pay 18 years later, you are probably in a better financial position and you would get that tax benefit; you don’t have to pay for the withdrawal for the college education.


Recorded on: March 27, 2008

Start with a social security number.

Related Articles

How schizophrenia is linked to common personality type

Both schizophrenics and people with a common personality type share similar brain patterns.

Mind & Brain
  • A new study shows that people with a common personality type share brain activity with patients diagnosed with schizophrenia.
  • The study gives insight into how the brain activity associated with mental illnesses relates to brain activity in healthy individuals.
  • This finding not only improves our understanding of how the brain works but may one day be applied to treatments.
Keep reading Show less

Human skeletal stem cells isolated in breakthrough discovery

It's a development that could one day lead to much better treatments for osteoporosis, joint damage, and bone fractures.

Image: Nissim Benvenisty
Surprising Science
  • Scientists have isolated skeletal stem cells in adult and fetal bones for the first time.
  • These cells could one day help treat damaged bone and cartilage.
  • The team was able to grow skeletal stem cells from cells found within liposuctioned fat.
Keep reading Show less

How exercise helps your gut bacteria

Gut bacteria play an important role in how you feel and think and how well your body fights off disease. New research shows that exercise can give your gut bacteria a boost.

National Institutes of Health
Surprising Science
  • Two studies from the University of Illinois show that gut bacteria can be changed by exercise alone.
  • Our understanding of how gut bacteria impacts our overall health is an emerging field, and this research sheds light on the many different ways exercise affects your body.
  • Exercising to improve your gut bacteria will prevent diseases and encourage brain health.
Keep reading Show less