Paying For College Twice

A reader asks:

My wife is 26 and I’m 28. She’s graduating in May to become a Nurse Practitioner. I’m a mechanical engineer. 

    • We have $265k in retirement accounts + $35k in taxable accounts = $300k, all in the Vanguard Total World Index Fund.
    • Additionally we have $33k (10% of Portfolio) in alternatives such as Bitcoin, Ethereum, USDC, and whole life insurance.
    • $20k in cash, more than covers 4-5 months of expenses.


    • We’re moving back near our family (first baby on the way in 1 week!) in rural MN and selling our WI property.
    • Due to a hot housing market, we’ll leave WI with $165k windfall of cash from selling our house.

 With retirement accounts maxed out, here’s my plan with the excess cash:

    •  $50k – Down payment on a small, old $150k farmhouse within our family. Balance ($100k) goes to mortgage.
    • $70k – Pay off my wife’s student loans.
    • $10k – Series I Bonds (shout out you guys)

Question: What do I do with the remaining $35k? No other debt. Cars run well. New house meets all our needs.

Kudos to this couple in their 20s for having their finances together.

The first step in this process is to figure out your goal for this money of course but I have some thoughts since you have a newborn in the mix.

People who already have kids love giving advice to new parents.

The only problem is much of that advice centers around sleep training, diet, and how to parent correctly. So much of that stuff is subjective and dependent on the child.

I have twins so understand better than anyone the nature vs. nurture stuff. All kids are different so not every parenting technique works the same for every child.

But I do have plenty of thoughts on the financial impact of having kids.  I have 3 young children so consider myself something of an expert when it comes to family finances when you add a baby to the mix.1

Here are some of the things no one told me ahead of time that would have been helpful:

  • Don’t waste your money on nice furniture but make sure it’s leather if you can (cleans up better than fabric).
  • Get rid of all lamps on your end tables and consider getting one of those softer ottomans in lieu of a coffee table with sharp edges. It’ll save you a lot of tears once they start moving around and eventually walking.
  • Get yourself a good cordless vacuum cleaner. I like the Dyson one. It’s expensive but we use it every single day. Ours probably has 120k miles on it.
  • Don’t skimp on your washing machine/dryer/dishwasher. We use all three almost every single day. This is a worthwhile investment.
  • Buy multiple pizza cutters for when they get to the quesadilla/PB&J stage.
  • Get yourself one of the portable baby chairs for when you start going out to eat or to other people’s houses (we used this one).
  • Mr. Clean magic erasers for your walls truly are magic.

This is the stuff they fail to tell you at the hospital when they send you on your way with a new little person in your life.

Do you want to know what else they don’t prepare you for? The cost of childcare.

There are all sorts of books, experts, financial aid and savings plans to help pay for college but basically nothing to prepare new parents for the cost of childcare.

This month I was prepping my taxes when Turbo Tax asked how much we spent on childcare in the past year. Our twins will go to kindergarten in the fall so this got me thinking about how much we’ve spent on daycare/pre-school now that all three of our children will be free and clear into the public school system.

Our first daughter was born in 2014 so we’ve had at least one kid in childcare on and off for the past 8 years now. There were two years when all three kids overlapped.

I had an idea of the total but adding it all up led to some serious sticker shock.

All of the kids went from the time they were infants on and off through preschool at the same place.

We’re all friends here, right? We’re in the trust tree? It’s not taboo to share these things?

The grand total so far was a little more than…drumroll…$163,000!

That’s an average of around $20k a year.

We basically paid for the kids to go to college without 18 years in advance to save for it.

Now, I am not here to ask for your sympathy, dear reader. I am only sharing our story so other new parents understand the potential costs involved.

Obviously, we didn’t have to send our kids to childcare. There are other options.

Some people have only one spouse that works. Some people have grandparents or other family members chip in. I have friends who had one spouse work during the week and the other on the weekends.

The point is someone is going to have to sacrifice one way or another — whether that’s foregone income from not working or paying up for childcare.

And this is a judgment-free zone since it’s not an easy decision for a parent to make.

I will say even with the outsized cost, it was worth it for our kids.

They’ve learned a lot (way more than we could have taught them). They socialize. They get some independence. They have fun. And they make little friends.

My 8-year-old daughter met her two best friends in daycare when they were all 3 months old and are still best buds to this day.

But it’s important to understand the potential outlay for something like this.

According to the 2021 Cost of Care Survey more than half of all families surveyed with young children spent more than $10k on childcare in 2021. That’s higher than the average cost of in-state college tuition.

And we live in Michigan. It’s certainly worse in other states.

My point here is having that extra $35k as a cushion for child-related expenses is not a bad idea.

In the 9 months leading up to our twins being born I saved any extra income for childcare. I wanted at least a year’s worth of childcare expenses in the bank so we didn’t have to worry about it when those bigger bills came due.2

I don’t know what this person’s childcare options are. Maybe they have other plans.

There are always financial trade-offs involved in these decisions. Having some extra cash set aside might make those decisions easier to stomach so you can focus on your new baby.

We talked about this question on the latest Portfolio Rescue:

Nick Magguilli joined me as well to discuss his new book, asset location and averaging down into losing investment positions.

Podcast version here:

Further Reading:
The First Thing You Need to Do Before Investing Your Money

1Recenty bias? Probably.

2In the two years when all three kids overlapped we spent close to $40k a year on childcare alone.

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