Q&A With Financial Expert Jean Chatzky

I recently had the pleasure to interview Jean Chatzky, a financial expert who is also a contributor to BabyCenter.com. Considering that raising a child costs an estimated $227,000, according to the U.S. Department of Agriculture, we discussed ways families can save to raise their “recession generation” babies.

MotherTalkers: How can someone living paycheck to paycheck afford to have a baby?
Jean Chatzky: There are so many people living paycheck to paycheck. More than half of the people in this country are living paycheck to paycheck, yet they’re having babies all the time. It is possible. You have to (take inventory) of how much money you are bringing in and where your money is going….When you do, you can view your budget line-by-line and say, “this is how I am going to save on groceries. This is how I am going to save on gas.”

MT: How much of our inability to “afford” children is that our country offers no middle class women subsidized or free childcare or health care?
JC: I think it’s very, very difficult to blame the fact that a lot of people cannot afford to have children or pay for college on (any one thing). You have to look at the landscape….People also have to look at what they’ve got and they have to make priorities….Maybe you can’t afford the new car and the vacation this year. This is the choice that parents and non-parents have to make in their lives.

MT: The other issue I see compared to previous generations is that many college-educated women are saddled with student loans and other debt.
JC: More women now than in previous generations are getting out of college that they pay for with student loans. The cost (of a college education) has gone up three times the rate of inflation! It is a great thing that the money (to borrow) is available, but more and more we have to ask ourselves if “the cost of this education and the job I anticipate is worth it.” (She quoted another expert who said): “You only borrow what you will make in your first year out of college.” You can also go to a community college for two years. There are a lot of strategies like that.

MT: I hear mixed things about parents being able to “afford” to stay home with their children. On the one hand, I hear that staying home is only for privileged couples. On the other hand, I also hear that some women can’t afford childcare and opt to stay home instead. What’s the real story?
JC: I think the real story is that there are a lot of ways to afford to stay home if that’s something that you want to do. The stay-at-home spouse can be a huge advocate for the family budget and live cheaply. The question becomes are you willing to live on one salary when you are used to two? Have you shopped around for daycare in your neighborhood? The nine months during pregnancy is the time to road-test it and see if you can live on one salary.

MT: The nine-month road test is a good idea.
JC: Thank you!

MT: What I tell women who are considering staying home is to make sure they budget the occasional haircut or something nice for themselves. Being a stay-at-home mom is hard work. At least that’s my litmus test as to whether someone can afford to stay home. What’s your litmus test?
JC: I would tell you that the research we did for BabyCenter showed that most people are not splurging on themselves, they are splurging on their kids. It is important to take care of yourself. Taking care of yourself doesn’t have to cost any money. For me the de-stressor is going outside to exercise.

MT: Are there tax breaks and/or government programs that parents can take advantage of to help them with child-rearing costs?
JC: There are a lot of tax credits and tax breaks….Parents leave them on the table all the time. Get TurboTax. Those programs take you by the hand.

JC: Elisa, we are out of time.

MT: One last question: what are other cost-saving tips do you have for families?
JC: At Babycenter.com, I wrote a wonderful list of 10 tips. I say it is wonderful even though I wrote it. (Laughter)

MT: Okay, one last question (really!): college savings or retirement?
JC: Retirement, hands down.


The Pros and Cons of Saving for College

If you are like me and feel guilty that you have no college savings account for your children, check out this article in MSN.

According to certified accountant and financial writer Sally Herigstad, there are disadvantages to stashing away too much cash for college.

Other financial goals come first. It’s heresy to some, but it’s true: Your retirement plans are more important than your children’s college funds. Your kids can get through college somehow, and you will probably find a way to help them, but it’s more important to plan for your retirement. Remember, your kids can get student loans, but there’s no such thing as a retirement loan.

If you have to choose between putting money in the kids’ college funds and buying a house, buy the house. You may be able to pay tuition with a home-equity loan when the time comes.

Other considerations include the low returns on a college savings account as opposed to other investments like stocks and real estate. Also, colleges give less financial aid to parents who save, and yes, they assume children will help pay for their own educations.

Still, as grants dry up it seems irresponsible not to save anything. Also, surely, there are advantages to these college savings accounts, which unfortunately, Herigstad did not cover.

Are you saving for your child’s college education? What are the pros and cons? What would you do if your child decided not to go to college?