Question

Neal and Catherine recently graduated from college and are starting a family. Currently, they are just making ends meet with their $45,000 salary. They want to contribute the maximum amount (currently $2,000) to fully fund an Educational Savings Account when their baby is born. How much additional money will they need to budget every month and what are some things they can do to their budget to find the money? Please it's my last question and I have a lot of other work I'm doing right now.

Answer 1

Answer:

Not enough data is provided but I will try my best.

Step-by-step explanation:

If the couple is desiring to save money for their baby's education then and they can opt to following options:

I think they must first lower their fixed expenses which includes their rental expenses per year, branded clothing cost per year, use of luxury items, etc. This will help them save more than what they are desiring to plan for their baby's future. This will help them own a small house which will substantially lower their expenses because rentals are usually 10-20% of household Income. Luxury expenses can be lowered if the by 80% by simply opting local brands. Furthermore, if they use bicycle then the cost of traveling which is 4-10% can also be significantly lowered. Modern research shows that owning a car is expensive than using Uber a year. I think using local transport will be very beneficial. Eating quality products is recommended but they must be cooked at home because the street food is very expensive and increases the cost of living. All these measures will help them in buying a house that will help them keep their expenses under control. Average saving by using these measures would be $25k which means they can own a house costing them $100-150k within 4 to 6 years.

I recommend them funding Educational Savings Account when their baby is studying in 3rd standard because public high school education is free for all the US residents. The University degrees that are the most expensive in the world cost around $230-$331k which means that if the couple starts saving $2000 a month, 10 years before the child enters the university then according to Florida 529 planning, after deducting for college studies they can save up to $272k which is more than enough.

Furthermore the amount deposited in the account is tax deductible and have to be paid aggregated when the money is withdrawn. So it also has a tax advantage.