Top 10 Money Mistakes New Families Make

Spurning Uncle Sam's Gifts

"Most families are leaving money on the table because they are not paying attention to taxes," says Openshaw. By reducing your annual taxable income, she points out, you reduce your taxes, and that equals money in the bank. That's why it's a major mistake not to take advantage of various tax shelters offered by your employer, chief among them 401(k) or other individual retirement plans. Yet a surprising number of people do just that, arguing that they can't afford to participate. In fact, they can't afford not to.

First of all, such plans force you to save -- a worthy goal in itself. Furthermore, because your contributions are exempted from current income taxes, you pay no taxes on that money until you withdraw it (as early as age 59 1/2). And you're not taxed on the interest you earn until then, either. More bluntly, if you fail to participate in your plan, you are doing nothing less than throwing money away, because your employer is then not required to put in its match, which in most cases is at least 50 cents for every $1 you earn, up to 6 percent of your total income.

Most employers also offer tax-sheltered flexible spending accounts for the cost of childcare, unreimbursed healthcare, and commuting; everyone who has such expenses should avail themselves of these plans. Paying for these items in after-tax dollars increases your cost by as much as 28 percent (if that's your bracket). And don't be embarrassed to ask for a tax receipt for a donation to, say, the Salvation Army, your favorite charity, or the local fire department.

Williams also urges parents to get their money's worth from their tax dollars by taking advantage of public facilities such as parks, pools, and libraries. "We used to rent or buy videos for the kids," says Janice Brathwaite, a mother of three from Delray Beach, Florida. "Now we take them out of the library, keep them for a week, and pay nothing at all."

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