How Much to Save
BLUNDER #2: Putting retirement savings on hold
With all your attention focused on your kids, it's easy to forget about yourself. Many new parents stop saving for retirement in order to start a college fund, but that's a serious mistake. "There are loans and grants for college, but not for retirement," says Katrina Miller, a financial planner in Golden, Colorado.
With retirement, how long you save is almost as important as how much -- because the longer you invest, the more you earn. So even a temporary break from savings can jeopardize your financial future. However tight money gets, continue to save something for retirement. (Ideally, young parents should be putting away 10 percent of their household income.) If your employer matches part of your 401(k) contributions, be sure to save at least up to the match; otherwise, you're passing up free money.
The College Fund
Once you've got retirement savings under control, start saving for college, even if it's only $10 or $25 a month. The sooner the better: If you don't start saving until your child is 5, instead of when she's born, you'll have to save 75 percent more every month to get the same total savings by age 18, Wyman says. The best ways to save: a Coverdell Education Savings Account or a 529 plan, both of which offer federal tax breaks on the earnings. You may also qualify for additional tax breaks if you use the 529 plan offered by your state. For more information, visit savingforcollege.com.