Manage daycare costs
Within USDA's $25,360 annual twin-spend, it estimates parents spend a little over 25% of that amount on childcare. However, costs vary widely depending on location and the type of care. For example, families spend between $6,605 to more than $20,000 per year on center-based daycare, according to Care.com member data.
Research your options to find a workable, affordable childcare arrangement. Options include:
- Join a gym that offers daycare. Many offer about two hours of childcare.
- Hire a part-time nanny. This route is sometimes more affordable than center-based daycare.
- Look for a daycare center that offers sibling discounts.
- Talk with your employer(s) about flex time and/or telecommuting options.
- Check with your employer — child care discount may be part of your benefits package.
Start or build your emergency fund
New parents learn to expect the unexpected, especially when it comes to expenses. One child may fall and need emergency care. Your house might need a new roof. Or you may have planned to breastfeed for as long as possible but now find that you need to use formula (breastfeeding can fail to work out for a variety of reasons). Formula for twins adds about $270 per month, according to conservative estimates.
Start or grow your high-yield savings account balance to help cover surprise expenses. And if you have or can open a Health Savings Account (HSA), make sure to contribute as close to the maximum as possible, as you can apply HSA funds to tax dependents. In 2018, you can contribute $3,450 to an individual account and $6,900 for family accounts.
Don't forget retirement savings
When you're figuring out how to save and invest money for babies-to-be, don't overlook your own retirement savings.
In addition to contributing to your 401(k) or 403(b), consider opening a Roth IRA. You can set aside an extra $5,500 per year ($6,500 for adults age 50 and older) for retirement. While Roth IRA contributions aren't tax-deductible, you're not taxed when you take the money out. In 2018, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $189,000 to $199,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $120,000 to $135,000.
If you need a backup emergency fund, a Roth can help. You can receive distributions from a Roth without paying an early withdrawal penalty if you're age 59 1/2 or older. You can also take distributions without penalty to cover qualified higher education expenses such as college tuition.