Expecting The Expenses

First and foremost, we need a will, Stenstrom said. It needs to clearly state who will get custody of Sam if his mom and dad die. "Both parents dying at the same time happens rarely," Stenstrom said, "but it happens." When she said this, I felt much of my body go limp. But even though the subject is hard to stomach, we must.

And we must also set up a trust that clearly states that we are leaving Sam all of our financial holdings, including my baseball cards. Children typically inherit their parents' money and property in many states, but the advisers suggest drawing up a trust anyway because laws change. Stenstrom suggests naming one of the parents a trustee and someone who understands finances the other trustee. Getting a lawyer to draw up these documents can set us back as much as $3,500.

We also need to enroll with either of our employers in a dependent-care savings account. Like a health-savings account, a dependent-care account allows us to set aside up to $5,000 of our earnings annually, tax-free, for day care. Our day-care bill will be about $12,000 a year, so having almost half of that set aside tax-free is a big help.

And then there is the largest expense of them all: college. Where to begin? T. Rowe Price has a useful -- and frightening -- calculator on its Web site that allows you to figure out how much a college education will cost for any school in the country. If we send Sam to the University of Maryland, his mom's alma mater, by 2025 it will cost $248,798. If we send Sam to my alma mater -- Southern Illinois University -- it will be more expensive, at $313,806. If we send him to Princeton University: $624,771. I read those numbers to my wife and she said, "I hope we are making more money by then."

One savings strategy is a so-called 529 plan available through the state of Maryland, where we live. A 529 college-savings plan is tax-free as long as the money is used for higher-education expenses. Money deposited into the account can be invested in mutual funds and other investment vehicles that are managed, in Maryland, by T. Rowe Price. (The District's 529 plan is managed by the Calvert Group, a Bethesda firm. Virginia's is managed by American Funds, a subsidiary of Capital Group Cos.)

We have opened a standard savings account in Sam's name at Bank of America for all the checks, cash and bonds he has received from family and friends. The advisers say we should quickly move those funds into a 529 plan, along with any other money he gets in the near future as gifts.

The bigger question is: Do we put aside our own money in a 529 plan? An even more difficult question: Do we put aside any money for his college education at all? As the old saying goes, "You can get a loan for a college. You can't get a loan for retirement."

My wife and I, like many other young couples in this very expensive region, are over-mortgaged. We have an interest-only loan on our house. We have yet to put a significant amount of money in our 401(k) plans. The more money we put aside for his college education, the less money we will have when we are too old to work.

That seems like a harsh way of looking at it, and my wife has told me as much. Her family paid for her college education; mine could not.

I took out loans and am still paying back about $200 a month. Looking back on the arrangement, I think I'm better off having done it that way. I was a crummy student in high school. Most of my memories from those days involve cutting class and hanging out at home while my parents worked. (When my mom would occasionally find me in the living room at noon, I'd say, "Bomb scare." It is amazing how many times that worked.)

But when I got to college and knew that I would eventually foot the bill, I blossomed into a great student. As they say in the business world, I had some skin in the game. I earned better grades my freshman year than any of my friends who had actually sat through high school all day. I was a consumer, and I was going to get my money's worth.

Glassman and Stenstrom both advised me not to put aside money for education at the expense of our retirement savings. Stenstrom said, "When the child graduates, you can always help them pay down their loans." Glassman's suggestion: If we are able to put aside money for both purposes, a tax-efficient portfolio might be a better way to go because we could use the money for ourselves or for Sam's education. Our hands would be tied with a 529 plan. It has to be used for education; otherwise, there are penalties.

The good part about everything that we have to do is that it is all relatively easy to set up. The hard part will be the financial implications on our daily lives. We won't have the kind of money we did as a young couple in love -- the trendy restaurants, the weekend jaunts to Cape Cod, the frivolous purchases at Nordstrom. Some of that will go away, and the rest will need to be moderated.

The best part of all of this: Sam's smile is a wonderful return on our investment.