How do you teach a child financial responsibility?

Stay with me here – I’m very concerned about my child’s future, especially in these debt-ridden times of financial uncertainty. It should come as no surprise that I’m just as worried about my child’s financial health as I am about his physical and emotional health. I’d guess that I’m not the only parent out there worried about it either.

Even though my son is only three, I am already teaching him that it’s important to value saving his money. Meanwhile, I squirrel away savings from each paycheck, and do my best to invest wisely and avoid needless expenses. These are the things in my control – at least for now. But one day, I may not be around to provide for my son’s future. That got me started thinking about life insurance.

Life Insurance as a Guarantee

If something were to happen to me, I need to ensure that my child will be taken care of. When he was born, I did think to draw up a will. But it hadn’t occurred to me that life insurance might help pay for college, allow him to stay debt-free himself, or give him opportunities I never even dreamed of. A life insurance policy could mean that both short-term expenses (funerals, medical bills) as well as long-term expenses (mortgages, car payments, student loans) will be taken care of.

Start Early for Greater Benefits

Life insurance rates are less expensive when you are young, so it’s to your advantage to look into policies early.  The three general types of policies to consider are:

• Universal Life Insurance: A flexible policy that you can structure around your needs and your monthly income. You can adjust the premiums paid per month if your income varies over time as long as you pay enough to keep the policy valid and in effect. There may be a death benefit option that can either increase or reduce the death benefit as needed. This is especially useful if you have young children and want certain levels for lengthy periods of time, but then want to be able to reduce the benefit when your children are grown.
•  Term Life Insurance: This kind of policy will maintain a certain premium for a distinct time period, after which you can opt to continue coverage with a premium that increases annually. You might decide that you want life insurance for 15 years with guarantees that your premiums will remain fixed. If you have a fixed budget, this might be especially useful.
• Whole Life Insurance: This offers a guarantee on the death benefit and guaranteed cash value for a guaranteed premium.  This is often most expensive kind of life insurance, but may pay dividends (refunds of unneeded premium) that can be used in a variety of ways.

Planning is Everything

Investing in life insurance doesn’t have to tax your monthly income. Spend the time to work out your monthly expenses and you’ll discover there are many opportunities to save a couple of dollars every month. The little things really do add up.  There are many available resources online, such as Genworth’s life insurance budget calculator, that can help you determine how much you can save every month. And only buy as much life insurance as you think you’ll need, neither more nor less. I can promise you will find comfort in knowing your spouse and children will be protected no matter what the future holds.

So, is there anyone else out there like me thinking about how to protect their children? I would love to hear your story so please share. 

This post was written by Ben.