As our children travel the long and never-dull road from infancy to adulthood, we nurture them, worry about them, scold them, and love them. Most of all, we try to protect them. We want them to grow up in a stable world, one in which they are physically safe, emotionally nurtured, and financially secure. Still, meeting expenses can be a challenge. The United States Department of Agriculture estimates that the average nationwide cost of raising one child in a two-parent family from cradle to college entrance at age 18 ranges from $176,550 to $407,820 depending on income. (Source: Expenditures on Children by Families, 2013, released August 2014) Then, when they turn 18, add in college expenses, and your financial outlay can get even worse. Between raising them and educating them and making sure they get a good, strong start in life, one thing is obvious when it comes to children–they are a major responsibility. Fortunately, as long as we remain alive and healthy, we manage to somehow meet these expenses. It’s part of what parenthood is all about.
Have you taken steps to protect them? What would happen to them if something happened to you? No, it’s not the kind of question we like to dwell on. But these matters are important. This is why many financial professionals recommend that, above and beyond the day-to-day efforts to provide for their children, parents should take specific steps to help protect their financial well-being.
Review your life insurance coverage. Life insurance is an effective way to protect your family from the uncertainty of premature death. It can help assure that a preselected amount of money will be on hand to replace your income and help your family members–your children and your spouse–maintain their standard of living. With life insurance, you can select an amount that will help your family meet living expenses, pay the mortgage, and even provide a college fund for your children. Best of all, life insurance proceeds are generally not taxable as income. Keep in mind, though, that the cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance.
Consider purchasing disability income insurance. If you become disabled and unable to work, disability income insurance can pay benefits–a specific percentage of your income–so you can continue meeting your financial obligations until you are back on your feet.
Start building a college fund now. College costs may seem daunting (and they are expected to continue increasing), but you have about 18 years before your newborn will be a college freshman. By starting today, you can help your children become debt-free college grads. The secret is to save a little each month, take advantage of compound interest, and have a sum waiting for you when your child is ready for college. But keep saving for your own retirement, too. Many well-intentioned parents put their own retirement savings on hold while they save for their children’s college education. But if you do so, you’re potentially sacrificing your own financial well-being. Finally, enjoy watching your children grow up. And remember, just as they are important to you, you are important to them. Make sure they’re protected financially.
-Bill Dowell, Vision Financial Group
Bill Dowell is a Registered Representative of ProEquities, Inc., A Registered Broker-Dealer, Member FINRA & SIPC. Vision Financial Group, Inc. is independent of ProEquities, Inc. Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2015
