Once a person becomes a parent, as many people come to find out, it changes your worldview in at least some way. For many of us, before having children, we primarily focused on ourselves for most of our lives, and then we added our spouse/partner to our highest level of responsibility later in life. Okay, some may have had an elderly parent, an unhealthy sibling, or a niece/nephew to take care of. However, for the most part, our primary responsibility had been ourselves. We looked at the world in terms of our place in it.
And no, pets do not count
Then, the first child is born. After that magical moment, things really do change!
Suddenly, you and your spouse/partner become responsible for this helpless young child. Feeding, caring, protecting, providing are all on your shoulders. As your young child would grow older, the way you take care of your child would change based on the child’s stage of life, but the responsibility would nonetheless be yours. And it would naturally be a big responsibility. From the day the he or she comes into the world, all the way through adult life, your maturity and wisdom will be there to guide your child.
As a parent of two, I like to actively think of ways that I can take care of them in many ways, including financially. With respect to this part of life, there are many steps you can take to help protect your child’s financial future. Here are 6 that can make a big difference:
- Prepare a will. If you have a will, you can determine what happens to your assets in the event you and your spouse die. You can spell out division of assets, and how they will be distributed. If you do not have a will, your exact wishes might not be followed. In that case, your assets will be allocated to your heirs based on your state’s laws. What are the chances that these default laws will line up with your wishes? Protect your kids and your wishes – make a will.
- Purchase insurance. Sure, almost all of us have car insurance and homeowners or renters insurance. But what happens if you unexpectedly die? As a provider for your children, your income is necessary for their day-to-day expenses. What would they do if you weren’t there anymore? Where would the money come from? Just think about it. Protect yourself with life insurance. Or, you could be living but become disabled. How do your kids get cared for then? Protect yourself with disability income insurance.
- Try to save at least some money for college. A college education is obviously going to be critical for today’s children to succeed when they are older. Many will go on to graduate school. There are many ways education can lead to increased net worth, but it doesn’t come free Why burden your child with a the entire debt at a young age, in their 20’s, that they may not be able to pay off until they are in their 30’s or later? That will cripple their ability to save for their own future, much less help the following generation. Be sure to keep this mind. Of course, one can borrow for money but can’t borrow for retirement, so keep that in mind too to protect yourself.
- Form a trust. With young children, this protects them and makes sure that the assets are handled properly. From a tax perspective, there are ways you can build in some real, measurable benefits.
- Obtain long-term care coverage. Do you want to ultimately leave your children an inheritance? If so, be sure to consider long-term care coverage. The cost of such care can be very high – shockingly so to many people. Every situation is different of course, but in some of those, your nest egg can be drained very quickly if this care is needed.
- Teach your children about personal finance. There is a well known quote that says: “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” Think about this in the context of your kids and how they will eventually handle money as young adults. If you are reading this, then you clearly have an interest in protecting their financial future. Share this interest with them by teaching them lessons and practical strategies for managing finances.
My Questions for You
What are your thoughts about these tips – any you think are especially important?
Do you have any other tips to share?
Please feel free to share this post with anyone who has kids or plans to have them in the future