No matter the age of your child, as a parent, you will want to set up different financial resources for each stage of life. Your child looks to you as their teacher – from learning how to talk at a young age, to opening their first bank account as they grow older. In addition to putting financial safeguards and assets in place early on, it is also important to directly teach your child about money and how to manage it. Follow these simple tips and be on your way to planning a solid financial future for your child
1. The First 5 Years of Life – Investing in your child’s financial future early on is the best investment a parent can make. Consider opening a bank account for your child at this crucial stage in life. Setting up a savings account or even a college savings plan at this point allows for many years of growth. And, don’t forget to let your family members know – grandparents, aunts and uncles may want to invest in your child’s bank account or college plan. Additionally, if you have not already done so, this is an opportune time to ensure your family’s financial stability by getting life insurance quotes and purchasing a policy.
2. Years 6 through 12 – These years provide the perfect opportunity to teach your child about saving money. Your child will undoubtedly find a new toy or game they would like to have; teach your child to put money aside in order to save the amount needed for the desired item. You can even discuss small chores your child can do (depending on age) and if they will be rewarded monetarily. Include your child in the act of opening a savings account if you haven’t yet opened one. During this period, you should consider your current life insurance policy and determine if the coverage meets your family’s need during this time. Saving for education is also an important action to take – you can save almost $38,000 by the time your child turns 18 by putting away $250 per month, starting at the age of six. (Begin at birth and this number jumps to approximately $53,000!)
3. Years 13 through 17– These years are extremely important for your child regarding money management. If your teenager is working a part-time job, encourage him or her to save between 25-50% of their paycheck and deposit it into their bank account. Take your teenager’s money management skills one step further and teach them about budgeting, credit cards, balancing a checkbook, making deposits/withdrawals, etc. You can even have your teen be involved in the payment of one bill each month– for example, sit with your teen and help them write a check or pay the bill online. This will prepare your son or daughter to be financially responsible when they incur bills of their own in the future.
Discuss college plans during this period and begin to research grants, scholarships and loans. Because you have now entered a new life stage, you should once again evaluate your life insurance policy and determine if any adjustments need to be made. With college just around the corner, make sure your family is protected in case of an unexpected loss by having an adequate life insurance policy.
4. Years 18 through College – Help your son or daughter establish a budget during this time, and determine the amount of money they will need each month while they are in college. If they are working, have them decide what percentage of each paycheck will be saved and how the remaining money will be used. Explain the pros and cons of obtaining a credit card, and describe the monthly and long-term responsibilities and consequences that come along with it. If your son or daughter moves away from home to attend college, but is not living on campus, you may also want to consider renters insurance to protect their valuables.
Whenever you and your child enter a new stage of life, share additional money management skills with your child and review your life insurance policy to determine if more coverage is needed. Regardless of how much time you spend with your child talking about financial security, if you do not have a concrete plan in place when the unexpected happens, your child is left unprotected.
This post comes to us from our friends at LifeQuote, where professional and experienced insurance brokers assist you in determining the type of policy and amount that is best for your situation.