We spend so much time talking about the reasons adults need life insurance (income protection, covering funeral costs and so on) that it’s easy to forget why it may be a good idea for you to insure your children as well.
When we think about it, we reason that our kids aren’t contributing to the household budget—in fact, anyone with kids knows that raising them takes a lot out of that budget! But getting a permanent life insurance policy for a child can offer financial advantages for them later in life (in addition to the death benefit).
So before you find yourself caught up in internet debates over how to get your baby to sleep or what kind of diapers to use (or if you’ve already been through that and are dreading the next round of parenting arguments), here are five things to know about buying life insurance for your child:
1. Life insurance policies “grow up” too. A great reason to invest in juvenile life insurance is to ensure that your children are covered from the get-go, and as they get older, may be able to take advantage of riders that allow them to expand their coverage at a guaranteed rate without any question about their respective health. People’s health changes, including children’s, and having a policy in place can ensure they’ll have the coverage they need, despite health changes.
2. It creates a sensible foundation: While there are tax-advantaged vehicles for saving for retirement and college, that’s not necessarily the case for other major expenses that young adults face such as automobile down payments, weddings and first home purchases. The cash value of a policy can be borrowed from—understanding, of course, that it reduces or eliminates the death benefit if not repaid—for these expenses.
3. Not sold on getting them their own policy? Add them to yours. Check to see whether easily affordable riders on your own life insurance policy are available to cover the kids.
4. Don’t buy the first policy that crosses your mailbox, either: The same marketing clearinghouses that make sure you get every single updates on your pregnancy week by week are also making your contact information available to firms that market life insurance. Be sure to compare prices, and it’s always helpful to talk to an insurance professional or advisor who can help you navigate through choices before committing to a policy.
5. The safety net is there. We all want to see our kids grow up happy, healthy and strong. But if the worst happens, as was the case for the Koonsman family, (you can watch their story here) then juvenile life insurance can help provide a buffer—covering funeral expenses, sure, but also allowing parents to take time off, care for their other children, and allow everyone to grieve as needed. And as the Koonsman’s story shows, they were also able to keep their daughter Hope’s memory alive by establishing a scholarship in her name.July 31, 2018 | Helen Mosher |
Whether they receive it from relatives on birthdays, from you in the form of allowance, or from working once they're old enough to do so, most kids have some access to cash. And yet, many parents still find themselves paying for every little thing kids get, letting their money pile up in their piggy banks.
As a mom of three, I have a few reasons for making my kids spend their own money on certain things. First, I like them to learn early on that every financial decision is a trade-off. Going to the movies on Saturday might mean not buying an after-lunch treat at school on Monday, for example. Second, I don't want to constantly get called upon to make yes/no purchasing decisions, or listen to whining. Third, kids who need money are a lot more likely to work, and working around the house helps me out, while working outside the house helps them develop valuable skills. (Whether you tie chores to allowance is a whole other ball of wax. At my house, allowance isn't direct pay for chores, but you can't receive your allowance if you're not a household member in good standing, which includes having chores done.) Finally, making kids use their own funds teaches them to plan ahead. "Are you going to want ice cream at the beach? Bring your money. Carry it in a way that you won't lose it."
Now, I'm not about to ask the kids to use their personal funds for groceries or rent, but there are plenty of items they should buy themselves. Here are some expenses kids can take over, divided by age group.
My children started making their own purchases before they were in elementary school. However, I limited the things preschoolers had to buy for themselves to small luxuries. After all, a four-year-old is quite likely to lose her money on the way to the checkout counter, so you're not going to put her in charge of much cash.
"Mom, the ice cream truck, the ice cream truck, the ice cream truck!"
My kids go into a Pavlovian frenzy at the sound of that music, and no econ lecture from me will ever convince them that they could get a lot more value for their money in the freezer section of the grocery store. From an early age, the ice cream truck was a pay-for-yourself proposition at our house. One unexpected benefit of this policy is that my kids spontaneously started buying for their siblings, if they had money and the others didn't.
Whether it's a trip to the local children's museum or a flight around the world, travel is full of shopping opportunities. To prevent fun trips from turning into begging fests, I remind my kids to pack their own wallets as we head out the door. Having to be choosy about souvenirs will also prevent your house from filling up with clutter.
Saving up for a toy has been a rite of passage in our family, one not without its heartbreaks. I recently got rid of a big, fancy makeup case that had been around our house for about a decade, and my oldest and I reminisced about how excited she had been the day it was delivered to open it up and start applying makeup — and how disappointed she'd been that the play makeup it came with barely showed up on her skin at all. That kit had taken her months to save up for, and minutes to become disenchanted with. But that was just one of the many lessons kids learn by buying their own toys. (See also: How to Use New Toys to Teach Kids About Money)
At some point around second or third grade, it clicks for most kids that they have the power to get stuff without taking no for an answer — by buying it themselves. A minor money-obsessed phase may ensue, but don't worry; eventually they'll get used to being consumers and drop the Scrooge McDuck routine. (See also: 10 Fun Books That Will Get Your Kids Excited About Money)
As a parent, it's your responsibility to make sure your child has something to wear to school and to keep them warm. But fancy barrettes? Earrings? Hair dye? That's on them.
Sometime during the middle-school grades, if my kid gets invited to go to the movies with friends, I start asking if they have enough money for the ticket. This is a decide-as-we go category, because some outings, like tickets to an amusement park, my kids just can't afford on their own. I will pay for those outings, if they really want to go. And if we go as a family, I pay.
The elementary years are a good age for the kids to start giving back. If you're out together and you see a collection bucket for the animal shelter, you can set a good example by putting some of your own money in the bucket — then ask them if they want to put in some of their own.
7. Anything they could get for free
If your kid wants a book, movie, or video game that could be checked out at the library for free instead, they should pay for it on their own. This is a good time to start learning the value/cost proposition of convenience. (See also: 7 Modern Reasons to Visit Your Local Library Today)
8. Fundraiser items
So far this fall, my kids have already participated in two kinds of popcorn sales and one candy and nut sale. Then there is the monthly order form for book sales that kick back a small portion to the school. Some parents don't let their kids buy sugary treats with their own money, but I'm fine with letting them help their own and their siblings' sales totals.
9. Treats for their own pets
When my daughter begged for a pair of hermit crabs, I agreed to buy her a tank and the animals if she promised to keep her room tidy for 100 days. She came through, and the animals came home. But part of the deal was that after the initial setup costs, she was responsible for buying their food, their water dechlorinator, and any decorative plants and rocks she felt they needed.
Other parents might pay for the necessary supplies, but let kids spend their own money on treats and accessories. I feed our family cats, for instance, but my daughters didn't even bother asking me to pay for Halloween costumes for the cats, because they knew I'd say no. Poor Myrtle and Katie were then outfitted as mermaids for the holiday.
10. Business supplies
My fifth-grader recently got into the slime business. At first, I thought she was just making slime for fun, and as she didn't have any money, I agreed to purchase the contact solution, shaving cream, glue, and other supplies she wanted. But then she came home with a fistful of cash, announcing that she had made it all selling her slime at school. I told her that was great, but that all further supplies must be paid for out of her revenue. She bought more supplies, sold more slime, and ended up using the profits to purchase a computer game, which I hadn't even known she'd wanted.
The same rule applies for lemonade stands; they get the lemons from our tree, but they have to pay for the cups and sugar.
This is really important, because understanding that profit only kicks in after you cover your costs is a fundamental business lesson. (See also: 13 Businesses Your Tween Can Start)
11. Certain gifts
We don't give our kids money to shop for holiday and birthday gifts for family. If they don't have money, they can always make something.
At this age, we still pay for the birthday gifts our kids bring to parties. However, there is an argument to be made for having kids pay or contribute to birthday party offerings. When they have to pay for birthday gifts for friends, they'll have to decide if the birthday kid is a real friend that they're happy to get a gift for, or just an acquaintance whose party they're going to for the free cake and bouncy house.
12. Things they broke or lost
The first backpack at the beginning of the school year is on me. If my child loses it and needs another one, they'll be paying for it. If they need some time to save up, they can dig out that embarrassing princess-themed backpack from under the bed and use that for awhile.
Broke a neighbor's window playing baseball? I would pay up front, but you bet they are going to pay me back, week by week.
Once they turn 12 or 13, suddenly your kids have real earning power. My teen has earned $10 a day for walking and feeding pets for out-of-town neighbors, and $8 an hour for baby-sitting. With that ability comes the opportunity for her to get herself things I would not have provided; but it also comes with the opportunity for her to take over some expenses I previously footed.
13. Salon services
Bright hair colors are all the rage in both smaller kids and teens these days, but having this done in the salon is not cheap. I pay for my teen's basic haircuts (because if I didn't, she'd never get one), but if she wants an ombre or a manicure, that's on her. I can always point her toward the local beauty school for discounted services.
I recently told my teen she is responsible for paying for all of her clothes. I don't think this is a choice that all parents will agree with, but I want to see how it goes. She's already well acquainted with the benefits of thrift store shopping, so it won't be as expensive for her as you might think.
15. Entertainment with friends and dates
While I pay for more expensive outings for my elementary kids, as a teen, my daughter can pay for her own ticket to a theme park or play if she goes with friends. I'd still treat for a family outing, though. As the kids get older, we're grateful that they want to spend the day with us at all, and we're not going to risk them saying they don't want to come along because it's too expensive.
My teen hasn't dated yet, but when she starts, there is no way I'm giving her money to go out on a dinner date.
At some point during the high school years, teens can take over the cost of bringing a gift to a birthday party they're invited to. This can push them to learn how to put together gifts within their budget. My teen recently bought her friend who loves to bake a gift of frostings and sprinkles in a cute hand-decorated gift bag. (See also: 25 Thoughtful and Frugal Personalized Gift Ideas)
17. Data plan
I bought each of my older kids their first phone (or gave them a hand-me-down) and paid for call-and-text-only service. I didn't want to give my kids the option of not paying for the service, because I wanted it active for safety and so I could keep track of them.
But when the teen wanted a data plan in order to start posting on Instagram, that was on her. So far, she has paid it without complaint, even though she's not getting much value for her money, since she usually forgets her phone at home or forgets to charge it.
18. School extras
I pay for supplies required by school, P.E. shoes, and field trip fees. But if my kid wants a yearbook, she has to pay for it. Same goes for tickets to a school dance or any other nonessential fun thing. When she gets to high school and wants to attend homecoming and prom, she can pay for the clothing, tickets, and dinners that go with those events.
19. A car and driving expenses
Most schools don't teach driver's ed anymore, so learning to drive is likely to require the cost of private driving school in addition to DMV fees.
Once they have a license, should you purchase a car for your teen? What about insurance, oil changes, and maintenance? The answers to these questions are going to vary according to family circumstances. While I am all for teens footing the bill for their own expenses when possible, I can imagine that in some families, having the teen drive may be as much about convenience for the parents as it is for the kid.
When I started driving, my parents happily handed over the responsibility of getting my little brother to all his activities. Because of that, it seemed fair that they gave me use of their old car and paid for the extra insurance cost of having a teen driver on their policy.
However, most families will agree that certain driving expenses, such as gas and traffic tickets, should be footed by the teen driver. Outside of parent-mandated errands, kids need to learn that the number of miles they can drive depends on how much gas money they have. It's also not a bad idea for them to learn to ask friends they transport to pitch in at the pump. And if your child gets a moving violation or even a parking ticket, what better way to remember to behave better next time than to have to work extra hours to pay for the ticket? Oh, and if your child has an accident that causes the insurance payment to go up, or loses their good-grade discount, they should pay the difference. (See also: 6 Mistakes Parents of Teen Drivers Make)
20. Travel without family
Once a year, our middle school runs an international trip led by teachers and a tour company. It costs thousands of dollars. My daughter knows that if she chooses to participate, she will have to raise those thousands of dollars herself.
Family travel, on the other hand, comes out of my pocket. I want her there with me, and I'm willing to pay the fare to make that happen!
21. Extracurricular activities
This is a tough one, because like most parents, I want my kids to participate in sports and other activities that help them develop their bodies and minds. My teen is into figure skating, and I currently pay for classes, new skates, costumes, and competition fees. But this may change as she gets older, especially if she is able to start a regular part-time job.
It's certainly fair to ask teens to split the bill for an extracurricular, or to set a limit on the number of extracurriculars the parent will pay for. If nothing else, kids who want a new pair of cleats instead of accepting hand-me-downs should pay for that.
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