How expensive is raising a child?
The U.S. Department of Agriculture estimates that the average cost of raising one child to age 18 ranges from $205,960 to $475,680 (Source: Expenditures on Children by Families, 2009). When they turn 18 add in college expenses, and your financial outlay can get even greater. According to the College Board, for the 2010/2011 school year, the average cost of one year at a four-year public college is $20,339 (for in-state students), while the average cost for one year at a four-year private college is $40,476. The bottom line: Children are expensive! Fortunately, as long as we remain alive and healthy, we manage to meet these expenses. But what would happen to your family if something happened to you? 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 parents should take specific steps to help protect their financial well-being.
Review your life insurance coverage
Life insurance is one of the most effective ways to protect your family from the uncertainty of premature death. It can 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.
Purchase 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. What about Social Security? If you do become permanently disabled you may be eligible for benefits, but qualifying isn’t easy.
Start building a college fund now
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.