I recently was talking with a friend about the different options that are available to secure children’s future financially, and I was surprised slightly to hear about her strategy. With just one child, she just decided the best way to tackle the entire issue with getting the highest life-insurance amount for herself and her husband. With that, she said, whatever debts her daughter accumulates through college or later eventually can be paid off by this life-insurance policy.
Needless to say, there are many problems with this strategy. Most obvious, a term life-insurance policy may end before a person’s death. In addition, planning a future that hinges on borrowing for college and living on credit isn’t a sustainable approach. If the past few years are any guide, you can see how lending criteria have been subject to change based on economic trends. And, of course, we have seen how credit can ruin numerous lives when things don’t work out as hoped.
With that in mind, are there better ideas for parents to secure their children’s future financially? Yes. Here are a few suggestions:
Insurance, again
Insurance should be part of the plan, but not the entire plan. Have an insurance policy is a must for making sure that if a parent — or both — is lost, the children and their guardian have the financial security that is necessary to get them a proper life and education at least until they are able to earn an income and support themselves. Selecting the right insurance policy, taking into consideration inflation, is a must. But it is also important to take into consideration all the other financial obligations that may deplete a policy payment pretty quickly. These may include personal loans or mortgages that become immediately due, in addition to the loss of an income.
College funds
If your goal is to save for your children’s college education, it makes sense that you check the many college funds that are available through financial institutions as well as through the universities themselves. Based on where you think you child will be attending college, you need to check the local programmes. One point that you always should keep in mind, though, is to come up with realistic plans based on actual research. For example, answer questions such as: Will college tuition continue to increase at the same rate as inflation? Are you planning to save for the entire four years of college? Still, having a college fund in place is a good way to commit to saving for your children’s higher education. The earlier you start, the more money you will be able to put aside, giving them the financial stability that is a must of quality education.
Saving plans and investments
Just putting money aside is a good way to make sure that in case of a crisis like losing a job, children’s qualify of life and education don’t have to be compromised. This security doesn’t only provide parents with a peace of mind, but it also provides a financial cushion that relieves concerns related to issues like rising costs or unexpected major expenses for health care, relocation, etc. In short, if you want to shield your children’s present and future from the typical ups and downs that you may be vulnerable to, make sure that your savings and investments are solid and don’t be tempted to dip into them without a serious consideration.
Financial discipline
Your own financial discipline is the best guide to your children for how money should be handled. But you also should make sure that you prepare them with the right values about money, the ability to control impulsive shopping as well as the right view of the importance of money relative to other necessities in life. Although many of these values may vary, the bottom line that applies to everyone, the more understanding children get of how money should be handled properly, the better they will be prepared to tackle their future financially.
Rania Oteify, a former Gulf News Features Editor, is currently a Seattle-based editor.
