Being a new mom is both thrilling and scary, involving all kinds of interesting contradictions. For example, the experiences that bring you the greatest joy will also bring you the greatest fear. There's a delicate balance between being helpful and sharing too much. And, when you see your children are about to make a mistake, sometimes the best thing you can do is to let them learn for themselves.
However, one area in which children need a lot of guidance is in how to manage their finances. Yes, in addition to teaching children about good manners and hygiene, you also have to teach them about money. If not from you, where else will they learn how to create a budget? With that goal in mind, here are a few nuggets of financial wisdom to consider between your midnight feedings and carpools.
Lesson #1: You can't save too much or too soon for college
A college education is expensive and expected to become even more expensive. You've probably read about the extensive debt many graduates carry. Consider starting a college fund by your baby's first birthday. You'll have 18 to 20 years to benefit from the magic of compounding interest.
If you do have to use student loans to help with tuition, consider buying a term life insurance policy insuring your student for the total amount of the loan. If something tragically happened to your child, the death benefit could cover the cost of repaying the student loan, protecting your retirement savings. The premiums are typically low and could be worth the risk.
Lesson #2: Start teaching good financial habits early
Two of the most important values to teach children are the value of a good education and an understanding of the value of money. Debt can be crippling. Student debt combined with consumer debt is thought to be a contributor to delayed marriages and fewer homebuyers. A commitment to savings and careful spending will likely lead to a more secure future.One way to start teaching kids about money is to give them a school clothes budget when they reach middle school.
Lesson #3: Whole life insurance can be a great value
Celebrating your baby's first birthday is a milestone and probably more significant to you than to your baby. Many first birthday gifts will be long forgotten by the next year. Consider buying your baby a whole life insurance policy for his first birthday. Whole life insurance is generally inexpensive for children. There are 10 and 20-year payment options that completely pay the policy. Your child could have a paid-up policy with cash value that can be used for graduate school or a down payment on a first home.* You also give the gift of insurability if you have an available guaranteed insurability option that allows for increased amounts of insurance without medical underwriting. That can be very valuable if children develop Diabetes or other conditions that might limit their ability to be approved for a life insurance policy later in life.
Whether you're a new mom or an experienced grandmother, take a moment to share a few financial lessons. The ultimate goal of raising children is to teach them how to thrive on their own. Many of us never received financial guidance from our parents and therefore, we made a lot of mistakes before we mastered smart money management. No matter how much you teach your kids, they'll make mistakes too. But, if you equip them with a little money management know-how, they'll make it through the learning curve a little bit faster.
*Loans against the policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest.