Got a Family? Things to Get in Order

When you have kids, there’s so much more to do. Of course, you have to take care of them, and that sure takes up a lot of time. But also, you need to get certain financial arrangements in order to ensure they’ll be taken care of properly for a long time.

First up is dealing with life insurance. I say it’s first, but in fact, most parents like me take a really long time to get this annoying task out of the way. My son just turned seven and we just got final approval on our policy a few weeks ago. Please tell me you’re not as disorganized as this!

Before the kids, especially when you’re young, you just don’t think about death, or worry about how others will survive once you go. Particularly if you’re a couple who both work, you just assume the survivor will get by. My husband and I relied entirely on mortgage insurance: if one of us died, the house would get paid off, and that’s really all we needed.

But mortgage insurance is associated with some problems: claims can be hard to make (there’s no medical exam before you apply and apparently many have been denied claims for lying — like not mentioning a casual doctors visit or a minor injury) and your premiums stay the same over the life of your mortgage but the value of the insurance goes down as you pay down the principal. As well, when you have kids, your mortgage is no longer your biggest cost. Childcare, clothes and food for wee ones takes up a big chunk of your budget and will be a huge issue of your die and leave your spouse to do it alone.

So, a more comprehensive product such as permanent or term life insurance is in order. Understanding life insurance is not a quick thing. Best to educate yourself on the types of insurance, figure out how much coverage you need using a calculator and compare insurance rates to get the best deal and the best product for you and your family.

The good news about life insurance is while, yes, someone does show up at your house and take blood. But the premiums, if you get them while you are still young and healthy, can be more affordable than mortgage insurance.

Also, you’d better get a will to make sure your assets go to the right person when you die. And get to them quickly: if you die without a will, your money can get frozen while things are sorted out, and your family may go without much needed money for months.

A will is also the place you stipulate who will raise the kids if you both should die. It’s not a pleasant business, and it’s easy to put this task off. But there are wills available online that make the task quick.

Also important is to look ahead to the more cheerful business of your kids’ education. Establishing registered education savings plans (RESPs) early on is an easy and effective way to save for college or university.

First of all, you need to apply for a social insurance number (SIN) for your child. Once that’s done, you can simply visit a bank or go through an investment advisor to set up a plan. Most organizations suggest you put a set amount in each month, and a good advisor will put your kid’s money in a plan geared towards his or her year of high school graduation to maximize gains now and minimize risk closer to when college or university should begin.

One great argument for putting money away in an RESP is free money. The federal and most provincial governments have grants that top up your contributions year after year.

Most financial experts warn against dumping a lot of money into RESPs when you have other obligations: it’s equally important to pay down your mortgage, invest in tax-beneficial registered retirement savings plans (RRSPs) and tax free savings accounts (TFSAs). Keep a smart balance between your family’s financial goals. Kids can work while they’re in school! Also, encourage grandparents to make donations in lieu of gifts and put in a small monthly or even end-of-year payment that’s in keeping with your budget.

Kids take up a lot of time and they do cost us money. But raising a family can also encourage us to get our finances in order — and that’s always a good thing.

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