Here's a confession: I love Jean Chatzky, one of the columnists for Money Magazine.
No, not in THAT way, but I love her in that she writes in a simple, practical manner with money tips that people can actually use to improve their finances. (Imagine that!!!) Unfortunately, this is a rather rare trait for personal finance columnists, but that post is for a different day.
Today, I want to highlight Jean's latest article that addresses a growing issue many couples are facing: having children at an older age and thus trying to balance the competing financial demands of raising a child/college with saving/paying a mortgage/saving for an upcoming retirement. First of all, here are the facts:
- The birth rates for 40- to 44-year-old women between 1980 and 2002 have gone up 32%
- The birth rates for 40- to 44-year-old women between 2002 and 2003 alone have gone up 6%
- 14% of AARP members have children under the age of 18 living at home
In other words, this is an issue that many people are currently facing and that more and more will be facing in the future. Here are the issues these people need to address:
- "Think of the double whammy of being hit with college expenses and retirement at the same time. Or of maintaining health insurance for your family after the age you personally would qualify for Medicare. These and other issues are only magnified when, as is often the case, a late-in-life child comes in a second marriage and you already have older kids."
- "Presumably, if you decide to have a child after 40, you'll be on firmer financial footing than when you were 25. The downside is that you could get hit all at once by three big money sponges: college tuition, retirement and your own aging parents."
Now, what to do about it:
1. Invest for retirement first, college second -- There's no financial aid for retirement; there's lots of financial aid for college
2. Tweak your estate plan -- When you have children at an older age, you risk dying while they're relatively young. When you're selecting guardians, look to nieces, nephews, even your own older children. Also, don't put too much money in the hands of your kids before they can handle it. Think carefully about how much you want them to receive and at what age, and establish trusts that pay out over time.
3. Consider extending your life insurance -- "We don't necessarily find that our clients need more insurance, they just need it to last longer." Say you had a baby at 30 and purchased a 20-year level-term policy -- then had another child 10 years later. When your initial policy runs out, your second child will be only 10. If you want coverage until you're 70, a simple term policy with the option to convert to a permanent (cash-value) policy (which allows you to keep your insurance in the event of a health scare) is best.
For more financial tips for expecting parents, click here.
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