Tips to help your adult child protect their financial future

Insurance
3 MIN READ | #blog

Just because your adult child is living on their own or perhaps even raising children of their own, that doesn’t mean important parent-child conversations should stop.1 In fact, in recent surveys, it was found that parents are still the top source of information when it comes to financial advice. Conversations like these should also include the important financial protection conversation. Use the following tips to get the conversation rolling.

Life insurance

Talk to your child about the importance of considering life insurance as soon as their budget allows.2 The benefits of getting life insurance include:

  • Both term and whole life insurance offer death benefit protection for dependents and financial obligations

  • Rates are based on age and health history, so for many people, the younger you are, the cheaper your rates will be
  • Whole life insurance offers many living benefits by building cash value, which can provide the opportunity to use it to help purchase a home, pay for education, or start a business 3,4

Disability income insurance

Discuss with your child the importance of hoping for the best, but preparing for the worst when it comes to possible accidents or illnesses that can affect their ability to earn a paycheck. Disability income insurance can provide the following benefits:

  • Protect a portion of their income in the event of an accident, injury, or illness
  • Replace more of their income, potentially up to two-thirds of it, than an employer group benefit alone may provide
  • Help them and their families to continue meeting financial obligations, even when they are not able to receive a paycheck

Building a significant savings

Approximately one out of every four millennials has $100,000 or more in savings.5 That doesn’t mean they have large quantities of money in their bank accounts. Instead, that money includes money they have invested into retirement savings, like a 401(k) fund. For those who don’t, it might seem like an unfeasible task to put money away consistently — but you can explain that if they do so, they will be set up for greater financial confidence:

  • During 2019, millennials represented 36 percent of homebuyers — building a significant savings account helps them avoid missing payments6
  • Nearly 50 percent of millennials carry credit card debt, and having a savings account could prevent them from damaging their credit if they can’t make payments7
  • Millennials owe total average debt of more than $100,000, and could benefit from working with a financial professional to help reduce or eliminate it8

It’s never too late to start

Whether your child is a recent college grad, new homeowner, or parent, now is the time to have discussions with them about how to help protect their financial future. In doing so, you can make them privy to important topics, including why it’s essential to plan ahead now by considering life insurance, the benefits of disability income insurance, and how to start building their savings.

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SOURCES:

1 https://themillennialbull.com/the-importance-of-life-insurance-as-a-millennial

2 https://www.cnbc.com/2019/06/25/how-to-buy-life-insurance-for-millennials.html
3 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.
4 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.
5 https://www.cnbc.com/2020/01/30/nearly-1-in-4-millennials-report-having-100000-or-more-in-savings.html
6 https://www.forbes.com/sites/megangorman/2019/08/31/how-millennials-are-revolutionizing-the-home-buying-process/#46e8f6ff2a02
7 https://www.nbcnews.com/news/us-news/poll-majority-millennials-are-debt-hitting-pause-major-life-events-n862376
8 https://www.experian.com/blogs/ask-experian/research/consumer-debt-study/

DISCLAIMERS:

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.