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Monday, April 30, 2012

Should you buy life insurance for your kids?

Is it financially smart to buy life insurance for your child, and if you do, should you buy the type with a savings vehicle?

If you have kids, or are expecting, you have most likely received ads in the mail for life insurance for your child (i.e. Gerber Life Grow-up or Life College plan). Many of these plans tout a savings vehicle in addition to the life insurance. This is a big selling point for these plans as they push the savings piece as an added benefit, a "how can you go wrong?" type of product. Does your child need life insurance? Is it giving them a head start in life? Is the savings piece worth it?

Why would you even consider life insurance for your child?
Here's the sell: "Give your child (particularly your newborn) a financial head start in life! The premiums are cheap and you are guaranteeing your kid's future insurability to boot! You have enough to worry  about as a new parent, so give yourself some peace of mind. Now your baby can be covered regardless of an unfortunate illness and in the worse case scenario you will have the cash to cover final expenses. The best part? If you buy a whole life policy, and your child grows to be a strapping healthy lad or dame, they will have access to the cash value in the future! How can you go wrong?"


How you can go wrong.
First, the purpose of life insurance is generally a salary replacement tool to provide security for one's dependents. So unless you have the Gerber baby itself, whom is providing income for your entire family, baby life insurance doesn't fit that definition. The Consumer Federation of America (a consumer advocacy and education group), along with many financial planners in the industry, believe that its almost never a smart financial move to purchase life insurance for your kids. I don't even recommend life insurance to adults unless they have dependents; so I definitely would not recommend life insurance for those dependents, especially if you are not meeting other important financial goals.

Second, the amount of these kid policies are usually quite low (typically $5,000-$10,000). This amount will not be enough as a salary replacement in the future, and many times you can't increase this amount as they get older if they do indeed have a chronic illness.As of today, the maximum you can purchase under the Gerber life plan is still only $50,000 which will not be much especially in 20+ years. They state that the coverage automatically doubles once your child turns 18, but once again, even $100,000 of coverage in 18 years will not be much when you take inflation into account.

Finally, what about the savings piece? In general, insurance policies are not good savings vehicles regardless of who is the insured. These policies not only have steep hidden costs, but they also provide you with minimal return on your investment. If you are going to invest money for your child's future (education for example), do it in a 529 account, not an insurance policy.

The Takeaway
If you have dependents, obtain life insurance policies (preferably term) for you and your spouse (particularly the breadwinner), contribute 10% of your gross income to your retirement accounts, 6-9 months of expenses in an emergency fund, and then do what you can in a 529 for your kids' education. The key is to make sure you are protecting your kids in case something happens to you, but also protecting your future so your kids don't spend money taking you in down the road!

Once all this is taken care of and you still want to open a policy for your kids, do your research, look into your employer's benefit package (many times you can supplement your own policy with juvenile insurance for pennies a month) and do not opt for a insurance/ savings vehicle combo.





Wednesday, April 25, 2012

Can you afford to workout?

Really, we can't afford not to work out. Not only is it good for our physical well being but it plays a big part in our mental health as well.

Furthermore, if you have kids, staying fit will help all of us stay a little more sane, not only because we will have more energy to play with our lovely offspring, but it keeps us from having emotional breakdowns (at least reduces the chances) to boot.

So, when it comes to finances, can we afford that gym membership? The fees can go from one extreme to the other. Some places may have relatively inexpensive monthly dues, but they require you to pay an enrollment fee and sign a lengthy contract. Furthermore, once you do sign up, do you ever go?

So take your pick and try at least one of these suggestions!
  • Take out your old workout DVDs and have at it. Free.
  • If you have Netflix, there are a variety of workout videos you can watch instantly (some videos I like are Cardio Sculpt-30 min. and 10 minute yoga series-50 minutes broken down into 10 minute sections). 7.99 a month for online instant access. Update 9/13/12: recently I noticed there are no longer workout videos on streaming Netflix! I complained, hopefully enough people will- it was a great deal!
  • Walk with a purpose. Walk your kids to the park. Walk to the grocery store. Walk your dog. If you are accomplishing something else while exercising, its easier to find the time. Free.
  • Clean your house. Set a timer for 20 minutes and do the hard-core cleaning tasks that take some energy like scrubbing bathtubs or floors, sweeping, vacuuming etc. Free.
  • Be a guest at a friends gym. Free.
  • Pay for individual workout classes. There are many fitness clubs and community organizations that allow you to pay for one class at a time. Usually between $5 and $15. 
  • If you want to stick with an official gym membership that's fine too... just make sure you go (and it fits into your budget)! If you sign up for a new membership, ask to see if you can have a no-commitment month trial and then you can see if it will work into your lifestyle.
The key to keeping up with staying fit is to do exercises that you enjoy (or don't even notice you are doing) and to mix it up. So maybe you do a video one day, take a walk the next, and then go to a class once a week- whatever will keep you motivated!

Monday, April 16, 2012

The steps to changing your name after marriage

OK, so I waited over 3 years to complete this whole list, which prompted me to communicate the steps so it doesn't feel so daunting to anyone who is approaching the process with trepidation.

1. Change your name with the social security administration. Go to your local SSA office with your marriage certificate (or a certified copy) and old SS card and done. This actually went very quickly.
2. Change your name on your license. Go to a DMV or MVA office (Express ones will do this as well) with your new SS card, marriage certificate, and old license (along with information regarding a current address if you moved). This also went very quickly- I went to a MVA express.
3. Tackle the financial institutions. This includes your checking and savings accounts along with credit cards, car loans, mortgage, and anything else you can tie to a bank or credit union. The easiest way (and fastest) is to waltz into a nearby branch. However, if you don't live near a branch, or just don't like live interaction, you may be able to do this via email/ mail (I did have to go into my credit union branch in person however). Shoot an email to the customer rep department and they will give you the steps that are required at their financial institution. This will include signing a new signature card (with your new name of course), you may need it notarized, and then send a copy of your marriage certificate.
4. Any website that has your financial information (credit card number) tied to your old name:  this can be changed on an as needed basis. Once your name is officially changed with your financial institution, the next time you make an online purchase, just type in your new name!

Monday, April 2, 2012

Restaurant coupons: are you really saving money?

I have become a bit of a coupon junkie especially when it comes to going out to eat. You can save loads of cash if you know where to go and when to take advantage of special deals.

Websites such as Restaurant.com and super daily deals like Groupon and Living Social can give you deep discounts on eateries in your area. However, you are not really saving money unless you already have plans to go out. Many of us jump at the opportunity to buy a $100 gift certificate for half the price, but its not worth it if you buy something that you wouldn't have used without the coupon (the same is true for any coupon).

So if you have plans to go out (think birthdays, date nights etc.), hop on to one of the above sites and see what you can find. If you sign up for email updates on Restaurant.com you will be notified when they have even deeper discounts like purchasing a $50 certificate for $4. However, make sure you read the fine print as you will still have to spend a minimum (i.e. $100 minimum purchase for most $50 gift certificates) and sometimes it excludes alcohol and weekends.

Happy Dining!

Sunday, April 1, 2012

Don't be a Fool! Your 'Signot' and the checkbook

Who manages the money in your household? Many of our significant others (signot) think of, and deal with, money in different way than ourselves. It's no cliche' when I say that the most important thing when it comes to couples and money is that you have the same (or at least very similar) financial goals. It's how we reach those goals that may become ammunition for squabbles.

Here are a few rules not to break (and some ideas to help) when it comes to sharing the checkbook and bills:
  • Talk about your financial goals and how you plan to save for them... write them down
  • Have a budget
  • Share that budget with your signot so they know what's up (or down) with the cash
  • Designate who's responsible for which bills, make sure someone is accountable for each bill even if its just one of you
  • Set up automatic bill pay so you don't forget!
  • If you share a checking account, set a spending limit (i.e. $50) that neither you or your signot can exceed in any one purchase without consulting the other one first. 
  • Consider setting up a second checking account just for your variable expenses (this way you know you're not spending your fixed expense money... like your mortgage)
  • Use cash allowances for both parties; this way, once the money is gone, its gone
  • Communicate throughout the month (i.e. "we only have $40 left to spend on entertainment this month... do we want to blow $30 tonight at the movies?")