What’s your long-game financial plan?

Date: May 19, 2016 Author: Barry Greenberg Categories: Advice | The Insurance Edge

For some people, deciding to marry is a difficult decision. For others, signing the dotted line on a mortgage is the largest financial commitment they’ll ever make. And for most – whether they realize it or not – starting a family is the biggest decision of their life.

Aside from the common fear of fretting about whether or not you’ll be a good parent, think about the responsibilities that come along with becoming a parent? Sure there’s the obvious, immediate ones like buying a crib and diapers but that’s just the short game. The long game is much scarier. Becoming a parent means that for the next 18 years (at least!) you must clothe, shelter, feed, educate and provide an adequate lifestyle for your child.

A young middle-class couple may brush off that responsibility list because they both have good jobs so there’s no worry. But what happens if one spouse can no longer handle the financial responsibilities? I’m not talking about job losses here; I’m talking about illness, disability and even death.

Would you be able to adequately carry on the financial responsibilities of raising a child if you lost half (or more) of your family’s income?

According to a 2011 report on MoneySense.ca, the cost of raising a child to the age of 18 is $243,660. After taking a minute to work out the math, you’ll discover that that’s $12,825 per child, per year – or $1,070 per month! And that tally doesn’t even include the cost of a post-secondary education!

So I ask again, what is your financial plan if, due to illness or death, one spouse can no longer contribute to the weekly household income?

There’s the reactive approach to this scenario – the we’ll-figure-it-out-if-it-ever-happens approach. (And this tactic usually involves the let’s-just-cross-our-fingers-and-hope-nothing-ever-happens technique.)

And then there’s the proactive approach. This tactic involves investing in insurance to protect your family against life’s unpredictability.

Disability insurance protects your income should you or your spouse be unable to work due to illness or injury. It allows the insured to concentrate on recovery and rehabilitation without worrying about daily living expenses. Critical illness insurance pays out upon diagnosis of a critical illness, rather than upon death; allowing the infirm to rest and recover without having to worry about financial obligations. And life insurance safeguards your family, allowing them to maintain their standard of living if you’re gone.

Yes, there is a cost to financial security; a cost that is often seen as an unnecessary one when there are many other pressing costs to raising a child (yes, diapers are expensive – but wait, one day that same child will eat you out of house and home).

But it is your child’s future we’re talking about!