An interesting topic that I have been reading about is the issue of life insurance for children. I, like many parents, was under the impression that purchasing life insurance was a responsible parenting decision. No one ever wants to think of the unthinkable, such as how to pay for the funeral of a child but the decision to purchase life insurance seemed like the right thing to do, or so I thought.

There have been a lot of different views discussed around the internet about buying your kids life insurance and I was stunned to learn that many leading financial experts consider the purchase a waste of money. Essentially, these experts agree that since the purpose of having life insurance is to protect a person in the event of a loss of income, it is pointless for a child to have a policy since a child does not have a job. Many feel that the only reasons a life insurance policy should be purchased for a child is if there is a family history of health issues that could result in difficulties getting insurance later in life. In such a case, insurance experts recommend finding a policy that is renewable and gives the option of converting to a whole life insurance policy.

So what to do? Those who say that insurance policies for children are a waste of money suggest that money be instead deposited into a savings plan, such as a 529 plan or an Education IRA. There is a small percent chance that a child will grow to be uninsurable as an adult and the money saved in an interest-baring account will generate more cash value than the value of the insurance policy.  It is also important that parents understand how essential it is to have adequate insurance on themselves before a policy for a child is even considered. 

Sadly, there are many unscrupulous agents and insurance companies use scare tactics to get parents to purchase policies, such as questioning their love for their children or their responsibilities as a good parent. Ultimately, the decision that is right is the decision that works best for your family and your finances. There are many choices and options regarding financial stability for your children and what works for one family, may not work for others. I feel confident in keeping the policy for my child to ensure that she will grow up to have insurance that she can increase as needed.

Is Life Insurance for Kids a Waste of Your Money? was created by and is property of American Consumer News.

Help your teenagers realize this and you’ll successfully prepare them for a wealthy retirement.  Try this on for size:  a sixteen year old with a summer job (working  four summers in a row) can invest the earnings in a Roth IRA.   It doesn’t have to be complicated, invest in a low-cost equity portfolio and let it grow until they turn 67 years old when they can remove the money tax-free and they’ll be a retired millionaire.

Just $2000 A Summer for Four Summers

Can your 16 year old clear $2,000 in a summer job?  They sure can!  At $8 an hour, a teenager would have to work around 250 hours to earn $2,000 before taxes- so even if you were to estimate 350 hours over a three month summer period- that’s less than 117 hours a month; or approximately 29 hours a week.

With $2000 over 4 years invested into a Roth IRA, your sixteen year old could become a millionaire upon retirement.  (If mom and dad… or some other doting relative decides to contribute to their earned income, the outcome would be an even greater amount!)

Roth IRA’s earn tax free income for as long as the money is in the account.  If you wait until after the age of 59 and a half, you can withdraw the money tax-free as well.

If you invested the $8,000 earned over the four summers into a Roth IRA; investing in common stocks with the average compound rate of 10.7%, your account would grow to be over $9,300 at the end of the fourth year.  Your sixteen year old would now be 20, and probably in college or just heading out on their own.  Keeping the money in your Roth IRA invested the same way, and with no additional contributions, would result in the following:

• Over $25,000 at the age of 30
• Over $71,000 at the age of 40
• Almost $198,000 at the age of 50
• Over $540,000 at the age of 60
• Over $1,100,000 at the age of 67

Not only will your sixteen year old have started their first million before the age of 21- but they didn’t even have to be a genious to pull it off.  They just had to keep their hands out of the piggy bank until the age of 67 to enjoy it.

How a 16 Year Old and a Summer Job Can Become a Millionaire was created by and is property of American Consumer News.