I Hope I Outlive My Life Insurance Policy, but if My Kids Ever Get That Money I Know Exactly How I Want Them To Spend It
If there's anything living through a pandemic has taught me, it's the importance of being as prepared as possible for the things you hope will never happen.
One of the practical ways my husband and I have prepared for the unexpected is investing in a life insurance policy that would provide for our two children in the event we aren't around to do that ourselves.
Getting Life Insurance To Protect Our Family
While securing a solid financial future for our family feels particularly fresh and urgent at the moment, our life insurance policy isn't new — my husband has had the policy since he got his full-time job at a software company in 2012. By then, we were already married, so I've been covered since then as well through his job.
However, we're in the process of adding another life insurance policy because what we currently have doesn't feel like enough. We both have term life insurance through his work, which covers us as long as my husband is employed. The premium is covered by his employer, so we don't pay anything out of pocket. We list each other, and our two young sons, as our beneficiaries. Right now, my husband is covered for $150,000, and I am covered for $25,000.
I'd love to boost both of our policy amounts to $500,000 in the near future, ideally a 20-year term to make sure our kids are covered through college and beyond. We both feel having more coverage is a smarter move for our children's financial security, especially because of what we hope they'd use the money for if they receive it.
What I Hope My Sons Would Do With Our Life Insurance Money
When I think about my sons' financial future, and what they would use the life insurance money for, my hope is that they would avoid making the same mistakes we did — particularly, that they would avoid accumulating debt.
My debt started building in 2006, when I began relying on student loans to pay for college, and my husband's debt started a few years later with his student loans. Currently, we both have around $40,000 in student loans remaining. That means we're paying around $700 per month including interest (we both have low interest rates after refinancing a few years ago, around or below 5%, which isn't too bad for private loans).
A car payment, then credit card debt came next. When we got married in 2011 and were living paycheck to paycheck, we started using credit cards to pay for everything from our cell phone bills and groceries to weekend trips and Christmas gifts. By the time we had our second son in 2016, we had accumulated close to $30,000 in debt.
By then, we were both making more money, but the credit card payments were so high-interest that they ate up a generous portion of our budget — which meant we kept using credit cards to pay for incidentals like dinners out or Starbucks. If I could change one thing about my financial history, it would be cutting up our credit cards and handling the debt sooner.
I Hope My Sons Never Experience Debt Like We Have
The impact of our debt on our relationship and our well-being is something I hope my boys never have to experience. The low-level anxiety of owing money zaps the joy out of a lot of experiences. It's hard to feel excited about a trip you're in the hole for, and earning a bonus doesn't feel great because you know it's not truly "your money." I hope my sons never have to experience the strain of having a negative net worth.
To prevent this, we're trying to model financial responsibility to them by paying off as much debt as possible and re-focusing our efforts on saving for the future. Whenever they receive cash for a holiday or earn a little money doing chores, we teach them about why it's important to save money instead of immediately spending it.
But we also know there are times when money is tight, and life is stressful. If we aren't around to help them, I hope my boys will use their life insurance money to avoid going into debt — to pay for college, to buy a car, to pay rent and cell phone bills and, if there's extra, to go on a vacation.
These things will be far more enjoyable for them when they aren't going into debt to make them happen, and more importantly, they'll be able to invest in their long-term financial goals when they're not throwing money away on interest payments like we did for so many years.
It's not fun or easy to think about my kids living without me or my husband. But it's also not fun or easy to live in constant strain with money. By taking the time now to consider how we can model financial responsibility to our kids, we hope to kickstart a new legacy for our family that they can pass on to their children one day — the joyful life and freedom that come when you're finally able to have more than you owe.