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Millennials Make Great Parents, But They’re Making One (Fixable) Mistake
Millennial parents, there’s good and bad news about how you’re caring for your kids.
The good news is you are probably willing to do whatever it takes to make sure they have the best education and child care money can buy.
The bad news? You likely aren’t doing enough to make sure they are taken care of if you die.
Morbid. I know. But Haven Life released a study this week, and it’s time to talk about it.
According to the study, only about 15% of millennial parents with children under 5 even consider life insurance a top child-related financial priority. It lags behind more important issues like health care, healthy food, quality education and child care.
Why Millennial Parents are Seriously Underinsured
With its low standing on so many parents’ priority lists, it’s not surprising to learn that 20% of millennial parents don’t have life insurance at all. To make matters worse, 53% of millennial parents have less than $5,000 put away to handle an emergency.
And of those who are insured, 70% have less than $250,000 in coverage — and most believe that’s plenty. According to Haven Life, that’s not nearly enough. (But remember, Haven Life’s job is to sell you insurance, so make sure to do your own math to figure out what your financial needs are.)
“Millennial parents have the best of intentions when it comes to raising kind, smart, well-rounded children. They are sacrificing personal time and dedicating financial resources to give their kids the best childcare, diet, educational support and enrichment activities that their budgets (and beyond) can provide,” the study summary said. “Yet, they are leaving a gaping hole in their family’s financial safety net.”
According to Haven Life, if something unexpected were to happen to a parent, that gap would make it extremely difficult to maintain the same lifestyle.
So How Much Life Insurance is Enough?
Haven Life suggests that study participants, who had household incomes of just over $81,000 a year on average, should have at least a $400,000 insurance policy. It adds that the magic number for life insurance value is 5-10 times your annual income.
According to CNBC, you should consider the following expenses when calculating how much your family might need:
- Replacing lost income.
- Paying home expenses.
- Funeral expenses.
- Primary education and college tuition.
- Child care for young children.
- Paying off debt (including mortgage and student loans).
Of course, choosing a policy that’s right for you can seem intimidating (and mind-numbingly boring) as you try to navigate the difference between term and whole life insurance, and calculate exactly how much you need.
For some added guidance, you can brush up on some of the life insurance basics with this post.
Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder. She has life insurance. She’s so responsible.