Married With CHILDREN - managing your money

Black Enterprise, Oct, 2001 by Donald Jay Korn

TAKING ADVANTAGE OF TWO INCOMES MAKES RAISING A FAMILY MUCH EASIER

MICHAEL AND DEBORAH WILSON ARE confronted with all types of financial "priorities," from starting an education fund to paying their monthly food expenses. But without safeguarding their finances as a whole, they understand their family can't really have a solid future.

"We're from back East, so there would be no one around in case anything happened," says Deborah Wilson, 36, president and CEO of the Urban League of the Pikes Peak Region in Colorado Springs, Colorado, referring to the safety of her 4-year-old son. She and her 37-year-old husband, Michael, director of marketing services for the U.S. Olympic Committee, have a formal plan to provide for their son should something go wrong. However, that strategy is only part of an overall plan that all married couples with children need in order to ensure their overall financial fitness.

Couples like the Wilsons need to construct a financial management plan that will make their family's lives easier while they're living, not just cover worst-case scenarios if the death of one or both parents occurs. This program incorporates estate planning, a variety of insurance coverage financing a home, financing the children's education and retirement planning. These five areas make up the building blocks that provide a firm foundation for family's finances. Implement them and you'll truly on your way to a richer, better way of life.

ESTATE PLANNING

While no one wants to dwell on the eventuality of his or her demise, making provisions to protect a spouse and your children must be a first priority. "You should talk to all of your close relatives while you're developing a plan to avoid hard feelings in the family," says Deborah. "Coming up with a plan takes some effort, but your peace of mind will be worth it."

Estate plans should always include a will. If you die without one, your state will decide how your assets will be divided, and your state's plan will unlikely be the exact arrangement you would have chosen. Name a trusted party (perhaps your spouse) to act as your executor to handle the details.

"You also should name guardians in your will," says Dawn Kountz, 39, a schoolteacher in New Haven, Connecticut, with two daughters. "A disaster might strike both parents. We took quite a bit of time on this issue, which is not easy to decide, before naming one relative who would handle our children's finances and other relatives, with children of their own, who would provide a home."

INSURANCE

"When you have young children, you need to carry more life insurance," says Dawn's husband, Keith Kountz, 40, a news anchor for the ABC-TV affiliate in New Haven, Connecticut. "I travel quite a bit on my job, and you never know what might happen."

Richard J. Peace, a Colorado Springs, Colorado, certified financial planner who advises the Wilsons, says that many employers provide $50,000 worth of life insurance to their employees as a tax-flee fringe benefit, so a two-income couple may have $100,000 worth of coverage. "That's usually not enough," Peace contends. "Although circumstances vary, most couples should have six to 10 times their annual income in life insurance." A couple with a $100,000 income, for example, might want $600,000 to $1 million in total coverage.

Employees can often purchase additional coverage through their company at an attractive price. "That insurance may be tied to the company," Peace points out. "You might leave your job and have a difficult time replacing the coverage because your health has deteriorated."

Therefore, Peace generally recommends shopping for supplemental coverage on your own, outside of what your employer offers. "You can buy a portable policy," he says, "one that you can take with you as you go through your career."

Life insurance policies generally come in two varieties: "term insurance," which is pure protection, and "permanent insurance, whole-life insurance," which includes an investment account, commonly called the "cash value." As people grow older and the cost of pure insurance increases, the cash value can be tapped to help pay the rising premiums.

"Term insurance is much less expensive than permanent insurance," says Alan P. Weiss, a certified financial planner at Regent Retirement Planning, in Woodbridge, Connecticut, who advises Keith and Dawn Kountz. "Although permanent insurance is appropriate in some situations, many couples with young children are better off with term insurance. They have so many financial needs that they can spend only so much on life insurance; term insurance allows them to get the most coverage for the money they spend. Today, many parents choose 20- or 30-year term insurance, so they lock in a fixed price for the years when their children are dependents."

HOUSING

Couples with children must provide a home that will accommodate a growing family. That may be a stretch in areas such as California and the Northeast, where housing prices have gone through the roof. In Brooklyn, New York, Darrell Oliver, 35, a public relations executive, recently bought a four-bedroom "fixer-upper" where he'll have plenty of space for his wife, Kendall, 34, a school teacher, and their two young children.