I have a son. I want what’s best for him. However, I also realize that providing what’s best for him doesn’t mean that he always gets what he wants.
On top of that, I don’t plan to ruin my finances just for my son. My retirement comes ahead of his college, and my husband and I don’t plan on leaving him a massive inheritance. We plan to enjoy our money in this life. After all, we can’t take it with us.
While my attitude might seem selfish, it’s actually quite sensible — at least according to Marc Wiznia, the co-founder and COO of Wizbe, a financial web site aimed at helping parents prepare a game plan for navigating their finances.
When You Should Put Your Finances First as a Parent
Rather than putting your kids first, it’s important to take care of your finances. The classic case is retirement vs. college. “Parents should make sure they are saving enough for retirement before saving for their child’s college,” Wiznia says. He then quotes the oft-used justification for this viewpoint: “There are student loans available for college, but there are no loans for retirement.”
We do contribute to a 529 for our son, but the priority is our retirement. We contribute to retirement first, and a lesser amount goes into the 529. And if a situation arises in which we have to choose, we are definitely choosing the retirement account.
But it’s not just about retirement and college. Wiznia points out that many parents feel like their children need their own rooms. As a result, some parents look for a larger house that they can “upgrade” to in order to accommodate a growing family. “If that larger home will be a major stretch for your household’s budget, you’re better off getting bunk beds.”
Don’t assume that you “need” a bigger home. While it might be nice, if you are going to have trouble making the payments, or if you are going to be house poor, consider keeping things smaller. You’ll be able to afford other things better, and you won’t be putting yourself in a situation that results in financial devastation if something goes wrong.
Finally, Wiznia looks at a situation where it makes sense to think about your children’s needs: Life insurance. You should buy life insurance to protect your family in the event that you pass on unexpectedly. “The primary purpose of life insurance is to provide a safety net in case your household’s cash flow disappears,” Wiznia says.
What about getting life insurance coverage for your children? Wiznia says that it usually isn’t necessary. “Unless your child is the next Miley Cyrus and making a big contribution to your household’s budget, life insurance your child is often unnecessary and certainly should not take priority over your own coverage.”
Bottom Line
Before you head out and buy your child everything he or she wants, and before you put your own financial future at risk, take a step back. You need to make sure your finances are solid, and that you are taken care of. You will be more likely to help others later — and less of a burden on them — if you have your own finances taken care of.
Image source: D. Sharon Pruitt via Flickr
