The Genius Advice a Financial Guru Gave Her Pregnant Niece
My niece Katie is an amazing woman—seriously smart, incredibly thoughtful and full of fun. And when it comes to money moves, she’s been a great listener. Naturally, you get an earful when you’re my niece. As passionate as I am about helping complete strangers take control of their financial life, I go into hyper mode when it comes to my family. And I couldn’t be prouder of how she followed my advice.
It’s been wonderful to watch her build a life of financial security. By the time she was married at 33 she was almost done paying off her student debt and had been saving for retirement for years. She had an emergency savings fund that could cover her living costs for two years and had set aside money for a down payment on a home. Even the wedding was a financial triumph. I was thrilled that she and her husband created a wedding that fit their budget. It was a perfect event made even more special by the fact that they didn’t go into debt to pull it off. Now that’s how to launch yourselves into marriage!
When my wife KT and I got the news they were having their first child, we were over the moon. We were so excited that these great individuals who were so good at being a couple were beginning to create their family. Of course, that meant it was time for another round of Aunt Suze’s money musts.
I sat Katie down and explained that there are two financial decisions new parents must take care of that will protect each other and their children:
1. A Will and Revocable Living Trust
A will is where you name a guardian for a child. A trust is where you appoint someone to handle your money if you die (or become incapacitated). While you’re alive, you are in charge of your trust (you’re called the trustee), and when you die, management of your trust will pass to the successor trustee you’ve appointed. That’s likely your spouse. But you also want to name a back-up trustee, just in case. While the odds of both you and your spouse dying simultaneously is extremely low, it’s not zero. A will and trust ensures that your kids will be cared for exactly how you want.
None of that has anything to do with how much money you have or don’t have. Estate planning is not for the rich—it’s for every family with dependents. And your kids are as dependent as they come.
In some states, if you die without a will, some of your assets may pass to your kids, not your spouse. Which would create quite a mess, as your spouse will then need to head to court to get it all straightened out. That costs time and money. With a will and a trust in place, the transfer of control of your assets is fast and easy, no court appearances required.
2. Term Life Insurance
Okay, I know the mere mention of insurance, let alone life insurance, is not a great conversation starter. Let’s do some rebranding. I have a question for you: Would you be interested in making a small investment to buy you and your family financial peace of mind?
That’s what life insurance is. If you have a newborn, a term policy that lasts 25 years will ensure that your family can continue to live the life you envision, even if one or both parents were to die prematurely. If the kids are already a few years old, you might only need a 20-year term policy to get the kids through college.
Every young family should consider having two policies: one for each parent. Especially if one of you is a stay-at-home parent. You might not be getting paid for that job, but if you were to die, think of all the caregiving support your spouse might need to hire to keep the trains running. And being able to hire that support is what will enable your spouse to have the time (and energy) to focus more on parenting.
Buying life insurance sounds expensive, but I promise you, it can be really, really affordable. A 35-year-old woman in good health (not necessarily triathlon health, but good health) should be able to purchase $1 million of tax-free peace of mind for the next 25 years for less than $20 a week. If you’re in very good health, that premium could be as little as $15 a week. For a 35-year-old man, the cost is a few more bucks a week. If you’re younger, the price can be less, and if you’re older, a bit more. But bottom line: we’re talking affordable. That’s $2 million of peace of mind for a combined weekly cost of $40 or so.
What was so interesting to me is that my niece—who always listens intently, learns quickly and follows through—made sure they got their term insurance in place. But they seriously dragged their feet over the will and trust.
When their baby turned 4 months old, I lost what remained of my patience and delivered a loving Aunt Suze smackdown that was just the nudge they needed to finally get it done. Their hesitancy, or flat-out refusal, to deal with their will and trust is an all-too common bad habit of many young families. I get that you’re busy and not exactly contemplating death, but not taking care of this runs counter to everything you really care about.
As a new parent, you’re consumed with taking care of your baby. From buying the best car seat to making it to every pediatrician well visit, you’re in constant, unrelenting, loving protector mode. Yet when it comes to adding the protection of a will and trust, you just…can’t.
But the fact is, a will & trust is one of the most important ways you can—and must—protect your family. Yes, the chances of you dying, let alone both you and your spouse dying at the same time, are remote. But not unthinkable. None of us is in control of today, tomorrow or next year. The consequence of not protecting your family for a worst-case scenario strikes me as an unbearable burden to live with.
Even if you aren’t my niece, I want the very best for you and your growing family. Creating a will and trust and purchasing term life insurance may strike you as boring and a pain. But I ask you to see it for what it really is: loving your family.
Ready to secure your (and baby’s) financial future? Complete your will and trust (plus other must-have documents), in just 30 minutes with Suze Orman’s online program.
Disclosure: This post contains affiliate links, some of which may be sponsored by paying vendors.
Suze Orman has been called “a force in the world of personal finance” and a “one-woman financial advice powerhouse” by USA Today. She was a contributing editor to O: The Oprah Magazine for 16 years and the host of The Suze Orman Show on CNBC for 13 years, and has won two Emmy Awards for her television work. Twice named to Time 100 and ranked among the World’s 100 Most Powerful Women by Forbes, Orman is one of the top motivational speakers in the world today. She recently released her updated and revised best-selling book, Women & Money, and is currently the host of the Women & Money podcast. Visit SuzeOrman.com and follow her on Facebook and Twitter.
Published March 2019
Plus, more from The Bump: