Someone on the PFC facebook group (you should join, it’s great) asked whether they should have life insurance policies on their children. That question inspired this post.

Here’s my take on life insurance on kids:

• Financially, it’s a terrible decision. As this post shows, you’re WAY BETTER OFF investing in a tax-free investment account like a 529 or even a tax-advantageous investment account like a custodial brokerage account (UGMA/UTMA) rather than paying an insurance premium riddled with fees and inefficiencies. You can/should buy index funds inside of both of these types of accounts!
• Morally, at best it’s icky. I would never want to benefit from a child’s death. Insurance agents who push life insurance on children touting the death benefit gross me out.

Ok, but what ABOUT the death benefit? Is important to get paid if your child dies? No. Now stay with me here because I’m going to do that annoying emoji social media clapping thing:

The 👏 financial 👏 impact 👏 of 👏 your 👏 child’s 👏 death 👏 ain’t 👏 your 👏 financial 👏 problem

I hope no one reading this ever has to go through the unspeakable tragedy of losing a child. But if you do, grieving and figuring out how to go on with your life will be your focus. Whatever the costs associated with a funeral will be tiny details. Your savings, friends and family, whatever can help. Don’t be making financial decisions now for the irrelevant part of an extremely unlikely horrific tragedy. And planning for that extremely unlikely outcome ain’t the reason you have financial problems. Your financial problems are living below your means and investing early and often.

In the much happier and MUCH more likely case that your child outlives you and you decide to save or invest for them, give them the best shot at a the best financial future by saving and investing more efficiently in index funds inside a 529 or custodial brokerage account. 🙂

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy