Do your adult children have a back-up plan (other than you)?

iStock 000014295008Medium-250Picture this: You’re aged 60 and semi-retired
Regular contributions to your retirement scheme over the years will soon pay off and you’re feeling quietly confident that in five years you’ll be ready to retire completely. You’ve worked hard during your long career; you’ve paid off your mortgage and made every effort to generate a good level of savings along the way. A comfortable retirement has been well-earned.

Now imagine your 35-year-old daughter, a single mother of two, comes over to tell you she’s been diagnosed with breast cancer. After talking more about it, you discover she doesn’t have any trauma cover. Or income protection. And she forgot to renew her private health insurance.

So much for a comfortable retirement!

With all the focus on saving and preparing for your twilight years, it’s easy to forget about one of the biggest potential financial hazards any pre-retiree can face – their own children.

It’s a natural instinct for a parent to do whatever it takes to help your children when they need you. And luckily for the baby boomer generation, and your children, many of you have the financial resources to help out.

But what if ‘helping out’ meant you had to stay in the workforce longer, or cut back on your retirement lifestyle to help fund your child’s mortgage, medical expenses or living costs?

Or what if you had to provide for your grandchildren? What would that mean for your own financial situation – both now and in the future?

IRD came up with a round figure in 2009 for raising a child until the age of 18 of $250,000, or about $14,000 per year!

Do your children have it covered?
Generations X and Y are comfortable with the idea of using debt to achieve their goals. And to get into the housing market, they often have to take on considerable mortgages, which can take a decent bite of their income.

Of course, all of this is sustainable when they’re working full-time. But if your children don’t have adequate protection for their income, their debts, and their dependants, they could be vulnerable to serious illness or injury. Their own families (if they have one) can also be considerably exposed if they die.

Help your children help themselves – talk to them about life insurance
Many adult children will discuss their major financial decisions with their parents. Major events like getting married, buying a house, or even changing jobs are good opportunities to talk to your children about life insurance.

One of the good things about taking out life insurance from a young age is that premiums are often very affordable.
For example, a 35 year-old female clerical worker can take out $500,000 Life Cover, $2,500 per month Income Cover, $100,000 Trauma Cover, Major Medical Cover, Premium Cover and $50,000 Trauma Cover for her child for less than $5.00 per day*.

This cover will provide some financial relief in the event of serious illness or injury. It will also make available a lump sum on death that may be used to pay off debts, medical bills or help the family meet on-going living costs.

The best way to help your children get the right level of protection for themselves (and you) is to encourage them to discuss their life insurance circumstances with a financial adviser.