The financial planning process can be quite extensive when you're a business owner and a parent. Aside from your duties to the company's sustainability and employees' upward mobility, you have the added responsibility of raising your kids to be happy and healthy. Life insurance protection helps ensure their future is set up for success when the unforeseen arises.
And if you just recently became a parent, you'll need plenty of coverage, because raising a child today is a truly pricey proposition - rewarding though it may be.
The typical family in the U.S. spends between $12,350 and $13,900 per year per child strictly for rearing purposes, according to the latest data published by the U.S. Department of Agriculture. This equals out to be approximately $233,610, assuming parents provide for their kids' through the age of 17. However, with many kids living with their parents well after their 18th birthday, the total price tag is often a good deal higher.
"High income families spend $372,210 to raise a child through age 17."
Higher income families, meanwhile, tend to spend even more than the national average, perhaps unsurprisingly, given they have additional resources available. In 2015 dollars, these families spend around $372,210 over a 17-year period, according to government estimates.
Nearly a third of spending for housing
Where do parents devote most of their earnings when it comes to their kids' healthy upbringing? Look no further than housing. At 29 percent, housing accounts for the largest percentage of parents' child-rearing costs, USDA reported.
Homeownership may be the American Dream, but it comes with a hefty price tag. For instance, this past December, the latest month in which data is available, the typical house cost buyers a median total of $232,200, according to the National Association of Realtors. Up 4 percent on a from 12 months prior, it marked the 58th straight month in which asking prices rose on a year-over-year basis.
Second to housing in terms of share of spending is food at 18 percent, according to USDA's analysis, followed by education (16 percent), transportation (15 percent) and health care (9 percent). The least expensive purchase item for parents is clothing, accounting for 6 percent of annual child-rearing expenses.
"Understanding the costs of raising children and planning for anticipated and unexpected life events is an important part of securing financial health," said Louisa Quittman, director for the Treasury Department's Office of Financial Security.
She added that the Treasury Department has a website, MyMoney.gov, that can help parents plan accordingly.
Included in this planning is life insurance. Many Americans today wonder, "How much is life insurance?" Premiums vary, of course, but according to survey data from LIMRA, Americans typically overestimate what it will cost them.
Premium financing helps pay for premiums
That being said, when you own a business, you may have money tied up in areas that are crucial to your company's day-to-day operations. So if you know you need more life insurance for your family but your discretionary income is limited, it can create a bit of a dilemma.
Fortunately, premium financing may serve as an effective solution. For more information on premium financing and how you can make it a key contributor to your children's financial wellness when the unexpected happens, speak with a GFD Financial Services manager.