When we are looking out for our children, we think of the usual things like keeping them away from electrical outlets, away from dangerous cleaning chemicals, blocking off stairs, teaching them from running out into the road. Then as they get older we are still thinking about their protection, brushing their teeth, not talking to strangers, eating their vegetables. We're always trying to teach them to protect themselves regardless of how old they are. But one area we don't usually think to tell them about is financial responsibility, and that includes insurance.
Numerous studies have shown that kids' money habits are formed before they get to high school and that their parents are often their most influential teachers. In most cases, school curriculums do not cover the topic of insurance. Kids are very aware of life situations. They see what happens with catastrophic events, such as damage from hurricanes, a house fire, a car accident, someone getting sick from the virus or even when a breadwinner loses their job.
They need to understand that there are ways to save and prepare for these kinds of events, particularly through one major strategy known as insurance. Start by telling your child that on a regular basis (monthly, semiannually or yearly) you pay a certain amount of money for protection that includes auto insurance, life insurance, health insurance and homeowners insurance. Then explain that in return, the insurance company will pay a certain amount of money to cover expenses to help you through a catastrophic event. You may want to show your child the policies you have and discuss the reasons you selected the insurance companies and plans. And explain that insurance is a financial responsibility you have to protect them, your family and your possessions.
Once your child understands the basics of insurance and the rationale behind it, you can start explaining the different types of insurance and how they can protect you. You can talk about specific coverages such as boat owners insurance, income protection insurance, flood insurance, any area you think they should understand.
As your children get closer to leaving for college, you'll want to offer more detailed information about insurance that could affect them at school, such as auto, liability and renters insurance. Since all of these situations are different, it might be a good idea to set up a meeting with your insurance agent along with your child. The personal lines agents at J.P. Perry Insurance are happy to meet with you and them to explain the liabilities and risk involved with a child at college.
Insurance is a financial strategy that every child needs to know about and use throughout their lives.