3 Common Money Tips You Should Not Follow If You’re Childfree
Written by
Cara Danielle Brown
Edited by
Amber Barkley
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According to a recent Pew Research Study, 47% of adults under 50 in the United States are unlikely to have children — so it’s startling that, per Jay Zigmont, CFP and founder/creator of Childfree Wealth, “most financial planning assumes you do have kids or will have kids.”
So how should financial planning for childfree individuals differ? Well, childfree folks have more options and fewer requirements, making those traditional “You Should Have X Amount of Money by Age 40” calculators not at all applicable.
Here are three money tips childfree individuals may not need to follow at all.
Homeownership Is the Key To Building Wealth
Building equity in a home can be the right option for some — especially those who intend to stay put for at least five years. But, for others, homeownership is a money dumpster pit.
Homeownership is typically viewed as the cornerstone of the American Dream — along with two kids, a dog and a picket fence. But, for the childfree, that dream can look different. While parents are encouraged to own a home in order to put down roots near schools and family-friendly communities, childfree individuals have the option of asking whether a large down payment and the cost of upkeep makes sense for them, especially if they’re not tethered to any specific location.
“My wife got a job in another state, and we just packed up the car and went,” said Zigmont, childfree himself.
The more nomadic may never actually recoup on their investment, so it doesn’t make sense to tie up capital in home ownership. Childfree renters, on the other hand, can save money in unforeseen ways, especially those in high-cost cities.
“Rent is the most you pay each month; mortgage is the least you pay each month,” Zigmont explained.
While homeowners are financially on the hook for roof repairs, pipe breaks and termite damage, renters can just call the landlord… or move.
And, finally, since building generational wealth will not exactly be a priority, there’s no need to maintain an expensive property long-term so your children can inherit it.
Purchase Life Insurance
Life insurance is typically an important part of financial planning. The purpose of life insurance, however, is to provide money to your beneficiaries when you pass. Zigmont explained that if you don’t have kids, you may be able to skip life insurance and, instead, invest the money you would have spent into policies you definitely need as a childfree individual — like disability insurance and long-term care insurance.
“Sometimes, financial advisors sell life insurance, and that’s a problem,” he said, referencing financial kickbacks as a reason for advisors recommending life insurance regardless of clients’ individual circumstances.
Occasionally, however, childfree individuals with financial obligations too large for their spouses to cover post mortem opt for life insurance policies. As do childfree adults who would want their elderly parents to be taken care of. It’s an individual choice. But, on the whole, most childfree individuals can probably go without it.
Plan for a ‘Standard’ Retirement
Planning for retirement typically consists of maximizing retirement contributions, preparing for reduced earnings and diversifying investment portfolios to minimize risk. Zigmont reiterated, however, that the American Dream for childfree individuals does not necessarily look the same as for those with children. Many are not even planning on a standard retirement.
“Rather than following FIRE (Financial Independence, Retire Early), they follow FILE (Financial Independence, Live Early). If FIRE is an on/off switch for work, FILE is a dimmer switch. In FILE, it is about doing something you enjoy for a living, across your life, and scaling back where appropriate rather than a standard retirement,” he explained.
While childfree individuals can’t all be grouped together and some do desire a hard out, many have opted not to have children because their passions lie elsewhere — like their professions, for example. This can make full retirement less appealing.
Therefore, maximizing retirement contributions throughout their lifetime may not be as important.
Instead, that money could be allocated toward “personal goals like travel, philanthropy or legacy planning,” said personal finance expert at Couponsnake Aaron Razon, who noted many childfree individuals may not need to plan for reduced expenses during traditional retirement years, since their lifestyle will not undergo as major a shift.
And, as a result of their continued earnings, they may be able to take on slightly riskier investment portfolios than the average retiree.
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