Money Decisions for Midlife Parents With Young Kids

It hit me at my 30th high school reunion in 2011 that my life had followed a different trajectory than that of most of my peers. While they talked of sending their babies off to college and bragged about grandchildren, I was prepping for my son’s first day of kindergarten. The costs of child-rearing were largely behind my old pals, but I was just getting started.

My husband, Kirk, and I joined the parenting ranks six years ago, at 44, when we adopted Leo as a toddler from a Russian orphanage. Now Leo is 7 and we’re all living in suburban Minneapolis. Barring unforeseen circumstances involving the economy, the U.S. government and our son’s academic achievements, Kirk and I will pay off the mortgage, qualify for Social Security at age 62 and send Leo to college all in the same year: 2024.

No Time to Waste

Right now, though, as midlife parents of a young child, my husband and I find ourselves facing major financial decisions simultaneously, from paying for college to saving for retirement to protecting our family with insurance – and all with a greater sense of urgency than other parents in their 20s and 30s with a son Leo’s age.

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It’s not all bad, though.

“The biggest plus for midlife parents is that time is finite,” said Susan Beacham, the Chicago-area mother of two girls and chief executive of Money Savvy Generation, an educational program and website that teaches financial education to schools and families. “We don’t have the perceived luxury of time to waste.”

Midlife parents have a different perspective on financial wants and needs than young ones, Beacham said, and their list of goals may be different.

“We have made our money mistakes and learned from them,” she said. “We can’t help but look at life differently because we have lived it.”

Beacham has firsthand knowledge. In 2005, when her girls were in fifth and seventh grade, she received a diagnosis of cancer, just a few weeks after buying a life insurance policy. Now cancer-free, Beacham recognizes how the experience affected her entire family and is grateful to have purchased the insurance when she did.

Prepare for the Unexpected

As Beacham’s story suggests, protecting your family with proper disability, health and life insurance is especially important for older parents with tweens and teens. The risk of injury, illness and death is higher for older moms and dads than for younger ones.

“Parents in their 50s and 60s have a much different Plan B than younger parents,” Beacham said.

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Gwenn Branstad, a certified financial planner in Minneapolis, agrees. “Based on our experience caring for aging parents, we recognize the impact our own aging could have on our children in the future,” said Branstad, a financial representative with Thrivent Financial for Lutherans.

As insurance costs go, a long-term care policy might seem particularly pricey and a lower expense on your priority list than saving for retirement and college. But if you wait, will your health hold up allowing you to remain insurable? Not necessarily.

Keep in mind, too, that when you get to the age when you might need the care, your kids will be in their 30s or 40s, perhaps with their own families to support.

Branstad recommends that midlife parents purchase basic long-term care policies sooner rather than later, so they can establish insurability. They can expand coverage later when their financial resources allow.

Dual Saving Priorities

With college costs continuing to escalate, Kirk and I expect that we may need to help Leo pay for college more than our parents helped us – and perhaps more than our peers whose kids are already in college.

Branstad cautions older parents against sacrificing their eventual retirement by focusing too much on saving for college, though.

(MORE: Sandwich Generation: How to Save for College)

“Until the first tuition bills are due, save as much as possible in retirement accounts,” she said. “The downstream benefit of this strategy is that your savings will grow faster and may allow you to back off saving for retirement during the college years.”

As a result, if your kids will be applying for financial aid, you’ll then be in a better position to come up with what the federal government calls the “expected family contribution portion” of tuition.

Beacham puts it succinctly: “It should be clear to midlife parents that a kid can get a loan for college, but you can’t get a loan for retirement.”

If you have the cash, you can take advantage of what are called the “catch up” provisions for retirement savings, allowing people 50 or older to put away more than younger people.

For 2013, the maximum contribution for a 401(k) or similar employer-sponsored savings plan is normally $17,500, but someone 50 or older can invest up to $23,000. Similarly, the $5,500 maximum contribution for an IRA this year is $6,500 for people 50 and older.

Estate Planning Is Essential

One more thing: When you’re raising young children in midlife, some paperwork should find its way to the top of your to-do list — in other words, basic estate planning.

Make sure you have an up-to-date will that legally declares your wishes for the care of your children should you die while they are under 18. Health care directives and power of attorney documents are also vital.

Personally, I’m looking forward to my 40th reunion. Leo will be a teenager in high school by then. Maybe I’ll chat up some old friends about converting his bedroom into an exercise room, just like my classmates did a decade earlier.

Suzanne Olson writes for Next Avenue and other media outlets on a range of financial topics, most of which she has been able to share via online money tips. Her book, I Hate Financial Planning: A Guide for People Who Love Money but Hate Planning, was published by McGraw-Hill.