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Ask Dave

Helping The Kids

There are a bunch of things that Molly can do with her children's life insurance money, and she needs to know which is best.

QUESTION: Molly has 3 kids, and their father died 2 years ago. She was divorced from him, but he didn’t list a beneficiary for the $160,000 life insurance policy he had. What should she do with the money in the best interest of the kids; should she leave it with the insurance company? Absolutely not, explains Dave.

ANSWER: That’s very weird. I’ve never seen a life insurance policy without a beneficiary, unless it’s through work. That breaks down to about $53,000 per child. Don’t ever leave it with the stupid life insurance companies, because they’ll find a reason to keep it. You can put the money in some money markets and it will be safe, but you won’t make a lot off of that. You could invest money in some good growth and income mutual funds. These kids don’t have a lot of time before they go to college.

If they were my kids, I would take about $3,000 per child out and do something nice with each of the kids, like help them with their car purchase or something. You are allowed to do that as long as it goes to their good. Then put about $30,000 to $40,000 in money markets and the remaining $10,000 to $20,000 in mutual funds.