Does a stay at home mom need term life insurance?
The way to think about this is: what would happen to the family if stay-at-home Mom were to die. You obviously can't do anything about the loss, grief and trauma, but think about the financial implications. Assuming that Dad continues to work, and that the child is young, you are going to have to find someone to take care of him/her. If you have relatives willing to step in, that may be fine. but if not you will have to pay for daycare - an expense you don't now have. That's going to get less as the child goes to school, but not go away until he/she is old enough to look after themselves. Bringing up a child, as well as working a full time job, is pretty demanding. You may find that you don't have as much time for cleaning the house, cooking or other chores. Having a sum of money which can be used to hire help or pay for a few meals out can be very useful in these cases. Here is an article which places a value on the work done by a stay-at-home Mom. You might not need to pay for all of those services, but it gives you an idea of what the extra expenses might be.  Think about what extra money you might need to spend, and arrange for life insurance to cover it. Absolutely!  Just because a spouse doesn't have a taxable income, doesn't mean they aren't providing real, tangible benefit to the family economy with an important job. As tragic as it is to consider losing your spouse, are you truly in a position to replace everything they do you for you?  Knowing what they do for you and appreciating the effort your spouse gives is important, but don't sell short the dollar amount of what they provide.  Your life insurance policy should be to keep you whole. Without your spouse, you will need childcare.  You might need domestic services to the home.  What about a nanny or similar service?  Would $50K cover that until your child is an adult?  There are a number of added expenses in the short and long term that would occur if a spouse died.  How much for a funeral? Obviously you know the amount and term depends on the age of your kid.  But I think you should really try to account for the number of daily hours you spouse puts in, and try to attach a cost to those hours.  Then buy insurance for them just as you would for a wage earning.   For example, buy a policy that is 10x the annual cost for services it would take to compensate for your spouse.  Your tolerance for risk and cost can adjust it up and down from there. We asked the same question earlier this year as my wife is a SAHM with 2 young boys (5 and under). If something happened to her I'd have to quit work or change careers to stay home to raise them or something. We ended up getting a decent 20 year level TERM policy that will cover the care of both boys for many of their younger years. The cost is negligible but the piece of mind is priceless. Another source of insurance can be through the working spouses employment. Some companies do provide free or low cost coverage for spouses without a need for a physical exam. The risk is that it might not be available at the amount you want, and that if the main spouse switches companies it might not be available with the new employer. A plus is that if there is a cost it is only a one year commitment. Term insurance is the way to go. It is simple to purchase, and not complex to understand. Sizing is key. You may need to provide some level of coverage until the youngest child is in high school or college. Of course the youngest child might not have been born yet. The longer the term, the higher the cost to account for the inflation during the period of the insurance. If the term expires, but the need still exists, it is possible to get another policy but the cost of the new term policy will be higher because the insured is older. If there are special needs children involved the amount and length may need to be increased due to the increased costs and duration of need.   Don't forget to periodically review the insurance situation to make sure your need haven't changed so much a new level of insurance would be needed.
"Is all interest on a first time home deductible on taxes? What does   that even mean? If I pay $14,000 in taxes will My taxes be $14,000   less. Will my taxable income by that much less? If you use the standard deduction in the US (assuming United States), you will have 0 benefit from a mortgage.   If you itemize deductions, then your interest paid (not principal) and your property tax paid is deductible and reduces your income for tax purposes.  If your marginal tax rate is 25% and you pay $10000 in interest and property tax, then when you file your taxes, you'll owe (or get a refund) of $2500 (marginal tax rate * (amount of interest + property tax)). I have heard the term ""The equity on your home is like a bank"". What   does that mean? I suppose I could borrow using the equity in my home   as collateral? If you pay an extra $500 to your mortgage, then your equity in your house goes up by $500 as well.   When you pay down the principal by $500 on a car loan (depreciating asset) you end up with less than $500 in value in the car because the car's value is going down.   When you do the same in an appreciating asset, you still have that money available to you though you either need to sell or get a loan to use that money. Are there any other general benefits that would drive me from paying   $800 in rent, to owning a house? There are several other benefits. These are a few of the positives, but know that there are many negatives to home ownership and the cost of real estate transactions usually dictate that buying doesn't make sense until you want to stay put for 5-7 years.   A shorter duration than that usually are better served by renting.  The amount of maintenance on a house you own is almost always under estimated by new home owners." That's what I tell everyone. I make more without my degree than I did with. I also dropped out of high school and somehow made it to grad school and student loan hell. I'd have fared better with my initial plan to be a pot smoking stay at home mom. Now I'm making lots of money getting legal growers compliant. "Technically, this doesn't seem like a scam, but I don't think the system is beneficial.  They use a lot of half-truths to convince you that their product is right for you. Some of the arguments presented and my thoughts. Don't buy term and invest the rest because you can't predict how much you'll earn from the ""rest""   Also Don't invest in a 401k because you can't predict how much you'll earn They are correct that you won't know exactly how much you'll have due to stock market, but that doesn't mean the stock market is a bad place to put your money.  Investing in a 401k is risky because of the harsh 401k withdrawal rules  Yes, 401ks have withdrawal rules (can't typically start before 59.5, must start by 70.5) but those rules don't hamper my investing style in any way.    Most Term Life Insurance policies don't pay out  They are correct again, but their conclusions are wrong. Yes, most people don't die while you have a term insurance policy which is why Term life insurance is relatively cheap.   But they aren't arguing you don't need insurance, just that you need their insurance which is ""better"" You need the Guaranteed growth they offer  The chart used to illustrate their guaranteed growth includes non-guaranteed dividends.   They invest $10,000 per year for 36 years and end up with $1,000,000.   That's a 5% return!  I use 10% for my estimate of stock market performance, but let's say it's only 8%.   The same $10,000 per year results in over $2 Million dollars.  Using 10.5% (average return of the S&P 500 over it's lifetime) the result is a staggering $3.7 MILLION.   So if I'm looking at $3.7M vs. $1M, It costs me $2.7 Million dollars to give me the same coverage as my term life policy. That's one expensive Term Life Insurance policy. My personal favorite: Blindly following the advice of Wall Street and financial “gurus” such as Dave Ramsey and Suze Orman got you where you are. Are you happy with the state of your finances? Do you still believe their fairytale, “Buy Term (insurance) and Invest the Difference”?  Yes, I sure do believe that fairytale and I'm prospering quite well thank you. :) While I don't think this is a scam, it's outrageously expensive and not a good financial choice." Retirement calculation, in general, should be based on the amount of money needed per year/month and the expected life expectancy. Life expectancy, if calculated to 90 years (let's say) indicates that post retirement age (60 yrs.) your accumulated/invested money should generate adequate income to cover your expenses till 90 years. The problem in general is not how long you shall live but what would be your expected spending from retirement to end of life expectancy. The idea is at the minimum your investments should generate income that is inflation adjusted. One way to do this is to consider your monthly expense now i.e. the expense that is absolute minimum for carrying on (food, electricity, water, medicines, household consumables, car petrol, insurance, servicing, entertainment, newspaper etc.) this does not contain the amortizable liabilities (home loan, child's education, other debts). It is better to take this amount per family rather than per person and yearly rather than monthly (as we tend to miss a lot of yearly expenses). This amount that you need today will increase at a Compounded Annual Growth Rate (CAGR) of the average inflation. For example, if today you spend 100 per year in 7 years you will need to spend appx. 200 at 10% inflation. Now, your investments will not increase post your retirement, so your current investment needs to do two things (1) give you your yearly requirement (2) grow by a fixed amount so that next year it can give you CAGR adjusted returns. In general, this kind of investment grows by high net amounts initially and slowly the growth decrease. The above can be calculated by Net Present value (NPV) formulae (http://en.wikipedia.org/wiki/Net_present_value). The key is to remember that the money that is invested when you retire should be able to give you inflation adjusted returns to cover your yearly expenses. How much money you need depends on your life style/expectation and how much return is received depends on the instruments that you invest on. As for your question above on the difference between the age of you and your spouse, it better to go with the consolidated family requirement and get an idea of how much investment is necessary and provision the same as soon as possible from your as well as your spouse's income. Hope this helps.- thanks "Donbey since you mention your expenses are very low, I'm going to assume that social security will cover your expenses once you qualify for it.  Since you have no savings currently the first and most important job for this money is to make sure that you can live comfortably until social security kicks in.  Social security could start for you as early as 62 so you need to set aside at least two years worth of money plus another chunk as a safety measure. Also, if you don't have health insurance please look to get a plan through your local ACA exchange as not having health insurance is by far the most common way someone your age ends up bankrupt.  Insurance will eat up a good chunk of the money, but will be much cheaper after the first year if you continue to have no income. Now, if your expenses are low enough, you can look to use this money to delay when you start taking social security as long as possible as the longer you delay social security the more money you get.  The AARP has a calculator where you can see how much more per year you will get from social security if you delay taking it as long as you can.  This is a great way to insure you live as comfortably as possible even if you live to 120.  Assuming you are reasonably healthy, this is a very secure and very meaningful way to ""invest"" this windfall. Once you have set aside the money for your expenses, emergencies, health care and delaying social security in a combination of checking and high-yielding savings accounts, yhen it can be in your interest to invest any remaining amount.  Common, solid, low-risk investments for a 10+ year time frame would be either: While Glen is correct that it is possible for even the best bond fund to lose money it is rather unlikely that you will end up losing money over a period of 10 years.  The nice thing about the bond fund is that most funds (find the right one) don't charge a fee if you need to need to take your money out early.  CDs guarantee that you won't lose your money, but if you have to take the money out in an emergency the fees will eat up way more money than a bond fund would normally lose.  Also, a good bond fund will generally yield a bit more than a CD. Investing in stock is generally much too risky for this sort of time frame without large savings to back it up." "Government registering of financial institutions usually is to make the government safe (eg FINTRAC is watching for money laundering and financing terrorism) rather than to make it's customers safe.  Most governments have many levels of registrations and regulatory bodies. The most stringent requirements are usually obligatory only for banks, and they indeed often include precautions for insuring customer's deposits. Even this insurances have limits, eg in most EU countries the state guarantees deposits up to 100kEUR. If you deposit more and the bank flops - you lose everything over the limit. Companies like forex or currency exchanges usually make their best effort to avoid as many regulations as possible, just because it's costly. If a given company does have guarantee funds and/or customer insurance, it should be advertised and explained on their website. However the whole issue of trust is misguiding. You don't have to ""trust"" in your grocery store to shop there. There is no government guarantee that the vegetables sold will be tasty. If you buy and the product fells short of your expectations, you call it a loss and start shopping elsewhere. Financial services are no different than any other product. I recommend to your aunt to start small and see how it works. If a service turns out well, she can increase the amount sent through exchange and decrease amount sent through bank. But still, it's always prudent to send eg $1000 every week instead of $4000 once a month. It's more time consuming and cumbersome than having your bank do it - but it's the safety and convenience you're paying premium for." I've had many home loans, and all have been sold to a big bank.  They have certain rules about how much insurance you need to have, but I've never had one buy insurance on my behalf - they always send letters telling me I need to increase the insurance.  They do say that if I don't get enough insurance, they will do it for me, but this has never been necessary. Investing is good. Insurance when you have something to insure is good. But using a single account for investing and insurance is not so good. You need to determine how much you need to invest for retirement. You also need to determine if you need life insurance. As a single person you might determine that you don't have a great need for life insurance. If you get married, or have kids, your needs may grow. So you will want to revisit your decisions every so often. You may need to save for retirement, or setup a college fund. You may need to protect your spouse or children in case you die. It doesn't seem to make sense to invest and insure in a plan with complicated rules, fees and schedules. What happens if in 3 years you need to blow it up and start over? What surrender charges will they hit you with?