When you think of the messaging and imagery in financial media stories and advertising, do you ever get the impression that financial planning is mainly for a couple with three kids, a new SUV and a dog? Yet the latest census tells us the so-called traditional family is no longer Canada’s most common household – that title now belongs to the one-person household.
One hidden demographic is couples without children. Yet, among Canadian households with couples, most provinces have more households of couples without children than couples with children. Nationally, it’s almost an even split between couple households – 51% with children, 49% without children.1
Here’s a look at some of the financial planning issues and opportunities unique to couples without children.
The savings advantage
Raising children is costly. Without the financial obligation of saving for education, braces, summer camp and all the other costs of living, couples without children are presented with a savings opportunity.
If you’re part of a couple without children and you save and invest wisely, you can capitalize on this opportunity and reach your nest egg objective sooner than if you had children. This savings boost gives you flexibility because now you have the choice of taking an earlier retirement.
Getting ahead of the game means that a couple without children will typically begin the retirement discussion sooner. Do you want to retire earlier? Or retire at a more traditional age and enjoy an even more comfortable retirement? When you’re giving this decision some thought, please consult your advisor regarding the retirement income your investments will provide. If you retire at, say, age 55, you’ll want to plan on income to support your desired lifestyle for about 30 to 40 years.
No children doesn’t mean no insurance
Disability insurance and critical illness insurance protect your financial security regardless of whether you have children. Long-term care insurance or self-insuring for long-term care is especially important because you don’t have children to provide or supervise care if needed.
The question is whether you need life insurance, and the answer is possibly. At younger ages before you have accumulated enough wealth, your income may be needed to support your spouse’s lifestyle, in which case you have a life insurance need. You could also require life insurance for business needs if you have a co-owner, or for estate planning needs if life insurance is used to make a charitable gift or offset taxes payable by your estate.
Planning your estate
When you’re not leaving an inheritance to children, estate planning is easy to put on the back burner. The fact is, however, that because you don’t have children to name as beneficiaries of your estate, you likely need to give the beneficiary decision more consideration than usual. Some individuals without children choose siblings, nieces or nephews as their heirs. Others leave a legacy to a charity supporting a cause they believe in.
If an individual has children, naming a child as executor is a common choice. When you’re part of a couple without children, you may want to name your spouse, a sibling or close friend as executor. But do consider that administering an estate involves quite a bit of work that takes many months or even years, and that involvement can be strenuous at older ages. You may want to consider naming an interested niece or nephew, a professional or a trust company.
Leaving an inheritance isn’t an essential need for everyone without children, for a variety of reasons. For example, if your nieces and nephews are looked after financially, they don’t have a need for your savings. Or if you’re an only child, you don’t even have the choice of naming siblings, nieces or nephews. Instead of leaving an inheritance, another option for retirees without children is to freely spend their nest egg and enjoy life to the fullest. In this case, it’s prudent to establish a stream of guaranteed retirement income to ensure you don’t outlive your savings.
Canadian couples without children are a large demographic group, with many unique aspects to their financial life. Feel free to talk to your advisor whenever you have questions or need assistance with your financial plans.
1Statistics Canada, Census of Population, 2016