The 5 smartest steps I’ve taken with my money to protect my kids

• I grew up without a lot of financial stability, so I wanted to make sure my kids were financially protected.
• In order to do that, I had to educate myself about how to make sound financial decisions.
• Buying life insurance, budgeting, and saving for my children protects them from financial stress.
• Read more personal finance coverage »

When I was a child, my family didn’t have much financial security. Grocery budgets were determined by whether my mom had a busy or slow night at her waitressing job. Sometimes, the utilities were turned off. There wasn’t much in the way of financial education, because my parents just didn’t know much about smart money management.

Now, I have two kids of my own, and I want things to be different for them. Although they’re only 1 and 5 years old, I’ve already begun focusing on making sure they benefit from financial stability. I want them to be financially literate so they can make their own informed decisions in the future. Really, I think it’s one of the most important responsibilities I have as a parent.

Here are the five smartest financial steps I’ve taken to protect my kids:

1. Buying life insurance

When I was pregnant with my second daughter, my husband became a stay-at-home dad, which meant I was the only income-earner in the household. All of a sudden, I knew I needed life insurance. If anything should happen to me I wanted my children to be able to continue in their routines, which meant having their father at home, not scrambling to find work and pay the bills.

I chose a $250,000, 20-year term life insurance plan. At $29 a month, the payments are affordable, and the peace of mind knowing that my husband will be able to pay off the mortgage and stay home for a year if I die is priceless.

2. Teaching myself financial literacy

I want my daughters to understand personal finance in a way I didn’t as a young adult. If I had known about compounding interest, I never would have taken on massive student loan debt. If I had better understood the concept of debt-to-income ratio, I would have realized just how a large car payment or credit card debt can hinder your borrowing ability for more valuable purchases, like a home.

I don’t want my daughters to make the mistakes I did, so I plan to teach them important financial concepts. In order to do that, I’ve had to learn myself. I listen to personal finance podcasts and read online, educating myself so that I can pass it onto the next generation.

3. Learning to budget

As a business owner and freelancer, my income can be unpredictable. Having a budget is important for managing the peaks and valleys of my freelance income. Using a budgeting software that lets me plan ahead ensures I always have money for essentials (like groceries and utilities) and fun stuff (like swim lessons or an ice cream), even if one of my clients pays late.

The budget also gives me a framework for talking to my older daughter, who is 5, about money. When she asks for a new toy or expensive outing, I explain that we have a set amount of money to spend. We can choose to spend it on a toy or movie excursion, but that will mean we have to compromise elsewhere, like getting pizza that week. I’m teaching her to live within her means, which will hopefully protect her from overspending in the future.

4. Building my business

In order to provide financial security, you need income. When we first started a family we assumed my husband would be the main breadwinner, while my freelance income supplemented his salary. However, unexpected layoffs in my husband’s sector shook us and ultimately led to a role reversal: Now, he stays home, while I provide our income from my writing business.

As a business owner, I have multiple clients, and can never be suddenly laid off. Last year, my three biggest clients all stopped publishing. That was jarring, but I was able to quickly find new clients to protect our family from any financial uncertainty — something I couldn’t do if I were laid off from a traditional job. Plus, being self-employed means I can more easily time off for a school event or when one of my girls is home sick.

5. Saving for them

I want my daughters to be financially responsible, but also have the means to participate in activities that are important to them, whether that’s college or travel. That’s why each week I deposit $5 per child into a high-interest savings account. On birthdays and holidays, I gently suggest that family members do the same.

I’m not sure what they’ll do with the money, but I’m sure that as teenagers and beyond they’ll be happy that I spent $5 a week — the price of a cup of coffee — to invest in their future.

Protecting my kids financially has been a combination of educating myself and teaching them. While it’s still a work in progress, I’m happy to know that I’m talking to them about money and helping break a cycle of financial instability in my family.