Dave Says: Let's look at life insurance policies and allowance

Dear Dave,

My husband and I are debt-free. We are in our mid-20s, we also have a full emergency fund and we each have 401(k) plans with our employers. Currently, we are looking at life insurance. We do not plan on having children, so what length term policies would you suggest for a couple in our situation?

— Ashlie

Dear Ashlie,

I'd recommend you both find good 15- or 20-year, level term policies, with coverage amounts of 10 to 12 times your individual incomes. If you two have a change of heart, and decide you want kids later, I'd recommend converting those to 30-year term policies, still at 10 to 12 times your incomes. Why? You'd want the insurance to be there to protect everyone in the family until the kids are out on their own.

Between now and then, and in the years after, your continued saving and wealth building will lead you to a place where you guys are self-insured. And that's a great place to be!

— Dave

Dear Dave,

What is the right age to begin giving children an allowance?

— Ben

Dear Ben,

In my mind, there's never a right time to give kids an allowance. Instead, work out a plan to pay them commissions, and assign them age-appropriate weekly chores.

This can be done with very simple tasks starting at an early age. When the work gets done, they get paid. If they don't do the work, guess what? They don't get paid. This helps teach them a healthy work ethic, and it introduces them to the idea that work creates money.

Simply giving kids money is a sure way to plant the seeds of entitlement in a young mind. You don't want your kids growing up with the idea they deserve money simply because they're alive. Of course, there are things kids should be expected to do without pay, too. When you're part of a family, everyone needs to understand they have a responsibility to pitch in and help out sometimes!

— Dave