February 2023

Please get in touch if you’d like assistance with your personal financial situation.

Raising resilient kids

We all want the very best for our kids and as much as we would like to shield them from the difficult aspects of life, sadly we can’t keep them from facing challenges along the way – both big and small.

The term ‘helicopter’ parenting has been bandied around a bit in recent years and refers to parents hovering over their children, with this well-meaning hyper vigilance aimed to keep them out of harm’s way. The problem with this style of parenting is that it can lead to children being so shielded from life’s mishaps that they don’t develop coping mechanisms.

It’s important for kids to learn how to cope when things don’t go well and deal with the big emotions that accompany life’s problems. After all, life only tends to get more challenging as we move from childhood into adulthood, and with the ability to bounce back more important than ever, by actively helping your kids develop resilience, you’ll be setting them up with important skills for life. 

What is resilience?

Although the term ‘resilience’ is talked about a lot, it’s not always well understood. Resilience is not about putting on a brave face in an unfortunate situation or developing such a thick skin that we learn not to care about what happens to us. Resilience is the ability to acknowledge a challenging situation or negative event, employ coping strategies, and rebound to feel okay again. That does not mean that you don’t react or feel strong emotions, just that you are able to recover and continue on with your life.

This can be a lot easier said than done for us grown-ups with all our life experiences and coping skills that we can draw upon, but it can be particularly challenging for little ones, teens and even young adults.

How do we help our kids foster resilience?

The good news is that resilience is a skill that can be learned and built upon and when we help our kids, we as grown-ups can become more resilient too!

Each day, our kids are internalising messages about the world and their place in it and that inevitably includes exposure to stressors. However, that’s not all bad. Gradual exposure to stress, at manageable levels, actually helps children become more resilient. Their brains are encoding each experience, whether it’s minor like handing in homework late or more significant like being bullied.

Each experience they have creates new neural pathways to help them in future situations and assist them to develop their own coping mechanisms they can call upon in future.

A helping hand

There is one key thing that can help build resilience and that’s the role of supportive adults in children’s lives. To help kids navigate problems and bounce back from setbacks it helps to consider the following framework.

The “Three C’s”:

Connection: Children who feel a sense of connection with others are more equipped to handle problems. We connect with our kids when we spend time with them – giving them our full and present attention, listening to their hopes and fears and feeling their joy, and their sadness.

Consistency: Children need a foundation of consistency to be in the best possible place to cope with change. This can take many forms and could include consistency of routine, location or relationships. Establishing, and committing to threads of consistency in your child’s life anchors them as other pieces shift and move and provides a sense of stability in an uncertain world.

Comfort: A big dose of comfort when needed can help a child to be more courageous. Knowing that someone has their back and is there to comfort them when they fall can empower a child to take risks.

We can’t always wrap our children in cotton wool and prevent them from experiencing unpleasant situations – but we can do our best to equip them to deal with difficulties and be there to help when they need a guiding hand.

Stepped vs level premiums: which is best?

These days, most people hold some form of life insurance in their super account. While this is a welcome safety net, the level of cover held this way is often inadequate.

A Rice Warner study back in 2020 found that life cover within superannuation only met about 65-70 per cent of actual need.ⁱ

With the impact of Covid since that time, that figure is growing.ⁱⁱ

Holding the appropriate level of life insurance, whether inside or outside super, and reviewing it regularly as your circumstances change has never been more important. After all, how would your family cope if the unexpected happened? How would the mortgage be paid? What about the school fees?

While life insurance should be considered a non-negotiable part of your financial plan, there is flexibility and potential cost savings in the way you pay for it.

Stepped vs level premiums

The regular and ongoing payments you make for life insurance cover are known as premiums. 

You can choose either a stepped premium, or a level premium, or a combination of the two.

A stepped premium is where the amount you pay each year increases while a level premium generally stays the same each year.

While stepped premiums are always cheaper at the outset, over time the total cost of the stepped premium will outstrip that of the level premium. Ironically, the time when you consider cancelling the policy because it is becoming too expensive is likely to be just when you need life insurance cover the most. That is, when the demands on your income from your mortgage, childcare and private school fees are at their highest and the loss of your income would hurt the most.

Level premiums meanwhile start at a higher level but are less likely to change over time. That does not mean they won’t increase but this would only be in circumstances where the policy is indexed to inflation or if you decide to increase your cover.

The earlier, the better 

The younger you are when you take out a life insurance policy, the lower the premiums. This is the case whether you opt for stepped or level payments.

Say you are a male non-smoker seeking $1 million of life insurance cover. When comparing stepped and level premiums, it is estimated that if you are aged 30 when you start the policy, a level premium is about 60 per cent more expensive than a stepped policy at the outset. This jumps to 120 per cent more if you are aged 40 when starting the policy and 170 per cent higher if you are 50.ⁱⁱⁱ

But at some stage there will be a breakeven point where you start to make substantial savings with a level premium. This is particularly the case if you hold on to the policy till aged 65.

If you take out a policy at aged 30, then you will break even after 23 years. If you hold on to the policy for another 12 years until you are 65 then your savings over that 35-year period would be $58,700. This drops to a $46,000 saving if you take the policy out age 40 and a much smaller $10,000 if you wait until you are 50. Nevertheless $10,000 is a decent sum of money to save.^iv

It’s a personal decision

There are many reasons why you might choose a level premium, not least because it allows you to have certainty when it comes to budgeting.

But for many, the lure of cheaper premiums at the beginning can steer you to favour stepped premiums. Also, if you do not plan on holding life insurance for an extended period, but perhaps just until your children become independent or the mortgage is paid, then stepped premiums might work out best. 

Some insurers can offer you a combination of stepped and level premiums which might help with your cash flow.

If you would like to know more, or would like to discuss your life insurance needs, give us a call.

i https://www.insurancenews.com.au/life-insurance/super-reforms-reveal-scale-of-underinsurance