There is a bigger difference between Childfree and Childless than just a definition. When it comes to financial planning your plan may be similar, but the differences matter. The US Census defines Childless as not having biological children (12.8% of Childless older adults have adopted or stepchildren), while Childfree is defined as not having and not planning on having any children. Approximately 15.2% of older adults (55 and older) in the US are Childless while 11% are Childfree (more here).
The choice to have kids or not is more important than if kids are biological, adopted, or stepchildren. We each have our own reasons for having kids or not, but that choice changes our goals, supports, and life events. Those who have kids have a different foundation and end goals of their financial plan.
What does this mean to you? If you are childless, with adopted or stepchildren, your financial plan will be very similar to most parents. If you are childless and undetermined about having kids, then your plan needs flexibility and to take both having kids and not into consideration. If you are childfree, your plan needs to reflect that (more here).
Let me give you a few examples and the differences between parents, childless, and childfree.
Life Insurance – Life insurance is designed to take care of your loved ones after you have passed. 32.1% of Childless individuals (over 55) were never married, and 40.3% live alone. If there is no one counting on your income, you probably don’t need life insurance. If you are married (or the like), the question is, could your spouse live without your income? If so, you probably don’t need life insurance. If you have kids or may have kids, you may need to provide for them long after you are gone and should look at life insurance (look at Term Life insurance).
Estate Planning – Who gets your money when you pass changes your entire investing and retirement plan (in particular tax planning). People with kids often plan on leaving their investments to their kids and therefore avoiding paying taxes on the gains (up to the Estate Tax Limit of $12.06 million in 2022). When you are Childfree, you don’t have a core belief that your kids will get the estate. Whatever legacy you want to leave will change your investing and tax strategy. If you want to travel the world, you may be spending investments that those with kids otherwise would have given away, meaning you need access to it and a tax strategy. If on the other hand, you want to create the biggest, coolest animal sanctuary (a non-profit) there are a different set of options and planning.
Long Term Care – The classic BINGO question for the Childfree is “Who is going to take care of you when you get older”. The truth is, for both those with kids and without, your financial plan (and long-term care insurance or the like) is what is going to take care of you as you get older. According to the US Census, in older adults, neither childless nor parents received much financial support as they got older (only 2.5% and 1.5% respectively got financial support from family). The big difference is who is going to make decisions for you. Healthcare (and most state financial regulations) is designed to look for the next of kin to make decisions. If you are Childfree, you may want to appoint a professional healthcare proxy and power of attorney (for finances) to make decisions for you when you can’t.
This is just the tip of the iceberg of how Childless and Childfree planning are different. Bottom line is that if you never plan on having children, the answer is to build a Childfree Financial Plan. If you ever change your mind, you need to adjust your plan because the foundation has changed. If you want help looking at your options and talking through a plan, I offer a no-cost 60-minute meeting. You can schedule your meeting with me, Dr. Jay Zigmont, CFP® at https://calendly.com/coachdrjay/intro.