Is 5 years of wages a good measurement for how much life insurance to purchase?
I've always been told to have five years of wages covered by life insurance. I am in my early thirties and I have two young children.
Answers | 2
Want more years of financial stability for them? Buy a bigger bucket. Can't afford a bigger bucket? Buy a smaller one.
By the way, the number that you come up with may in fact be equal to five years wages, but I simply see that the wages approach deals with what you might make, while my approach deals with what you actually spent last month (which is a hard number not a soft number), and it relates primarily to your needs rather than to what the paycheck is.
YES if: You are married and have a working spouse (roughly equal to what you make) AND you have no desire to help with (or pay for) your children's college.
NO if: You are a single parent (or have a non-working spouse), and you want to pay for your children's college.
Also. NO if: You have multiple real estate properties (either business or commercial). Or you are planning to add additional properties in the future.
Feel free to contact me with further questions.