Umbrella policy?

Dear Dave,

I follow you on Twitter, and I was wondering if you recommend buying an umbrella policy. If so, how much?

Dean

Dear Dean,

If you’ve started to win with money and build some wealth, an umbrella policy is some of the cheapest insurance you can buy. It’s just about the biggest bang for your buck.

Here’s an example. In most states, you can get an extra $1 million in liability coverage added to your car insurance and homeowners insurance as an umbrella policy for as little as $200 a year.

There’s no problem if you don’t have any money. But if you’ve got some cash, and you bump into somebody, it’s a really good thing to have that extra umbrella insurance policy in liability situations!

—Dave

Drop the arrogance!

Dear Dave,

My son is in his thirties and has been married for seven years to a girl from a wealthy family. Her parents provided them with a lot of financial support over the years, but now they’re getting divorced and he has come to us for the money to make this happen. On top of all this, when we ask him why he doesn’t have the money he tells us it’s none of our business. We don’t like his attitude, but we’re not sure what to do.

Dee

Dear Dee,

This is a grown man we’re talking about, and if he’s going to take on the lifestyle and actions of a grown-up he needs to act like one and take care of his responsibilities. I understand he’s your son, and he’s hurting right now. Still, it takes a ton of arrogance to beg money from someone and tell them the reason they don’t have it is not their business.

If he seriously wants to get into some financial counseling and start becoming accountable for his money — to himself and to you — then you might consider helping him out financially. But at this point, you’re giving a drunk a drink if you just hand him money because he wants it.

Anyone can make a mistake, Dee. But it’s not your job to fund his irresponsible behavior or his arrogance!

—Dave

Don’t drop the coverage!

Dear Dave,

My husband and I are debt-free except for our home, and we have about $100,000 in savings. Recently, one of our daughters was diagnosed with Crohn’s disease. We’re worried about this, and the fact that she and her sister are both teenage drivers. Do you think we should drop full coverage, and have just liability, since we’ll probably have lots of medical bills over the next few years?

Kim

Dear Kim,

I’m really sorry to hear about your daughter’s medical situation. But speaking from a financial perspective, you guys are in pretty good shape to handle things. You have a pile of cash in savings, I assume you have some kind of medical insurance and you’re debt-free.

Under the circumstances, I get where you’re coming from and the idea of having even more money available to put toward medical issues. In your case, however, there’s no way I’m going to have only liability coverage when there are two teenage drivers in the house. There’s a reason insurance rates are so high for teens. It’s called statistical analysis of their driving ability. They’re not good drivers!

I haven’t had a wreck in over 20 years, but I’ve had some kids who did. No, I wouldn’t drop the coverage. Hopefully, your daughter will be okay. But I wouldn’t take a chance on having to write a check for another car on top of medical expenses.

—Dave

Kids and family

Dear Dave,

I receive child support payments for my two kids from my ex-husband. My new husband and I are using your plan to improve out finances, but we can’t agree on how to handle these payments. I’ve been keeping it in a separate account. He thinks we should combine it with the rest of our house money and budget. What do you think is best?

Leslie

Dear Leslie,

I don’t blame you for being protective of the child support money. I’m sure the feelings you have stem from a desire to protect your kids. But if your new husband is a good guy, one who’s kind, loving and willing to treat these kids like they’re his very own, then my opinion is the money should go into the pile where it helps take care of the kids and family.

Your job as a parent is to be a blessing to your kids. That means feeding them, clothing them, educating them and giving them a good home. As long as these things are happening, and we’re talking about a functional, loving marriage, then all the money should be combined and be part of the family. Put it right at the top of your monthly budget, along with all your other household income.

Money is important, and I’d expect you to make sure your kids and your cash are treated properly. But I’m talking about two responsible people being involved in a happy marriage, too. A healthy, loving relationship is one of the best gifts any couple can give to their kids.

—Dave