Credit card, stocks, or life ins.?

[scend]

I need advice on my own small windfall; I'm getting a nice tax refund since I bought a home and had a baby last year. I'm a single mom. My bank just went public and I can buy $500 of stock in it and put it in my child's name. It's a time limited thing, so I need to decide in the next few weeks. Is it better to buy the stock, or use the $500 to pay off more of my credit card balances? Or should I buy some nice term life insurance?

[creditcardfree]

Term life insurance is a good idea since you are now responsible for a child. Do you have the ability to pay for this out of regular income? If so, pay for the term that way and put this new windfall towards your credit card balances. Do you already have a emergency fund? If not, the emergency fund comes first.

I would completely overlook buying stock in one individual company until you have knocked out your credit card debt.

[scend]

Hmm, re emergency fund. I do have about $10000 available on credit cards (which I do NOT want to use!). But shouldn't I use available funds to pay off the credit card balances, which are at about 11%, instead of putting some aside for an emergency fund?

I'm leaning toward not buying the stock; it does seem better to continue getting rid of those debts; I've got about $5K left to pay off (down from $30K 5 years ago!)

I have another question though; my job has group life ins. for me. What is the difference between that and term? I do understand what term is, it's the group life ins. I don't understand.

[creditcardfree]

If you feel comfortable using your cc's as an emergency fund that is fine. Personally, if I wanted to get rid of debt, it is nice to have a small amount of cash, say $1000, to use without having to add more to the debt you are already trying to pay off.

Group life insurance, just means that you are getting a group rate. Do you know how much coverage you have? Is it enough to cover expenses for your child should you die? Many people suggest 10x your income. You can keep your group life and still add on a seperate term policy.

Good job paying off $25K!! That is awesome! Keep up the good work.

[jIM_Ohio]

Originally Posted by scend

Hmm, re emergency fund. I do have about $10000 available on credit cards (which I do NOT want to use!). But shouldn't I use available funds to pay off the credit card balances, which are at about 11%, instead of putting some aside for an emergency fund?

I'm leaning toward not buying the stock; it does seem better to continue getting rid of those debts; I've got about $5K left to pay off (down from $30K 5 years ago!)

I have another question though; my job has group life ins. for me. What is the difference between that and term? I do understand what term is, it's the group life ins. I don't understand.

I'd pay down the debt before setting aside cash or buying stock.

group insurance is a level payment plan your company set up. If you are "old" it benefits you, if you are young, the insurance might becheaper on your own. The insurance is probably priced based on avg age of employees.
I believe I have this right...

[scend]

So with the group life ins., if I were to die young, my child would get a payout? Is it that the payout would be less than if I were to die older?

[jIM_Ohio]

group life is cheaper for older people (relative to term) and more expensive for younger people (relative to term).

It is a term policy either way, your employer has negotiated a fee to subsize this for all employees. These policies may or may not be portable (if you lose your job, can you take policy with you?). Even if portable, fees will probably go up.

Call an insurance agent and ask him how much a term policy is, then you'll know if group term is a better deal. Each situation will be different.

[creditcardfree]

With your group policy, you are covered for a certain amount. When my husband was privately employed his was 2x his income for no cost to him. We had the option of purchasing more which I think we did.

Your child would receive the amount you are covered for at the time of your death regardless of your age.

Your age is a factor in determining how much to charge you for insurance. An older person is statistically more likely to die than a younger person...with all other factors being the same.

[LuxLiving]

Your employer is paying for the current life insurance? is that right?

Not taking debt or other considerations into the equation, just thinking about L.I. I would be interested in covering the gap years of when you think your child would be able to fully support themselves and try to cover that time frame (this is being said w/o consideration for what other support system your child has, ie grandparents, godparents, etc.

If your child is 5 then a 15 year term policy might be nice. However if you aren't able to meet the premiums out of current income then it should obviously be a no-go.

I'd stay away from the stock.

Most likely I would pay the debts first and then consider the life insurance, but that's just me.

[Ima saver]

I would pay off the debts first.