February 24th, 2020 12:00am
Every parent dreams of the very best possible future for their family. Included in that dream is financial security and prosperity, both for themselves and their kids. In order to reach that goal down the road, though, you need to start planning now.
Just in Case
When you envision your family’s future, you likely see yourself growing old, watching your kids grow up and have kids of their own, and eventually, you’ll pass the baton to them as you leave life in this world. However, things don’t always work that way, and in the event you meet an untimely demise, it’s best to establish some form of safety net.
Life insurance is one obvious part of that safety net, and while you might have a basic plan through work, CNBC warns that’s typically insufficient coverage. There are several types of life insurance, such as whole, universal, and variable—which fall under the category of “permanent” policies—and there is term life insurance. Permanent policies have a cash value, but are on the pricey side. Term is less expensive but has no investment value. For young adults, these tend to give good bang for their buck, as they become more expensive as you grow older or develop health concerns.
Another inexpensive life insurance plan is a burial policy. These are usually easy to get and offer adequate coverage for your final arrangements, as well as some extra to pay off end-of-life expenses. They also pay out quickly, so it’s a simple and effective solution for many families. In this case, it’s best to think through what sort of funeral arrangements you want, price them out, and purchase a policy for that amount.
Lastly, your safety net should include some legal paperwork. By putting together a will, establishing guardianship, and so forth, you ensure their safety and your peace of mind.
Plan for Rainy Days
There are lots of bad things that can happen to you, and most you are likely to survive. However, many of those bad things can eat through your finances if you’re unprepared, so the next thing you should prioritize is an emergency fund. This should be $1,000 at the very least. That’s enough to get you through some snafus like car repairs and broken appliances.
Beyond that, you should build up a cushion of three to six months’ worth of living expenses. That way, if you lose your job or become unable to work, it allows you some breathing room while you get your bearings.
If you don’t have rainy-day savings already established, get a budget set up. This way you can organize your spending in a manner that helps you meet this and other financial goals.
You don’t want to reach your senior years only to have your adult children bail you out financially. Therefore your next goal is establishing sufficient retirement savings.
As Ellevest explains, if your employer offers a 401(k) matching plan, that is your first and best place to start. These situations basically provide free money, and your workplace handles making all the arrangements.
Next, look into what sort of investment account might meet your needs best. For instance, solopreneurs should consider a one-participant 401(k). If you’re interested in investing in metals or real estate, a self-directed IRA might be a good fit. These can get confusing fast, but a professional financial advisor can help you sort the details.
Last but not least, consider setting aside money for your children’s education. There are several viable options, such as a Coverdell ESA, UTMA/UGMA, or 529 plan, which are designed for parents saving for their children.
There are other options as well, such as a Roth IRA or mutual funds. The nice thing about these forms of savings is that even if you earmark them for your children, you can use them for other things if necessary.
Having kids is a dream come true. When your dream also includes financial stability for the long haul, there are important steps to take right now. Thanks to your proper planning, the future will be bright for you and yours.
Sara Baily is a widow, and mother of two. Thewidow.net
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