5 Financial Steps All Parents Need to Take
Did you know 3 out of 4 millennial parents don’t have life insurance and only half of American parents have wills or living trusts? This is a topic I’ve personally been wanting to tackle since I started my blog. Thankfully, I was approached by Sara Bailey, creator of TheWidow.net, who already experienced firsthand the necessity of long-term planning. As a widow and mother of two, Sara understands the need for more parents to know how and why they should prepare for their family’s financial future. Many thanks to Sara for sharing this vital information with my readers.
Getting started is simple! For those who are ready to take the next steps, please consider working with the following legal and life insurance team.
Are You Planning for Your Family’s Future?
You’re a pro at paying the bills, balancing the checkbook, and making your family’s money stretch. But are you thinking beyond the next paycheck? To achieve true financial security, you need to think about the big picture, too. How can you make sure you have enough money to save for retirement, put your kids through college, and weather any bad luck that comes your way? These questions might seem overwhelming, but just a few simple steps will put your family on the path to greater financial security.
Plan for retirement — including long-term care
As a parent, you’re used to putting your needs last. However, when it comes to saving for the future, you should do the opposite. Being able to support yourself in retirement means your kids don’t have to worry about your bills in addition to their own. Participate in your employer’s 401(k) plan and make sure you’re accounting for long-term care in your retirement savings goal. Long-term care services can cost $50,000-$100,000 a year, and Medicare won’t pick up the bill.
Then think about a college fund
Only once you’re on track for retirement should you think about saving for your kids’ college. However, if you can afford it, saving for tuition is a great thing to do. College costs are high and rising. Today’s public university grads are leaving college with nearly $30,000 in debt. Any amount of help allows your kids to enter adulthood on sounder financial footing.
Buy life insurance
Every parent should have a life insurance policy regardless of whether they earn income or not. In addition to covering funeral costs, a life insurance policy helps a surviving spouse cover the bills and pay for childcare if one parent dies. If a single parent or both parents in a two-parent household pass away, a life insurance policy serves as an inheritance for children. If you’re concerned that a policy will be too expensive and eat into your other savings, know that term life insurance policies can be affordable, and you don’t have to work with an insurance agent to buy one. You can determine how much coverage you need, compare rates, and buy a policy all from your computer.
Appoint a trustee or custodian
Since you can’t leave money directly to minor children, parents have to name someone to manage property left to minor children. There are a few ways to do this:
Name a custodian under the Uniform Transfers to Minors Act. Under the UTMA, parents can leave property to minor children and appoint a custodian to manage it until children reach the age of majority (typically 21).
Create a living trust and appoint a successor trustee. However, trustees have more responsibilities than UTMA custodians.
Name a property guardian in your will. This is the simplest way to leave property to minor children, but gives them full control of the inheritance at age 18. You can choose one person to serve as both personal guardian and property guardian or appoint different individuals for each role.
Buy disability insurance
Death isn’t the only possibility that could leave you unable to provide for your children. The odds of becoming disabled and unable to work, either temporarily or permanently, are higher than you think. A healthy emergency fund can stand in for short-term disability insurance, but consider a long-term disability insurance policy to protect your family if you become seriously ill or injured.
Saving for the future is a lot more important when you have a family counting on you, but saving alone isn’t enough. No matter how much you scrimp and save, a single bout of bad luck could rip your family’s financial security out from under you. As you plan for your family’s future, make sure you’re taking every possibility into account.
