Life is full of unpredictable moments, especially when you have kids. But, for us parents, we wouldn’t have it any other way. The good news is, establishing routines and habits can help you take some control over your life and ease anxiety. One of the most important places you should focus on is your finances. Creating financial security for your family will give you peace of mind that everyone and every issue that arises can be taken care of no matter what.
If you’re wondering how to create financial security for your family, here are three crucial ingredients to help you get started.
Build a cash cushion.
No matter how budget savvy you are, it’s impossible to predict every new expense or unexpected cost that will creep up when you have a family, but building a healthy savings fund can wade off debt and stress when something unexpected occurs. A car accident or urgent medical issue can happen at any moment, and keeping a separate account with cash, you can quickly access can make things less complicated and stressful.
Aim to save 3 to 6 months of living expenses in a separate account. Start by creating a line item in your monthly budget for savings and set up an automatic transfer from your checking to a savings account, so it’s out of sight and out of mind. Even better, open a high yield online savings account where you can earn up to 1.35% back on your savings.
Set up an estate plan.
According to Caring.com’s 2019 survey, 57% of U.S. adults do not currently have estate planning documents such as a will or living trust. When you have kids, though, this is an incredibly crucial step toward ensuring your family is protected in the event of your unexpected passing. Without certain legal documents in place, things can become confusing, complicated, and difficult for your family during an already difficult time.
Creating an estate plan doesn’t have to be confusing or expensive. These days you can do it online within minutes thanks to sites like TrustandWill.com. Think of it as the Turbo-Tax for estate planning–the site provides guides you through the process of selecting either a will or trust after you answer a brief survey, along with step-by-step instructions. You can create a will in 10 mins starting at just $70 or create a trust in 15 minutes starting at $399 (with unlimited updates). The site has an in-house legal team and support available via live chat. This tool makes it easy, accessible, and affordable for everyday people to set up their estate plans.
Purchase life insurance.
Your family depends on you financially for their everyday needs, and that’s where a life insurance policy comes in—this ensures your family’s needs are met when you’re gone, covering everything from a mortgage to groceries to healthcare to college expenses. All of these situations must be considered when reviewing plans to determine an adequate amount of coverage. It’s a good idea that even a parent who stays home gets life insurance to cover the cost of childcare if something were to happen to him or her.
Keep in mind, the costs of a plan vary significantly depending on how much coverage is needed. A good rule of thumb to follow when trying to determine how much life insurance coverage is adequate for you and your family is to look for a plan that covers at least six to eight times the amount of your gross annual salary. However, it’s also essential to consider a few other vital factors, such as how much debt you’re carrying or how much money you have in savings. If your house is paid off and you don’t have any debt, for instance, you could likely get away with less coverage.
Run a quick search online to compare insurance rates and use a free insurance calculator to help you determine how much coverage is right for you and your family.
Comments