In the hustle and bustle of every day family life, it can be difficult to see beyond the present and prepare for the future. Often important actions that each family should take fall to the wayside as the days are crammed with work, school, sports, and household duties. In Five Things Every Young Family Should Do Now, we highlight steps that are critical to ensure the financial security, safety, and well-being of your family.
1) Protect Your Family with Adequate Insurance
You don’t realize how important insurance is until you need it. Life insurance is probably what comes readily to mind when you think of insurance and young families. Life insurance provides a payout to designated beneficiaries when the main earner (or both earners) die. You can imagine how a family, in the wake of a tragedy, could also fall into extreme financial hardship without life insurance. Of course, no one wants to think about the possibility of one’s death, particularly when a spouse and young children rely on you. However, having the right life insurance plan shows how much you truly care for your family’s livelihood. In addition to life insurance, your family should also consider your need for disability, liability, and property & casualty insurance.
2) Create an Estate Plan
At a high level, estate planning is preparing for the transfer of one’s wealth or assets after death. However, it is also much more. Often associated with getting older, it is an important exercise for the parents of young children as well. Through estate planning, parents select guardians for their children, determine to whom and when assets are distributed, and choose a trustee to manage their estate until children are older. An estate plan is yet another way you can continue to provide safety and security for your family long after your passing.
3) Keep an Emergency Fund
The unexpected happens, but you can do your best to prepare for it. Maintaining an emergency fund to cover at least six months of living expenses can help you in the wake of job loss, injury, illness, or unplanned home repair. It also can provide peace of mind knowing that your family could remain financially sound in the face of life’s surprises.
4) Plan for your Retirement
Not all of financial planning is preparing for difficult, unexpected events. Planning for retirement can position you to start new adventures, travel, and spend more time with family once your working years are complete. From daycare to extra-curricular activities, having a family is expensive. However, it is important to start saving for retirement as soon as you can. Take advantage of employer 401(k)s and contribute the maximum amount if possible (or, at a minimum, enough to maximize any employer matching benefit). Put money into Individual Retirement Accounts (IRAs) for both partners. Always ensure your investment strategy reflects your age, goals, and financial circumstances. Sufficient retirement savings will ultimately benefit your whole family. As your own children start their young adult lives, they will be less burdened knowing that you are financially prepared. Your security will mean more time to enjoy life with generations to come without the fear of your money running out.
5) Plan for your Children’s Education
The idea of saving for children’s education can feel daunting. Most of us are aware of the rising cost of education and have seen sky-high predictions for the future. Like retirement savings, the key is to start early if possible. There are a number of saving vehicles that can be used specifically for college savings, such as 529 Plans and UGMAs amongst others. As your children get older, you can explore loan options, grants, and scholarships. Encourage your children to work hard in school and get jobs to maximize what they can contribute to themselves.
It is important to understand that you should prioritize saving for retirement over your children’s education. Remember, you and your children can take out loans to pay for college, but there are no loans for retirement. Ideally, you can develop a plan to reach your retirement goals while concurrently putting aside some funds for your children’s college.
If you have further questions, please reach out to a Wingate Wealth Advisors advisor who would be more than happy to help!