As parents, one of the last things you want is for your children to face financial hardship. Thankfully, there are a number of key steps you can take now to ensure security for you and your kids, no matter what happens. Here’s how to establish solid financial footing for your family so you can always have peace of mind, come what may.
Consider The Worst Case Scenario
The worst possibilities inevitably cross all parents’ minds at some point, but have you made plans for those unfortunate circumstances should they occur? Many people have misconceptions about what happens if they don’t survive to see their children through to adulthood. They think their children automatically go to godparents, or that grandparents can assume custody. However, as Livestrong explains, unless you establish the proper framework, the court decides who receives guardianship. Seeing an estate planning attorney can resolve this and other legal concerns relating to your children’s futures.
Similarly, should the worst case scenario play out, life insurance can help your loved ones cover their basic needs. It’s a chance to ensure they don’t struggle financially if faced with the loss of your income. One idea is to consider a 30-year term life insurance policy, which can be ideal for young families. It’s a great choice for many situations, and offers loved ones a safety net.
Ensure Your Golden Years Shine
Kiplinger explains those who begin saving for retirement as young adults have the best chance of building a nest egg that keeps them comfortable in their golden years. One of the best retirement savings options available is 401(k) employer matching. Plans generally offer a tax-free contribution from the employer, relative to the employee’s contribution. While there are often limits, you’re essentially getting free money from your employer. Smaller employers can’t afford matching plans, and might not offer a 401(k) at all. Thankfully, you can build your own retirement plan without your employer through opportunities like a self-funded IRA, a Roth IRA, or a myRA.
Is It Time To Save For College?
Many parents worry about saving for their children’s education. While that’s a terrific goal, Dave Ramsey points out it’s in your family’s best interests to address other financial matters before establishing college savings accounts. For example, it can make more sense to pay off your debts first, and it’s your responsibility to establish your retirement savings.
If those things are already on target, there are a couple good college savings options. The 529 plan is useful to many families. It varies from state to state, and it’s tax-free. You can click here to explore the options. An Education Savings Account (ESA) is another viable choice, and it’s also tax-free but with income limitations. It’s also referred to as a Coverdell, and there are several selections available. Lastly, there are UTMA and UGMA accounts. These are also called custodial accounts, and be forewarned, when your child comes of age, the funds do not have to be spent on education.
Dealing With Daily Dilemmas
Last but far from least, if your finances tend to be derailed when an unexpected expense arises, you need to get a handle on your current budget and establish an emergency fund. A practical budget helps you spend your income wisely and meet all your planning goals, both short- and long-term. Then when hiccups come along, like when Joey breaks a window or Janey needs braces, you can sail right through. Start by tallying your income, then deduct overall expenses, and aim for a zero balance. Leftover money can go toward debts or savings, and too little money means you need to adjust your spending. Some experts suggest a half year’s income set aside for emergencies, and you can use this tool to calculate the amount you need.
When your family depends on you, planning for the future is a must. Create a functional budget,
set up appropriate savings, and arrange for the worst case scenario. Your family can rest easy with solid footing in place.