Texas Home Lending News

5 Financial Steps All Parents Should Take to Protect Their Family

Via: Guest blogger Sara Bailey

As a parent, the safety and security of your family is your No. 1 priority. However, creating a safe home and looking after your children isn’t enough. To truly protect your family, you need to think about financial security too. Here are five financial planning steps all parents should take:

1. Write a Will

No parent wants to think about passing away before their child grows up. But while it’s tough to think about, it’s important to plan for. If you don’t write a will and something happens, you’ll have no say over who raises your children or how your money is allocated. Even if you have few assets, it’s imperative to create a will that namesa guardianfor minor children.

2. Purchase Life Insurance

Life insurance is another critical piece of worst-case-scenario planning. If you pass away without a life insurance policy, your family could struggle to afford a funeral and stay afloat financially. While this is especially true for wage-earning parents, the high cost of child care means life insurance is important forstay-at-home parents, too.

When shopping for life insurance, you’ll need to choose between term and whole life insurance. Term life insurance expires after a set number of years. It comes with low premiums that are suitable for parents who don’t have a lot to spend on life insurance. For those who want a life insurance policy that never expires and guarantees return on investment (as long as you pay the bill), whole life is a better choice.Learn moreabout the options at Nerdwallet.

3. Plan for Long-Term Care

We all want to be close to family as we age, but relying on adult children for care in old age isn’t the best choice. According to the Family Caregiver Alliance, family caregivers lose anestimated $300,000in wages. That’s enough to prevent adult children from saving for their own retirement and their children’s education.

Plan for long-term care now so you can afford professional caregiving when you’re older. Because Medicare generally doesn’t cover long-term care, you’ll need to increase your retirement savings, purchase long-term care insurance, or make another plan to finance long-term care. While it may seem early to be thinking about old age, making a long-term care planwhen you’re young gives investments time to grow and secures you lower premiums on long-term care insurance.

4. Build an Emergency Fund

Not all financial planning involves looking decades into the future. An emergency fund is a key financial tool for dealing with unexpected andunavoidable billsthat can crop up any time, like hospital bills in a medical emergency. It’s not enough to have spare money in investments. As SmartAsset explains, an emergency fund should be held somewhere that’seasy to accessin a hurry, like a high-interest savings account or money market account.

5. Buy Disability Insurance

If one parent were suddenly unable to work, would your family be able to stay afloat indefinitely? If the answer is no, you need disability insurance. Disability insurance pays a portion of your income (usuallyaround 50-60 percent) if you’re sick or injured and can no longer work.

Some workplaces offer disability insurance through their employee benefits package. Talk to your HR department to learn if there’s a disability plan you can opt into. Otherwise, you’ll need to purchase individual insurance. You may also choose to supplement an employer’s policy with additional insurance, such as if your employer only offersshort-termdisability insurance.

Keeping your family safe is about more than clicking in seatbelts and cleaning scraped knees. True family security involves asking the hard questions, like how you’ll pay the bills if you lose a job or your spouse passes away. By facing these tough questions head-on and taking financial steps to prepare, you can secure your family’s future no matter what happens.

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