Parents have a lot of things to plan for, both expected and unexpected. While many people anticipate and save for retirement and their child’s college education, it’s also important to prepare for unfortunate events, like serious illness or job layoffs. Life planning will keep your family financially secure if you’re hit with an unexpected event. Here are some critical contingencies to prepare for and financial considerations to keep in mind as you plan for your future.
Be Prepared for a Sudden Death
While the hope is that you never have to face the unexpected loss of your partner, it’s important to be prepared. Spouses leave behind all kinds of emotional and financial challenges for the surviving family.
Ensure that you and your spouse have a valid will and proper insurance. You should both be aware of each other’s estate plan and have information about financial accounts, assets, beneficiaries, debts, and major assets. Life insurance is a blessing for families who previously relied on the income of a deceased spouse. A 30-year term life insurance policy is a popular option among parents. This kind of long-term coverage is especially beneficial for newlyweds, primary income earners, families with substantial debt, or those with special needs children. Do some research and compare rates online to find the best policy for your situation.
Plan for Illness
Like a sudden death, critical illness can threaten the security of your family. If you or your spouse get sick, you may lose a substantial portion of your household income. If your children develop a serious illness, medical bills can quickly drain your savings. This is why it’s crucial to have good health insurance. When looking for a health insurance plan, check that your preferred doctors and pharmacies are in the plan’s network and that the unique plan benefits align with your lifestyle. Learn about the different types of health insurance so you can choose a plan that meets the needs of your family. If you already have health insurance through your employer, make sure it’s actually going to protect your family in the event of a medical crisis.
Develop an Emergency Fund
Whether you have insurance or not, an emergency fund is essential. According to Investopedia, emergency funds are set up to cover a variety of financial problems, like a major home repair or the loss of a job. Typically, emergency funds contain at least 3 to 6 months of living expenses. Build up this emergency account over time, setting aside money from your monthly salary. If you have to chip into this fund for any reason, build it back up again as quickly as you can.
Save for Your Retirement First
Other important things to save for include your child’s education and your retirement. Many parents are so eager to save for their child’s education that they prioritize it over their retirement. However, it’s critical to start saving for your retirement first. Your retirement accounts will pay for your living basics when you’re no longer working. While your children can apply for scholarships or get part-time jobs, you won’t have an alternative source of income during your senior years.
Develop Financial Goals
Being financially prepared also means making goals for the future. One of your top goals should be paying off debt. Monthly interest can eat up a good portion of your minimum payment and make it difficult to pay off debts, so consider consolidating your debt into a low-interest loan or transferring it to a credit card with a few introductory interest-free months. Cut back on other expenses until you’ve paid down your debt so you can put your income toward your other financial goals. If you have surplus cash, learn how to invest instead of spending all of your excess money or simply dumping it in a savings plan. Without investing, your money will be worth less every year due to inflation.
While it’s best to start life planning when you’re young, it’s never too late to get your finances in order. Now is the perfect time to start an emergency savings account, shop around for insurance, and consider investing. Smart money management is your ticket to meeting your financial goals, whether this means buying your dream home or retiring in comfort.