Important Financial Planning Advice for Parents
Getting your finances in order is always important, but it becomes even more integral when there are children and other dependents in the picture. Fortunately, it’s never too late to get your financial planning skills up to par. In basic terms, financial planning entails putting things in place that will allow you to accomplish your long-term goals. Let’s look at what this usually means.
You Might Need a Financial Planner
Investopedia recommends making a financial plan as the first step of financial planning. To create a financial plan, you’ll need to document your short-term and long-term goals as well as what it takes for you to accomplish them. You’ll also need to determine your net worth, detail your assets and list your liabilities in order to establish your cash flow. If all of that sounds like too much to handle, then it might be time to look into getting a certified financial planner. A financial planner can guide you in setting realistic goals and give you an objective view of your finances. They can help you establish retirement accounts, reorganize your debt, look at refinancing mortgage options, if necessary and let you know if there’s anything you need to downsize.
Getting Insurance Coverage
As a parent, there are a number of insurance policies you should have. These are health insurance, disability insurance, life insurance and umbrella insurance. The benefits of health insurance are fairly straightforward, so let’s look at the other three. Disability insurance helps protect your income when you’re unable to work. The policies can be short-term, long-term and based on Social Security. If while you were developing your financial plan, you detailed a significant amount of assets, your financial planner may suggest getting an umbrella insurance policy. Umbrella insurance is a type of liability insurance that protects your assets in the event of a lawsuit. It picks up where other liability insurance policies end such as automobile insurance or where you aren’t covered at all.
Life insurance policies tend to fall into the categories of term life and permanent life. Term life insurance policies can be more appealing to parents as they are relatively inexpensive and only last for a maximum of 30 years. Level term life policies offer set premiums throughout the life of the policy while maintaining the same death benefit. This guarantees that your beneficiary will get a set payout. Make sure to get quotes for insurance policies before proceeding.
Start Planning for Long-Term Goals
If you don’t already own a home, it may be a beneficial investment for you and your family as real estate tends to increase in worth over time. While 20 percent down is no longer the standard, you’ll still have to save for a down payment. However, if you are able to make a down payment of 20 percent, you can avoid having to take out mortgage insurance. Many
home buyers prefer conventional loans because of their flexible and favorable term options.
Statistics from Top University state that a college education can cost as much as $21,370 per year at a public four-year college and as much as $48,510 for a private four-year college. This is why planning for your child’s education is crucial for your financial plan. While you can research scholarship options, you can also look at all the other ways you can fund a college education. There are a few college savings plans that might be appealing to you. These include 529 plans that would allow you to either secure a college’s tuition at present rates or participate in investments that would allow you to build the funds for a college fund. There are custodial accounts available as well that you can set up for your child. While these accounts don’t have a set annual contribution limit, they may affect your child’s ability to access financial aid in the future. You can also look into U.S. saving bonds that have a reputation for being low-risk and reliable ways of building a college education fund. With all the available options, make sure you do your research to see which ones will work best for your situation and yield the most suitable result.
You’ll Need a Will a Plan for Guardianship
A will is a legal document that details the information about your estate as well as your beneficiaries. As such, it’s important to ensure that you update your will whenever information regarding your estate or the beneficiaries change. In order to draw up a will, you’ll need to create a list of your assets, debts and to whom you’d like to bequeath these assets. You’ll also need to appoint an executor to carry out your wishes upon your passing. Make sure you choose someone who is up to the task as the identity of the executor must be named in your will. Ideally, you would specify guardianship for your minor child in your will as well. However, if you’re not yet at the point where you can prepare a will, you must at least prepare a guardianship plan for your child. This would allow you to have a legally binding document that states who your minor child’s guardian should be in the event of your passing or if you become incapable of taking care of your child. You’ll want to make sure that the person you choose is up to the task of meeting your child’s needs before naming them in the document. In all cases, make sure you consult with an attorney so you know you have covered all the essential areas.
Be a Financial Guide to Your Child
According to research studies, children start establishing patterns and habits from as early as the age of four. By age seven, they start to self-direct from their internal thought processes. As a parent, it would be great for you to start influencing their financial education while your child is still young enough to easily incorporate the information into their routine. You can do this by having basic talks with them about, budgeting and setting goals. As they get older and start to receive an allowance, you can encourage them to save for toys or games that they’re interested in. You can even make up financial games to play. Make sure to include them in basic financial conversations that will impact the family such as setting budgets and choosing outings based on affordability. If you start your child off on the right financial footing, they will be even more likely to avoid common pitfalls as they grow older. Financial planning is something everyone needs, though many people don’t think seriously about it until circumstances force them. You’ve made a great decision to get your finances in order so make sure you do your research and consult professionals when you need to so you can get it right!
Todays blog is written by Sara Bailey
you can check her out on her website thewidow.net