If you have a family or plan to have one, you’ll want to consider these tips for preparing for the future. The future can be uncertain, but with some strategic planning and actionable steps, it becomes easier to deal with both expected and unexpected events.
Use this information to help you get started on the right path to better financial security and ensure you’re ready for future events when the time comes.
1. Smart Planning for the Future – Start a College Fund
When it comes to planning for the future of your family, one of the first steps you’ll want to take is saving for college. Sending students to college is expensive and requires some extensive pre-planning to ensure it’s affordable. There are college savings plans out there tailored to specific incomes and family needs.
Start saving right away to make the process less impactful on your budget and increase the chances that the money is ready for them when they go to college. Some other options include Roth IRAs and high-interest savings funds.
2. Save Money for Emergencies and Future Needs
Emergencies happen without notice and require extra money to navigate. So start saving now to reduce the impact on monthly finances and ensure there’s a cushion ready if an emergency strikes. Some costly emergencies to prepare yourself for in the future include:
- Unemployment
- Illness or injury
- Car repairs
- Fires
- Appliance replacement
Put away some money into a savings account each month and don’t touch it. If you can get a savings account with over 1% interest, it makes it even easier to prepare.
3. Have Adequate Health, Home, and Auto Insurance Coverage
When speaking about insurance, you might have a specific product or two in mind; however, effectively planning for your family’s future requires several insurance products. Insurance is one of the most essential and practical tools for mitigating financial expenses along the path of life.
To begin, you’ll want to make sure you have adequate health insurance for every member of the family. You may have insurance through your job, but if you purchase it privately, research to find the most affordable and extensive coverage you can get.
You’ll also want to make sure you have home insurance and car insurance. These are usually required by law and help you recover from incidents and accidents that could otherwise be financially crippling.
4. Purchase Life Insurance
Life insurance is another great tool for planning for the family’s future. There are two main types of life insurance:
- Whole life – Whole life insurance is a policy you pay for in monthly premiums with a maturity date much later in the future. Once it’s mature, you can cash it out to pay for college, unexpected expenses, or retirement. (However, if the policy is cashed in early, it may not pay off.) You can also borrow against the policy for emergency financial needs.
- Term life – This type of life insurance is designed for a shorter term, usually a few years, and paid for upfront or in larger chunks. This policy pays the face value in full if the claim requirements are met. It can provide a more significant sum if the unexpected occurs but doesn’t offer a cash-out option in the future, like whole life, and you can’t borrow against the policy. This option is suitable for younger families.
5. Buy an Annuity
If you really want to create a stable financial situation for your family, consider investing in one of the oldest policies intended to assist with financial planning: an annuity. So, what is an annuity?
An insurance company offers the annuity, and the purchaser makes equal payments at regular intervals. This product is a type of insurance against outliving your income.
The payments made through the annuity can last a lifetime but help mitigate risks associated with retirement and old age. You might have heard about annuities but may wonder: “What is a fixed annuity?” It’s important to understand the different types of annuities as well as how an annuity works.
- Fixed annuities are designed to help you grow an investment over time. You earn reuse or a percentage that doesn’t change.
- Variable annuities offer the best chance to build wealth faster and pose a risk for losses based on the stock market. This product is an excellent tool for younger investors rather than older individuals in their 40s looking for a stable return.
- Immediate annuities divide up a single large payment into smaller payments over time.
- Registered index-linked annuities are capped at the losses or gains possible over their lifetime. There’s less risk for loss and a better chance to earn more or save more.
Buying annuities online is the easiest way to save for the future and protect yourself from the risk of outliving your income.
Summary
Planning for your family’s future is critical to help meet goals and cover expected and unexpected expenses. Consider creating a financial strategy and use these tips to guide you through the process.
Over time, with investing, the impacts on monthly finances reduce while the benefits increase for each household member. Remember, the sooner you take action, the better your financial health will be later in life.
Photo by Gabrielle Henderson on Unsplash