Whether you are just beginning to plan for children or you just had a baby, this stage of life is an exciting time. It can also be financially frightening. You want to make sure your children will be financially prepared, and you might consider starting a savings account for their college funds. However, the first real step to ensuring your children are financially secure is to ensure that you are.
Your Children and Insurance
You probably have health insurance coverage, but you need to look at how your plan will change once your child arrives. Your premium will increase, as will your deductible and out-of-pocket costs. If you’re able, you may wish to change plans based on these increases.
Also, you should look at what your plan covers, and you may want to consider having better coverage to avoid paying higher hospital bills if something were to happen.
If you don’t already have life insurance, you should get adequate coverage. The prices for your life insurance policy will depend on how much coverage you get and which policy you choose. It is important to have a policy that covers all living, personal, and household expenses for your spouse.
However, if you have dependent children, the amount of life insurance you need increases. To get your answer for how much you need, Forbes suggests being clear about what your situation is and what risks to mitigate. The article provides a great example with a step-by-step calculation process. They also advise you to “periodically review your life insurance coverage with your advisor to determine whether you still have enough or too much.”
You should also consider long-term disability insurance coverage. If you or your spouse becomes disabled while your children are still dependent, you want to be sure they will be able to survive financially. Also, it is a good idea to review beneficiary designations for all insurance policies.
Move Up In Your Career
When planning your family’s future and trying to move up in your career, the MBA degree can be the stepping stone you need to meet your goals. According to recent studies, an MBA can increase your salary up to 50 percent over your pre-MBA salary range. This kind of financial flexibility allows you to plan more effectively for your family’s future.
Additionally, you can grow a stronger professional network by working with higher level of business professionals. This can lead to an increase in prospects over the course of your career and provide additional stability to your life.
To help meet your future financial needs, especially for retirement, you need to save and invest a percentage of your gross income. But how much do you need to set aside? It’s often recommended that you save at least 20 percent of your income each year. The Baby Steps program teaches 15% annually into tax-sheltered retirement accounts.
Remember that saving for retirement could also include the possibility of moving to another home to downsize. As you get older, the two-story family home you originally purchased could become a safety hazard, or simply too much space for empty-nesters.
Moving can reduce your mortgage payment, which could be used for home modifications on the new home. Optimally, by the time you retire, your home will be paid off, though.
Retirement investments are important – you don’t want to become a financial burden for your children when you’re older because you didn’t build a sufficient nest-egg. Also, be sure to review beneficiary designations on your retirement accounts.
Get Your Estate Plan Together
You should have a will before you have children, but it’s even more important once children are in the picture. A will not only determines who receives your assets when you pass away. It also is the only opportunity to appoint a legal guardian for your children if you and your spouse were to pass away unexpectedly.
In a will, you also appoint an executor to help wrap up your estate and a property manager to take care of your children’s property that you leave for them. By law, children under the age of 18 can’t have legal control over any real estate left to them in a will.
The property manager you appoint will manage the property in their best interests, and turn it over to them when they turn 18. If you would rather not appoint anyone, there are other options to consider, such as a child’s trust specified in your will.
An Important Part of Loving Your Children
The excitement of planning for a child and having a child also adds the worry and responsibility of ensuring their financial security. By planning ahead and taking steps now, you can help to relieve some of the stress. Part of your children having a healthy financial future depends on you having a healthy financial future.
Carla Lopez manages BoomerBiz.org to help seniors launch their own businesses.