5 Financial Family Planning Efforts To Implement Today
Major life events, like loss of work and death, change your family’s income dynamic and strain your finances. These changes have a ripple effect on most other areas of your life, so they necessitate a financial plan sooner rather than later. A financial plan consists of your financial goals, assets, and liabilities, and it should be suited to your circumstances, like marital status, lifestyle, health, and age. Below are ways for protecting the family against financial turmoil in case of unfortunate events.
1. Procure Life Insurance
Everybody needs life insurance; it doesn’t matter whether you are 30 or 75. Life insurance is essential because it replaces your income by covering their living expenses if the unfathomable happens. As you take out a suitable cover, you are required to choose whether the insurance is paid out as regular payments or a lump sum amount to your beneficiaries.
The three main types of life insurance coverage to choose from are
- Whole of Life Insurance Policy: It offers lifelong protection for your dependants, provided you keep up with the premiums. However, it is far more expensive than term life insurance.
- Term Life Assurance: It only guarantees death benefits for the term of your policy. It is cheaper and simple without bells and whistles.
- Critical Illness Cover: This supports families when they need it most and will pay out on the diagnosis of certain conditions.
2. Create a Will
Dying without a will leaves the fate of your children in the hands of the government. The government picks a legal guardian for your children and a manager for your assets if the children are underage. These choices may not always align with your preferred family planning ideas, so it is better to have it all formalised on paper. You could utilise online tools to create the will or, better yet, get a legal expert to draft it for you.
3. Set Up Trusts
A trust fund includes the fundamental details of how and when your money is released to your children. It is an estate planning tool that entrusts money, property, and assets to a neutral third party, known as a trustee. It ensures beneficiaries don’t squander all the money at once, thus nurturing a sense of financial maturity and responsibility. You get to choose between revocable trust funds that are difficult to change and irrevocable trust funds whose details can be changed or revoked by the grantor.
It is always better to be safe than sorry. Thus, start saving early for emergencies that come up and for big purchases and payments, like school fees. If you prioritise private school education, which currently costs an average of £5700 for day schools and £11,565 for boarding schools in London, you must save for this cost to ensure in your absence, your children still get the best education. Start early to enjoy the power of compound interest.
5. Organise Your Documents and Communicate Your Plans
It is not enough to plan for unpredictable times; you also need to communicate your financial planning efforts to your dependents. Sharing your financial planning efforts helps to eliminate surprises when your will is read. The following are some essential documents to organise and make easily accessible to your trusted loved ones.
- Tax returns
- Insurance policies
- Mortgage paperwork
- Health insurance
- Estate plan
Additionally, list down your bank accounts, digital assets, retirement accounts, plus account numbers and other information needed to access these accounts. Also, list all your debts, including credit cards, insurances, and mortgages.
Taking care of these particulars now makes difficult times easier and more manageable for your family. In addition to taking the above steps, do not forget to keep your will and documents updated and current. For more information on how to start protecting your family if the unexpected happens, contact Claire by emailing her at email@example.com.
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