Whether you are expecting your first child or have been a parent for years, finances and building a future for your family go hand-in-hand. Luckily, there are money moves you can make now to help manage financial stress, support yourself and your loved ones, and help your children as they get older. Here are three key financial moves all parents should consider making.
Review and Update Your Life Insurance
For many, life insurance is a necessary but unmanaged expense for a good reason. It is not pleasant to consider a situation where your life insurance policy may become relevant to your loved ones. However, for parents, in particular, having adequate life insurance might be the difference between your children struggling or enjoying a comfortable future.
Many employers offer life insurance to their employees, often at a specific multiplier of their salary. For some families, this amount may be adequate; but in other cases, you may need to purchase an additional term policy that provides coverage until your youngest child is an adult. It is worth reviewing how much coverage you have, then comparing this with your average projected earnings over the next decade or so.
Also, update your beneficiaries after any major changes. A divorce decree does not remove an ex-spouse's name from a life insurance policy. For any changes in your marital status or if a named beneficiary passes away, you must update your list of beneficiaries with your insurer.
Consider a College Savings Account
As anyone who is still paying their student loans could confirm, college costs may be a major expense. For many, student loans are second only to the cost of a home purchase. Fortunately, time is on your side when saving for college for those with young children. The funds you put toward your child's future college education may have years to grow. In many states, contributing to a 529 college savings account might even provide you with a state tax credit.
Additionally, 529 funds do not have to be for a specific child. If your child gets a scholarship or decides not to attend college, you are free to change the beneficiary to someone else, even yourself. These accounts may also pass down and can be used by grandchildren.
Check Your Health Insurance Coverage
Health care costs might also be a huge part of any family's budget. And while many employer-sponsored health insurance plans may provide you with decent coverage at a reasonable cost, this is not always the case. Some families with fixed annual health care expenses may benefit from a lower deductible plan that provides more coverage, while other families with infrequent health care costs might find a high-deductible health plan with lower premiums is an easier expense in their budget.
If you are not sure about your options, a financial professional or insurance broker may be able to provide more information.
The opinions voiced in this material are for general information only and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
This article was prepared by WriterAccess.
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