There’s nothing we wouldn’t do for our families. We watch their dance recital, laugh at their jokes and put up with erratic behaviour. Sometimes we even clean out the garage. But if you actually want to do something really useful for your family, you might want to think about protecting their financial future.
Be it putting a safety net in place for worst-case scenarios, be it a lost job, an accident or having extra savings for when the kids decide they need piano / coding / interpretive dance lessons… having a bit of financial backup could be a big help in the long term and give you some much deserved peace of mind for the moment.
Step 1: Do a little bit of debt wrangling
Whenever you’re looking at finances it’s always a good idea to begin with debts. Far from being everyone’s favourite topic, you’ll feel better for having got your head around it. Start by writing a list of everything you owe, then jot down how much interest you’re being charged on each debt.
This can help define your most expensive debts and which you might want to think about paying off first. Organising your repayments like this can help you figure out the most sensible and efficient way to go about cutting your debt, which can only be a good thing for you and your family.
Step 2: Get some insurance
We don’t tend to think about it when young and healthy but it often works out to be the best time to get insurance in place. There are usually 3 main types of policies to choose from. Here’s how they work:
When you buy life insurance you usually pay a monthly premium and in return the policy pays your family a lump sum if you pass away. Some policies run for a set term, with cover finishing at the same time the policy does, while others might run for your entire life, so you’re guaranteed a pay-out.
This type of cover usually pays you a percentage of your take-home pay every month if you can’t work because of illness or injury. Payments stop once you can start work again or you retire, whichever comes first. Income protection is popular with people who work for themselves and don’t have any company sick pay to fall back on if they find themselves unable to work for a period of time.
Critical illness cover
As the name says, critical illness cover usually pays out either a lump sum or an income if you’re diagnosed with a specific serious illness, like cancer, heart attack or multiple sclerosis. This is another popular choice for people who don’t get sick pay from an employer.
The types of insurance that are right for you will depend on your individual circumstances. For example, you might decide you need a high level of cover if you’re the main breadwinner, or less if your partner brings in more than you.
Step 3: Start saving
Putting aside a bit of cash is always a good idea because, for better or worse, life happens! New babies arrive, boilers break down, people get sick — so a little financial cushion can make all the difference. The first step to saving money is working out how much spare cash you have available each month once you’ve covered all your essential expenses. It’s generally recommended to try to have three months worth of expenses set aside, just in case, so that might be a good savings goal to aim for. Even if you can’t afford to put away a lot, over time you should find you’ve built up a useful financial buffer.
And who knows? Maybe you’ll grow your savings to the point that you want to think about investing some in your family’s future. Unlike in a savings account, where you earn a fixed amount of interest, investment allows the opportunity to grow your money significantly faster, albeit with higher risk. The earlier you start, the more time your investment has to grow and the more you investments grows, the more you could earn from it.
You can read more about the wonders of this compounding effect, along with strategies to kick start saving in this article
Chances are you already have a few things keeping you up at night, whether it’s crying babies, a snoring partner or a book you just can’t put down. Financial worries definitely shouldn’t be one of them. You might not be able to prepare for every eventuality under the sun but having a little protection in place is a good way to make sure you family is looked after. As a Business Consultant I offer a free quote and will devote my best to ensure you get the right cover for your needs. Get in touch today with me, Anthony Paul for your best options.