How to Establish a Financial Safety Net for Children
One of the signs you have succeeded as a parent is if you have provided financially for your children. You should have put in place a structure that will allow your kids to survive and even thrive if something goes wrong, like the passing of a mother or a father.
But how exactly can you pay for necessities in the present and create a safety net for your children? A lot of payments still have to be made in the face of a parent passing away. House payments, insurance premiums, food, clothing, and college savings are all vital to a child’s well-being.
What happens to auto insurance when someone dies? Is it possible for your kids to still go to college on a single income if the other parent passes away? We’ll talk about some of the most common (and uncommon) problems that can crop up in the face of adversity, and how to lessen their effects before they happen.
#1 – Teach Your Kids About Credit and Debit Cards
One of the best ways to prepare for potential financial disaster is to give your kids the tools to carve their own paths without you. This could range from giving them an allowance for doing chores to adding their name to your credit card. Credit cards are a great way to show children the responsibility behind borrowing money from the bank.
These things will teach financial responsibility to your child and instruct them on the value of money from a young age. Learning about money as a child gives children a head start toward being knowledgeable financially.
Kids can’t have their own line of credit until 18 years of age. Still, having a card under your line of credit will give them skills that will be invaluable in the future. Learning about loans and not overspending past your limit are topics that are rarely discussed with adolescents.
You can also open a bank account in your child’s name and help them understand how to use debit cards. This will allow them to put their allowance in their own bank account, and you can show them how to withdraw money if they need to.
If someone who is providing for a family dies early, kids who have experience with taking care of money will be able to take care of themselves easier once they become adults.
#2 – Create an Emergency Fund
Having a savings account that serves to protect your family after your death is vital. It can be hard to figure out how to set money aside for this account, but many analysts suggest building four to six months of salary in savings. Expenses have to be paid each month. Necessities in the present overshadow the potential money that is needed in the future.
You can do small things to create a solid emergency savings account. See how much money you spend on things that aren’t necessary, and put the money in a savings account instead.
For example, many people have a lot of subscriptions they’ve forgotten about, perhaps to several different TV streaming services. Look at which ones you use the most, and unsubscribe from the ones you don’t use as much. This added money each month will really add up.
You could also ask your employer to take a small amount of your salary each month and deposit it into your emergency fund. This would be like any other direct deposit they give you monthly. Request something small like $25-$50 monthly to start, and increase it across time as long as it’s not putting a strain on your family.
#3 – Buy Life Insurance as a Safety Net
You should look into a life insurance policy. Young adults with no underlying health conditions and solid exercise and dieting habits will get a great deal on many types of coverage. This is the best way to protect your family in case you pass away before your children are 18 years old.
Make sure you have people whom you trust financially as the godparents of your children. These potential caretakers will then have their own money and the money you have saved to take care of your children in the case of your absence.
#4 – Have Good Car Insurance
Car insurance is an area where you can really help out your family and children if you are no longer alive. Car insurance can be transferred over to the spouse of the deceased and therefore will continue to cover children after a parent’s death. Parents or guardians might need to talk to their insurance agent for more details.
As long as the death is reported on time and all details are disclosed, the family should enjoy the same coverage as before.
A word of advice for spouses who can’t support their children and pay high premiums after a tragedy: Shop around. Whether you are looking for auto insurance in Long Island or car insurance by your vehicle’s make and model, your deceased partner’s driving habits will not affect your own and you can find better insurance by looking around a bit.
#5 – Pick Your Kids’ Guardian Wisely
One of the best ways to protect your family from sudden death is to pick your kids’ guardian wisely. Whoever is tasked with taking care of your children or teens after your death should be kind, financially responsible, and willing to put in the effort it takes to be a legal guardian.
You want to communicate with the chosen guardian about how to access your life insurance and your emergency funds. Along with the guardian’s own money, this should be enough financial support to create a good life for your children in the wake of a tragedy.
The guardian should also be someone who your kids are familiar with. A family member or a close friend is the best bet in this situation.
These money-saving tips are all helpful, but there is no way to overcome the emotional burden of sudden death in the family. Controlling the things you can and hoping for the best is often all people can do as parents.
Shawn Laib writes and researches for the auto insurance comparison site, AutoInsurance.org. He wants to help families prepare for their financial futures with prudent tips and sound money-making advice.