How do you protect your family and your wealth while you’re still alive and when you’re gone?
How do you ensure your kids’ financial future will be secure? What are some of the things you can do to secure the financial future of your loved ones?
These are some of the questions every adult should ask themselves regularly.
This post covers 7 smart ways for you to start with if you’re interested in protecting your family.
Ways to Secure Your Family Financially
1. Pay Off Your Debts
One of the best ways to secure your family financially is to pay off your debts or reduce it significantly.
Debts are a great stressor for many. In fact, 33% of Canadians mentioned debt as a major cause of their money stress. At some point, the anxiety and stress will get to your family.
And worse, debts are a big drag on your other financial goals. It is difficult to plan and control your finances when a good percentage of your monthly income goes towards loans payment.
So you owe it to your financial wellbeing, your sanity, and that of your loved ones, to prioritize debt reduction.
Here are some tips:
- Start with an assessment of your finances
- Create a budget and identify areas you can cut back
- Look for ways to make extra income
- Pay more than the minimum payment on your debts (use debt snowball or debt avalanche)
- Commit to using credit wisely going forward
2. Improve Your Finances
When you’re in control of your finances, you’ll be in a better position to protect yourself and your loved ones financially. To achieve that, you need to start taking steps to improve your finances.
Improving your finances can mean different things to different people. It could mean:
- Living within your means
- Creating a budget and tracking your expenses
- Building an emergency fund
- Paying off debts
- Start investing for retirement; and so on
As your finances improve, you’ll be able to start taking other steps to secure your financial future. For example, getting your debts under control will free up more cash to invest for retirement.
Related Post: 15+ Great Ways To Improve Your Finances (Starting Today)
3. Protect Your Income
If you’re the breadwinner of your family or contribute a significant amount to the family income, you should consider getting the right insurance policies to protect your ability to earn income or replace the income.
This could mean getting critical illness insurance or a disability insurance coverage. What will happen to your family’s finances if you suddenly fall sick and unable to work?
An emergency fund may be a lifesaver in such instances and cover some of your expenses for the first few months. It is a good start but it won’t be enough if you need to stay out of work for longer periods.
4. Get Life Insurance
If your loved ones will be left in a dire financial state if you were to die unexpectedly, then you should get a life insurance.
There are several reasons why getting a life insurance policy is a great idea depending on your specific personal situations. Not getting life insurance when you clearly need one is a grave financial mistake everyone should avoid.
If you’re young, just building a family, and with minimal savings and investments, a term life insurance policy can be used to augment your family’s finances if you were to die unexpectedly.
And the good part is that it is much cheaper than a comparable whole life insurance policy.
Some employers may provide some life insurance coverage as part of your employee benefits – usually a multiple of your annual income. But it won’t be enough in most cases.
A quick tip:
Go ahead to calculate how much you need in life insurance coverage using this tool from PolicyAdvisor.com. It will give you a recommended amount based on your specific circumstances. And it will let you know if you don’t need additional life insurance coverage.
Check out this guide to Canadian Life Insurance.
5. Plan For Your Estate
Estate planning deals with what happens to your assets when you pass. It is a good way to secure your family’s financial future because it ensures an orderly transfer of all your assets to the people you want to have them.
Getting a Will is a good starting point and one of the first steps in a good estate planning. With a Will, you can be rest assured that your assets will be distributed according to your wishes.
Do you know you can get a legal Will ready for your signature in the next 20 minutes in Canada and for just $39.99?
There are several online Will writing services that make the process both simple and accessible to many Canadians at a reasonable fee. Gone are the days of spending thousands to get a Will done with a lawyer.
But you should not stop with just getting a Will.
Think about your other investments and accounts. For example, have you updated your beneficiaries in your TFSA, RRSP and so on?
The Canada government permits some of your investments to transfer to your spouse at your passing on a tax-free or tax-deferred basis. So not updating the information may cause your family some extra stress.
Finally, you should consider working with an estate planning professional if your personal situation is quite complicated – for example, you have multiple assets in different jurisdictions, children from different marriages or dependents with disabilities that need special trusts.
Ready to get started? Check my review of the best Will writing services in Canada below and get the discounts when you sign up.
6. Save For Your Kids’ Education
Setting some money aside for your children’s education is a smart way to secure their future.
With average annual college costs currently at $21,000 for students living on campus, and projected to increase, ensuring your kids’ education will be guaranteed even if you’re not around is a great way to protect your loved ones.
The college fund doesn’t necessarily have to be a large sum – even a decent nest egg will do. A decent amount will reduce how much they need to borrow in debt and protect their future earnings.
Here’s a smart tip:
Start Early – it doesn’t matter how small your initial contribution is.
Even if it’s just $25 or $50 or $100 per paycheque. Start with what you have and gradually increase your contribution.
Fortunately, you can easily start saving even with little money.
And if you’re a resident of Canada, the government encourages education savings through the RESP program. RESP contributions up to $2,500 per year are matched by 20% under the Canada Education Savings Grant (CESG), with an opportunity to get even more for those with low income through:
- additional CESG matching (up to 20% on the first $500); or
- Canada Learning Bond ( $500 in the first year and $100 every year afterwards)
Learn more about RESP and the other government programs through the links below.
- 7 Things to Know About Registered Education Savings Plan (RESP)
- Canada Learning Bond: Free Money to Jumpstart Your Kids’ RESP
- 10 Ways To Start Investing With Little Money
7. Educate Yourself and Family About Money
Last but not the least, you need to commit to continually educating yourself about money and pass the information to your family.
One of the worst things that can happen is for your family to lose or mismanage everything you struggled to accumulate due to a lack of basic money management skills.
In most families, only one couple is responsible for most decisions about money. Make sure you discuss all major financial matters with your spouse.
Build a budget together, share the responsibility of ensuring the bills are paid monthly and so on.
For kids, start teaching them about money from a young age. Depending on their ages, this could mean:
- Getting them a piggy bank
- Opening a savings account for them
- Adding them as an authorised user on your credit card
- Helping them come up with their own financial goals and how to achieve them
- Making extra money; and so on
These are lifelong skills that’ll pay off and benefit them all through their lifetime.
But here’s the thing:
You can’t give what you don’t have, right? So start by improving your own knowledge.
Grab a book online or at the library, read blogs and articles on financial management.
Protecting yourself and your family’s financial future should be a priority. And getting started isn’t complicated.
The 7 ways above are a good starting point. Have any other way you’re using to secure your family’s finances? Let me know in the comments below.
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