It’s goo-ey and your kids are so creative with this stuff, right? When they’re done, somehow that play-doh finds its way all over your house. I once found some inside a can of tennis balls in my son’s closet!
Parents, I want your financial Play-Doh to be in one solid piece. Here are my recommendations for making sure your financial plan sticks together.
1. Get life insurance. Part of your financial plan should include some insurance. So if you are looking for the cheapest type of insurance to get, consider buying term insurance. But how much do you buy? How much is too much? First, figure out what your monthly expenses are. Then, multiply by 12. Next, add 2 teaspoons of salt, and you are good! You now have your annual expenses. Once you know this, a fee only financial planner can tell you how much you need to buy. Most insurance agents can too.
2. Consider setting up a family revocable trust as part of your financial plan. It is a legal document and money that you want to go to your kids (or anyone else) will avoid probate. If you answer the questions below, it could save you time and money when dealing with an estate planning attorney.
- Who will be the guardian(s) of your kids if something should happen to you? You need a pecking order like #1, 2, 3, etc.
- Who will be in charge of the money if the kids are under the age of 18? One person, 2 people? Do they both have to sign off on major financial stuff?
3. Set up a 529 college savings plan. The money grows tax deferred and as long as you use it for college, you can take it out tax free. Check out freshmanfund.com. It’s an easy way to allow your friends and family to gift money to the account.
4. Include Disability insurance in your financial plan. I know I have written about this tons but if you get hurt or sick, you could be screwed if you don’t have it. Period. You need enough of a benefit to fund your fixed living expenses, which includes taking care of your kids.
5. Consider setting up a custodian account for your kids as part of your financial plan. You could be custodian or whoever else you choose. But when your kid turns 18, it’s their money. This is not a type of account where you save money in taxes. Review with your CPA.
6. Buy an emergency kit for your house in the event of a fire or an earthquake.
Sometimes this financial stuff falls through the cracks. You know you need to do it but it’s just not a priority. But when you hear a story of someone you know who didn’t do a few of the items above, it really hits home. Your financial Play-Doh doesn’t have to be all over the place. Let’s make it stick together for your kids’ sake.