When it comes to money most of us live in the here, and now, we save for big things like holidays, Christmas and a new car or house, but, even these are short-term goals. We don’t think about our finances in the future. We just have the vague assumption that everything will be fine and that our financial situation will improve over time. We certainly don’t spend time worrying about our family’s economic future. We don’t worry about what would happen if we were no longer here, or if an earner suddenly lost her income.
There are usually two main reasons for this. Firstly, no one wants to think that anything bad will happen. We all assume that we will live to old age, that we will work and gain regular pay rises and that our finances will never get any worse. Secondly, many of us spend our lives living paycheck to paycheck, struggling to cover bills and pay our mortgage. When life is like this, it’s hard to see a way to save or make any plans for the future.
But, protecting your family’s finances in the long term is crucial. Your finances are unlikely to drastically improve without some efforts, and unfortunately, we never know what will happen in the future. If you want to ensure that your family never struggles with money and you want something to leave them when you are gone, you need to take steps now to protect their finances.
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Look After Your Own Money
The first thing that any of us need to do, even when we are thinking about the finances of other people, is looking after our own money. You can’t start saving for the future or building a nest egg to leave behind if you are currently in massive amounts of debt.
Sit down and build a household budget. Make some cutbacks and make plans to pay your debts off as soon as you can, before they cost you too much. Get in the black and start saving. This gives you a great platform to build from.
Get the Right Insurance
Most parents don’t have life insurance. They think that they don’t need it because they are young. We insure new homes and cars against accidents, damage and breakdown, but we don’t protect our lives. Tax efficient life cover gives you peace of mind. You know that your family will be ok if something happens to you and that the loss of your income won’t leave them with financial strains.
It’s also worth insuring yourself against loss of income, in case you are ever ill or injured and unable to work. If you are getting older, you might also want to consider funeral cover, to help them cover any costs.
Make A Will
We don’t all have insurance, and even less of us have written a will. The main excuse for this is “I’ve got nothing worth leaving” but if you’ve got a family, you have. Your will isn’t just about money. You can use it to specify what you want to happen with property and other assets, which may be worth money. You can also use your will to determine who you want to raise your children in your absence. What better protection is there than making sure that they are loved and cared for, even without you.
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Getting debt free should be your priority. The last thing you want to leave your family is debt. But, as soon as that is done, you need to think about saving. Leaving property is fantastic, but having money to leave behind, as well as money to look after you all in the meantime, gives everyone more flexibility.
Learn about high-interest savings accounts and try to save what you can, when you can. It’s worth setting up a direct debit for even a small amount so that your savings pot keeps growing. You can also use apps to help you.
Think About Your Estate
At the moment, you can leave someone £325k without paying inheritance tax. You may be able to leave children up to £450k. You might be thinking that this sounds like a lot of money and something that you don’t need to worry about. But, it includes your home and any other property, your possessions and your savings. Your estate might be worth more than you think, and a 40% tax bill could have a significant impact on your family. While inheritance tax can’t be avoided if your estate worth is over the threshold, it’s still worth learning about it.