Getting the Basics Covered
Having or expecting a child is one of the happiest and most exciting times of your life. It’s also one of the scariest. There’s so much that’s new, so much that’s unknown. I know that personally, there were times both during the pregnancy and after the birth that I have been overwhelmed by what felt like a mountain of uncertainty.
While these feelings are very real, the truth is that there are a number of simple things you can learn that make everything seem much easier. This is true of general childcare (like getting used to changing diapers or the sound of a crying baby), and it’s certainly true of your finances. While everyone’s situation is different and requires customization, there are a number of things that every family should be thinking about. I’d like to introduce some of those things quickly here before going into more depth on each in subsequent posts.
With each of these, the main focus is on protecting your family. I know for me, my top concern is making sure my family will always have the basics like food, shelter and clothing. There are other things that would certainly be nice, but protecting the ability to pay for the day-to-day needs is essential. Each of these protections come at a cost, but the reward is a peace of mind in knowing that you can deal with almost anything that’s thrown your way.
Just like getting used to having a child, this list can feel unfamiliar and overwhelming. Know that in subsequent posts, we’ll go through steps to make each one of these things feel manageable.
Emergency Fund
An emergency fund is simply a savings account that never gets touched unless there’s a financial emergency. A parent becomes unemployed or disabled and bills need to be paid. A child has a trip to the emergency room. Something in the car breaks and requires significant repairs. These things cannot be planned for but happen to all of us. An emergency fund makes sure that they can be addressed without impacting your regular budget.
Estate Plan
Estate planning is one of those terms that typically gets thrown around when talking about rich people. In reality, estate planning is absolutely essential for anyone with children. Each parent needs a will, without a doubt. You’ll also want to appoint your healthcare power of attorney and an emergency guardian(s) in case you are temporarily unable to care for your children. This is not the most fun topic in the world, but it’s an essential one.
Life Insurance
If your family depends on your income or your services (that means you, stay-at-home moms), you’ll want some amount of life insurance. Otherwise, how will that income or those services be replaced if you die? There are many different kinds of life insurance, but you almost definitely want what’s called “term” insurance. It’s the simplest, cheapest and purest form of life insurance and it’s the best way to truly protect your family.
Health Insurance
You likely won’t have much choice here, as you’ll simply be choosing between insurance offered by you or your spouse’s employer. You’ll want to be on a single family plan, and if you have a choice you should look through the different benefits offered and pick one that lines up best with your needs. We’ll go through some helpful terms to know in a subsequent post.
Disability Insurance
A good disability policy will replace a large chunk of your income if you become injured or sick and are unable to work for a period of time. Most people pass over disability insurance, but in fact disability is much more likely to occur than death, making it just as important as life insurance. Ideally you should get an individual policy rather than one through work, as an individual policy will stay in force if you change jobs.
Auto Insurance
If you have a car, you are already required to have auto insurance. But what you want to do here is make sure your liability coverage limits are high. This is the “Bodily Injury to Others” section of the policy, and it’s the part that pays for any damages you might cause if you get into an accident. This liability coverage is essential to protect your money in the worst case scenario where you seriously injure someone and they require significant medical care.
Renter’s/Homeowner’s Insurance
Whether you own or rent your home, you’ll want this insurance. Many renters forgo this, but it’s just as important for them. You want to insure your property in the case of theft, but the biggest piece again is the liability coverage. While your auto insurance will cover you while driving, this will cover you in most other situations.
