Essential Life Planning Tips for Current (or Future) Parents
For parents (or soon-to-be parents), one of the most important parts of any comprehensive life plan is the part (or more accurately, many parts) that concerns your children. If you want to be able to help your child with life expenses down the road or make sure they are taken care of in the event of your unexpected death, it’s vital that you know how to make the financial and legal preparations to ensure they’re covered. Here are some life planning tips for parents.
Start preparing for college before they can even read
If your child is two years, college is probably the last thing on your mind. This is a mistake. The importance of beginning to save and invest for your child’s college fund as early as possible is paramount.
The most common and probably the best way to safely build a solid college fund for your child is through the use of a 529 plan. These are specifically designed for college savings and are offered at the state level. You can pay into a 529 savings plan, which works a lot like a Roth IRA account, or a prepaid private plan which basically pre-pays tuition for public in-state or private out-of-state institutions. More on 529 plans here.
“Families considering private school may benefit by having both a private college 529 account and a standard 529 plan. Proceeds from the private plan could be used to cover tuition, since it’s prepaid, while the standard plan could hold money to pay for room and board, books and other college expenses,” suggests NerdWallet.
Consider investing in real estate
Real estate investing is becoming more and more popular as a form of saving for retirement, but there are also some benefits that directly relate to your children.
As one investment-savvy parent who invested in real estate puts it, “having bought my first home before I had started having children, I did some quick arithmetic and decided that the rental homes I now owned could serve as my children’s college funds. I designated one home for each child. No paperwork was required and there is no penalty if I decided to use the funds on something other than college.”
Not only that, but real estate is the perfect vehicle to teach your kids about finance. Check out real estate investment opportunities in your area.
If your child has special needs, save smart
“In order to remain eligible for government benefits, special needs children need to be practically destitute … For some programs, having as little as $2,000 in the bank is enough to disqualify a person. Fortunately, there are two ways to set money aside for a child’s care without disqualifying him or her from government assistance,” notes US News & World Report.
The way you do this is to set up a trust or an ABLE account, in which your child can make tax-free deductions for whatever issues arise as a result of their disability. Check here for more on ABLE accounts.
Make sure to have a current, updated will
Nothing is more stressful for your children than forcing them to deal with your death without knowing your clear vision for your assets and properties, making them go through probate procedures, and dealing with legal red tape. Take the time to update your will. It’s one of the smartest ways to spend a few hours.
The time to start life planning for your kids’ futures is yesterday. The next best time is right now.
This article was written by Brittany Fisher. Brittany has spent more than 20 years as a CPA, and is currently working on a book about financial literacy (due out in 2018). She also runs Financiallywell.info