Start your family on the path to financial wellness
Organized households have more money and less stress.
They rely on simple systems to ensure their banking is as automated and efficient as possible, their investments are on track and that their family is properly protected.
As you’re gathered with your family for the holiday season know that you can get your family’s financial house in order, too, with these starter steps.
Get the right kinds and levels of insurance
When families think of insurance they often stop at home and auto and this is dangerous. Don’t delay getting insurance for your life, critical illness and disability because these are even larger risks; that you or your spouse (if applicable) pass away, become sick or disabled.
How much you need for each coverage will depend on a multitude of factors, like your age, income, health history and so on. It’s not a one-size-fits-all situation. I’m a big fan of getting a referral to an insurance provider who can help you assess what you need.
It’s worth noting that the insurance business is being heavily disrupted by technology these days. You may find yourself consulting with both an insurance advisor (human) or even one of the emerging tech firms that has removed the human advisor part of the process and uses algorithms to pair you with a policy. Some of those names that have crossed my desk recently are Policyme.com and PolicyAdvisor.com.
The last point to remember when it comes to insurance is that you’re statistically more likely to become critically ill or disabled than you are to die, so don’t overlook your options for critical illness and disability insurance. I often see this mistake made with my students.
When you get your quote for coverage, shop it around and then build the cost into your budget.
Write your will
Willful.co, a digital will-making platform, ran a study just over two years ago and found that 65 per cent of parents haven’t set up their will.
Parents, if you don’t have a will, please stop what you are doing right away and make this one of your top priorities.
A will dictates how you want your assets and your children's’ guardianship handled if you die. This is no laughing matter. If you don’t make a plan for this, the courts will decide what’s going to happen for you.
In your will you will need to choose an executor (someone who administers the estate) and a guardian (someone who will take care of your children).
If you’ve got an old will, it’s possible it’s invalid now. Let this be your cue for a refresh. You can do your will through a lawyer (typically when your situation is a bit more complicated) or through an online platform like the above mentioned or something similar like Legalwills.ca
Systematize your saving and investing
You’re so busy you can hardly find a moment for yourself, right? At least that’s how I feel with two young kids. Rely on helpful tools and systems to take the guesswork and forgetfulness out of your finances. For example, set up all your bills to be paid through direct debit, including paying off the full balance of your credit card each month. Set up automatic investment contributions. Leverage the power of online meetings to have your semi-annual check-in with your financial advisor, investment advisor or planner. Preauthorize your lenders to take an extra payment or two each month so that you crush your debts a bit faster. Alternatively, round up your regular payments by a few extra dollars so that you are automatically paying a bit extra.
The systems you spend time setting up should kind of feel like your financial orchestra is being conducted nicely on your behalf, and the music sounds great.
Set your kids up for success
If you have children under 18 years old, you’re probably thinking “how the heck am I going to help them pay for their school?”
The good news is that RESPs are a fantastic way to save for their future education, which, 18 years from now, is expected to cost more than $100,000 for a child born today. When you contribute you’ll even get a boost from the government through the Canada Education Savings Grant (maximum grant of $500 per year or 20 per cent of your contributions). So, if you’re working that math backwards, you need to put $2,500 in per year to get that $500 maximum grant. If you’re making a lower income, you may even qualify for the Canada Learning Bond.
This may sound a bit crass, but, if money is tight, ask your family and friends to skip buying your kids more toys this holiday season (and for birthdays, too), and have them make an RESP contribution instead.
When you invest this RESP money well, and you should, it will grow through the power of compounded interest and reinvested returns as well as through the grant money.
There are other things you can do for your family that will be helpful in everyone’s financial journey. Talk openly about money. Encourage saving for things rather than using debt. Empower your kids to get a job and maybe even start to invest the money they earn. And, celebrate your financial success! The toughest part of getting your finances in shape as a family is getting started. Work at this step by step and learn as you go.
This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.
