How to Build a Financial Safety Net for Your Family
A financial safety net is meant to protect you and your family, at least in part, from losing your financial security or derailing your long-term financial goals because of some unexpected event like a catastrophic illness or other personal tragedy.
Buy Proper Insurance Coverage
Buying proper insurance coverage will ensure that your income and finances don’t suffer in certain situations. According to The Week, protecting your family with term life insurance is a crucial piece of your financial safety net. A life insurance death benefit can be a lifesaver for your family should something happen to you and provide immediate liquidity for your beneficiaries. The life insurance death benefit can be used to pay off debt, put towards your children’s college education, or simply be used to provide cash flow each month. Term life insurance is worth it even when you’re young and healthy because it’s inexpensive, and you can choose anywhere between a 10- and a 30-year term.
Invest in Income-Producing Assets
According to Podium, investing in income-producing assets will help you to build your savings account and you’ll have more money to put towards your financial safety net. These assets will help your income to build and if a catastrophe hits, you’ll have more than one source of income. Investing in real estate is like owning a business, and you should create a business plan that outlines your goals. There are many assets you can choose from. You should talk to an investment professional if you’re considering investing for the first time.
Create an Emergency Fund
An emergency fund is generally a stash of money held in a liquid savings account that is specifically set aside for unexpected events that carry some financial impact like losing your job, unexpected medical bills, or necessary, but unanticipated home or car repairs. According to Thrivent, it’s the most basic piece of your financial safety net. The only objectives for this money should be that it’s easily accessible in times of emergency and should help you and your family avoid high-interest credit card debt when unexpected or emergency expenses arise, which is why the money should be money that you have agreed not to touch under normal circumstances.
A financial safety net is something just about everyone needs. Ensuring that you’ve included the right pieces of the puzzle can offer maximum protection. It may take some work up front, but you’ll thank yourself for creating a strong financial safety net the next time a financial emergency comes around.
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