When you’re starting a family you face perhaps the most daunting financial pressures you’ll encounter at any stage of life. Expenses like a new home and young children weigh heavily, and you’re likely still early in your career, far from your peak earning potential. Meanwhile, you need to begin saving for the future: college for the kids, a nest egg for you and your spouse. How can you address all of these obligations at once?
The key is to imagine you’re at the beginning of a long-term building process. Financial security is a combination of insurance protection, and savings and investments that accumulate over time. Start small and cover all your bases. As your career progresses and your income increases, your financial security will grow as well.
The first step in establishing your financial security is to confront the biggest threats to it by asking yourself some tough questions: What would happen if you or your spouse or partner became sick, injured or died? All of these situations can be devastating to your family’s financial health. That’s where insurance comes in.
Life insurance can provide your family members the resources to maintain their lifestyle when you die. It can replace some or all of your income, pay off debts, cover funeral costs and can even help fund longer-range needs like college tuition or retirement. Ensure your spouse or partner as well, even if he or she doesn’t work outside the home. A stay-at-home parent provides vital household services—childcare, house upkeep and transportation to name a few—that would be expensive to replace. To find out more about life insurance and if you need coverage, use our Interactive Planner.
Disability insurance is also a must. It will replace a portion of your income if you are unable to work due to a disabling illness or injury. Why is that important? Think about how long you could make ends meet if your paycheck suddenly disappeared. A LIFE Foundation survey found that a majority of workers wouldn’t make it more than a month before serious financial sacrifices would have to be made.
Many larger companies and some smaller ones offer some disability coverage to employees through a group plan. If you need more, it may make sense to buy additional coverage through your employer’s group plan, if available. Buying your own disability insurance policy independently is also an option worth considering. Unlike group coverage, privately owned insurance stays with you even when you change jobs.
Be Sure to Save
Given all the costs a young family faces, the idea of saving may seem impossible. But it’s crucial to get into the habit early, and important to have a source of cash to fall back on in an emergency. Setting aside just $25 a week at a 6% annual return will turn into $31,000 in 15 years. If you have credit card debt, your first priority should be to pay it off. High-interest rates on credit card debt can turn into a long-term drag on your family’s financial health.