Author: Renee Hush – Financial Adviser, Macarthur NSW
One of my clients recently asked me “As a parent of two young kids, I'm increasingly worried about our financial security in case something unexpected happens. Can you provide guidance on how to financially protect my family in such events, ensuring we have a safety net?"
Ensuring your family's financial security is paramount, especially with young children depending on you. Having a safety net is always a good idea. This will come in a few different forms and your own personal circumstances will determine the level of safety net(s) you need. Here's a breakdown of the key areas you might consider:
1. General Insurance
Ensure you have adequate coverage for health (hospital and extras), car, home and contents, and any other valuable possessions like pets. These insurances help protect against financial loss due to unexpected events.
2. Life Insurance
Life insurance provides a lump sum payment to your family in the event of your death. This can cover expenses such as debt repayment, funeral costs, income replacement for your spouse or children, and future educational expenses for your children.
3. Total and Permanent Disability (TPD) Insurance
TPD insurance provides a lump sum if you become totally and permanently disabled and are unable to work. It can cover various costs including debt repayment, income replacement, medical expenses, children’s education expenses, and ongoing care needs.
4. Income Protection
Income protection provides a monthly benefit if you are unable to work due to illness or injury (usually between 60% - 75% of your current salary). This ensures a continuation of income during your recovery period.
5. Trauma Cover
Trauma cover pays a lump sum if you are diagnosed with a serious medical condition listed in your policy, such as heart attack, cancer, or stroke. This lump sum can be used to cover medical expenses, lifestyle adjustments, or any other financial needs.
You may already have some cover in your super, but it is important to review this and ensure you cover everything that is required. There are a number of ways to pay for this cover. Your financial adviser can provide you with a full review and to discuss the costs and your options available.
6. Emergency funds
It's essential to have liquid savings set aside for emergencies. This can be in the form of cash savings, a separate savings account, or a readily accessible line of credit. Aim to build up an amount that covers several months' worth of essential expenses.
7. Savings for Education
With young children, planning for their future education expenses is crucial. Consider setting up a savings plan or investment specifically earmarked for their education costs. There are dedicated education savings plans that offer tax benefits and other advantages.
8. Estate Planning
Prepare a comprehensive estate plan with a solicitor or estate planning specialist that includes a will, powers of attorney, and guardianship arrangements. This ensures that your wishes are carried out in terms of asset distribution and guardianship of your children in case something happens to you and your partner.
Seeking the advice of a qualified financial adviser is highly recommended. They can assess your specific needs, review your current coverage, and help you choose the right mix of insurance policies and savings strategies to build a robust financial safety net for your family. They can also assist with estate planning to ensure your family's future is secure regardless of unforeseen circumstances.
To find an adviser in your local area, visit www.fiducian.com.au today.