4 Best Actions to Help Your Children Financially

As a parent, you are always concerned about your children's financial future. Many parents need help to equip their children with the financial skills to thrive in this complex and uncertain economic landscape.?

Alternatively, parents want to plan for their children's future success by planning for education and achieving financial goals.?

With 36% of young adults facing financial risk, according to The University of Illinois 2018 study at Urbana-Champaign, the sampled pool gave access to their financial aptitude, basic concepts of interest rates and inflation, and financial practices.?

The study concluded that the financially at-risk participants had zero savings; they could not pay for living expenses for three months. In addition, they lack $2000 in case of an emergency.

The data is alarming.

In this article, you can will get practical solutions to help build a solid financial foundation for the future for you family.?

The article will detail:

• How to have finance conversations at home, and which actions parents can take to teach their children financial literacy
• How to save for your children's college expenses
• Adding children to parents' credit card
• How to get a life insurance

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1. Teach financial literacy

Financial literacy is the knowledge, understanding, and skills on financial concepts and tools that help you make informed decisions. The knowledge is crucial in helping your children navigate the complex world of money; planning their future and making sound financial decisions.

It is the first step in achieving financial stability.

Engaging children in financial talks and decision-making at home can be the start of teaching financial literacy. It is an opportunity to teach them about budgeting, investing, saving, and living within your means.

Here are some ways to teach children financial literacy:

• Start early – the best time to start is at a young age. David Anderson, PhD., a clinical psychologist at?Child?Mind?Institute, explains that children begin understanding basic mathematics in second or third grade. Therefore, parents have an opportunity to lay out a foundation for financial literacy and stability.
• Give allowances – it is an opportunity to teach kids about budgeting and saving by helping them divide their allowances into different categories, such as spending, savings, and giving. It traches money allocation.
• Be a good example – children learn from seeing what their parents are doing and imitating. Be their role model when it comes to finance. As a family, you can budget, save, and invest together.
• Allow children to make financial decisions – yes, this can be controversial, but we learn from our mistakes. Even you, as parents, did not get it the first time. You can allow children to make decisions on their allowances.?

2. Opening a College Savings Account

A savings account holds the money you plan to spend only for a short time. It is a deposit account held at the bank or any financial institution.?

Parents want their children to have good jobs and succeed. One way of ensuring a better future for children is through college.?

College is the best way to improve potential earnings. According to the Economic Policy Institute, the analysis of Labor Department Statistics in 2019 concluded that a graduate would earn twice as much as an American without a degree.

Despite the increase in college tuition (10-fold in some institutions) in the last decade, parents still want to ensure their children attend college. Therefore, the best option for parents is to open a college savings account to help children get ahead for their children's financial future by ensuring they graduate debt-free.?

Additionally, parents involve children in opening savings accounts to expose them to finance literacy.?

How to Open a College Savings Account

You can apply to open a college savings account in person or online.

These are the requirements:

• Name
• Phone number and address
• Date of birth
• Social security number
• Email address

To open a college savings account online is easy and fast. First, ensure you are using a secure and trustworthy network. Fill out the application with personal details (requirements).

Then, submit the form. Some banks may require you to fax or email additional documents (social security number, driver's license, ID, and bank account information.

3. Adding Children to Your Credit Card as Authorized Users

Parents adding children to their credit cards as authorized users can be counterintuitive to financial independence. However, it allows the kids to understand financial responsibility and build a credit score. It is the beginning of future financial freedom.

A good credit score determines the following:

• The neighbourhood where your children will stay.?
• Children's ability to access affordable funding.?
• Employment opportunity.
• It is the first impression at the bank.

Parents' credit cards increase the credit score of their children. When your child reaches 18, they have a credit history and can qualify for loans, credit cards, and auto loans.?

Credit card authorization helps children become independent by 18 years. They can apply for credit independently and have access to preferential rates.??The method saves parents money to preload a card before a child can get one. A no-credit history for children will affect their credit build.

4. Purchase Life Insurance

Life insurance is a contract between the policyholder and the insurance company whereby the insurer pays a specific amount of money to get a premium after the death of an insured person or after a particular period.?

How to Purchase Life Insurance

I.Decide the amount of coverage you need

The life insurance amount will depend on the current financial situation and lifestyle.?

The right life insurance coverage should cater to the financial beneficiaries for years after death.

There are many ways to calculate the potential coverage limit. However, a popular method is the DIME formula.

DIME formula accounts for the amount left on the mortgage, final expenses and debt owed, total income depending on what the beneficiaries may need after death, and expected or unpaid school expenses.

II.Pick a Type of Life Insurance

Different life insurance offers term or permanent coverage. Term insurance is cheap with fewer benefits, while permanent insurance is expensive with extra benefits.?

Term Life insurance

Term?life?insurance?is the cheapest life insurance coverage for young people. It offers specific period coverage, for instance, 10-30 years.

The primary purpose of term insurance is to provide financial dependency for the beneficiaries.?

For example, the insurance company will pay your spouse or children upon your death until the designated term ends and the benefits end. However, the spouse or children can opt to renew or convert the policy if it is renewable or convertible.

There are various types of permanent insurance, but the article will focus on whole and universal life insurance.

Whole Life Insurance

Whole?life?insurance offers lifetime protection with fixed cash values and premiums. For example, if you obtain insurance from a mutual company, the policy can be eligible for dividends depending on the company's financial performance.?

Some policies require the policyholders to pay a premium until death, while others require premium payment for a specific number of years.?

Universal Life Insurance

Universal?life?insurance?accumulates the cash value. The money is grown at a?fixed?interest?rate?or?current?market?rate.

Universal life insurance is available in various forms, including?variable?and?indexed.?

III. Research Different Life Insurance Carriers

Make the internet your friend. Many companies have profiles on the internet. Research different companies and narrow down potential partners according to your needs.?

Many companies include different life insurance options.?

Good life insurance combines competitive rates, coverage options that meet your needs, and excellent customer service.?

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?IV.??????????? Request Quotes from Different Life Insurance Companies

Life Insurance Company's website contains limited information. One thing they fail to provide is the price of the premium.?

?Major insurance companies have a quote generator on their website. The quote generator gives instant prices.

?The quote requires one to provide personal information such as gender, age, and address. In addition, they require details about your medical history. Some questions contain your lifestyle habits, such as smoking history, current medication, and past surgeries.?

?You can contact an agent if the company needs an online price generator.

Price quotation narrows down the best life insurance company and affordable rate.

V. Fill Out the Application

After selecting the life insurance company, please fill out their application form.?

?The form requires you're basic information, driver's license number, and social security number.

?The company may also require an Attending Physician statement (APS). An APS verifies the medical history and ensures you obtain the best policy.?

?Life Insurance Company uses the statement to calculate the death benefits.

VI. Prepare for the Phone Interview

After submission of the application, the company may request a secondary phone interview.?

?The purpose of the interview is to verify the information and may ask additional questions. For instance, they can ask about hobbies, lifestyle, income, financial health, and if you have other life insurance policies.

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????????????????????? VII.??????????? Schedule a Life Insurance Medical Exam

You can schedule the exam through a phone interview. The medical insurance examiner will visit your place of work or home to take your vitals, weight, blood pressure, draw blood, and height. The examination will take approximately 30 minutes.?Physical examination is essential before approval of coverage by many life insurance companies.?

?Nevertheless, a medical exam is not essential. Some companies will give you coverage based on if you meet the requirements.?

?No medical exam will rush the approval process. However, the policies are riskier and, hence, more expensive.

?A recommendation is to wait for the test result from the medical exam to lower the premium rate.

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?????????????????? VIII.??????????? Wait for Approval

The phone interview, medical exam, and application form will determine your eligibility for coverage.?

?The underwriter will take weeks or months to review the information.?

?After approval, you will receive the quotation. You can review the terms and see if it aligns with your interest.?

?If you are satisfied, you can sign the policy document.

?Life insurance is a great option to build up extra financial security for your business, family protection, and loved ones after death.

?Upon a spouse's sudden death, emotional devastation and financial challenges sidetracked the family's financial goals.?

?Most companies give their employees group life insurance equal to twice the annual salary. The amount may need to be increased, prompting another insurance cover.?

?The 2022 Insurance Barometer Stud suggests that 68% of people (life insurance owners and no life insurance) will be financially secure after the death of the primary wage earner. Moreover, 78% of life insurance owners (both employer-based and individual insurance) feel secure after the death of their primary bread provider.

?An essential part of obtaining a life insurance cover is to calculate your assets and assess if it is enough to cover the cost of the family. For instance, enough money for mortgage, daily expenses, and college tuition.?

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Helping your children with finances is a paramount responsibility for any parent. It is the gateway for your children to foster a healthy relationship with money in the future and build a successful future. All these principles will be essential in navigating the financial world.