What are you giving your valentine this year? Most people opt for candy, flowers or reservations at a nice restaurant. Unlike chocolate and roses, there are some financial gifts that show your love while truly standing the test of time. Here are some of the best financial gifts you can give to show someone you care:
If you have loved ones that depend on you and your income, make sure they continue to receive that support even after you’re gone. Life insurance should cover your liabilities and replace your income. Have you and your spouse worked out how much coverage your family needs? If not, that’s an important discussion to have.
“Life insurance” might not come to mind when you’re planning date night. However, it’s a smart way to ensure you and your spouse are on the same page. Pour some wine, sit down together and discuss what your life insurance needs would be if something happened to you.
Just remember: Don’t consider life insurance an investment. I recommend term life insurance in most cases because it offers that financial support without the investment components of whole life insurance. There are typically other investments to suit your needs even better.
Estate planning ensures that your loved ones don’t have to deal with messy decisions after you’re gone. Don’t wait until you’re old to create a will. This is especially critical if you are a parent. A will specifies a guardian or a caregiver for your children if you and your spouse die.
A will also lets you detail how your property should be split among your loved ones. If you don’t have a will, the state decides how to split your property. Take matters into your own hands so that you, not the government, decide who gets what.
If you have minor children, you’ll have to wait until they hit the age of majority to list them directly as beneficiaries of property assets. Until then, list someone you trust who can hold those assets for them until they are of age.
Don’t forget that an additional step is to specify beneficiaries for life insurance and retirement accounts on a beneficiary form because they won’t flow through the will.
Another important reason to get your will and ancillary documents together is that you will specify a healthcare power of attorney and a financial power attorney to be able to make decisions on your behalf in case you are unable to do so (for example, you are in a coma).
Dealing with Your Clutter
Have you ever had to help pare down the belongings of an elderly relative after they downsized their home or passed away? It’s usually a time-consuming, overwhelming process that drudges up old knick-knacks, boxes of random paperwork and the occasional spider. Someone will have to deal with all your stuff someday, so try to ease their burden by decluttering.
The same goes for your finances. Keep good records of your investments, your debts, and your assets, and keep them as organized as possible. It’s common for one spouse to control the money in a household. Make sure you include your spouse in your financial decisions and portfolio setup, and show them where to find important documents. That way, if anything happened to you, they could take on that role. Better yet, make those decisions together so you are both clued in.
This is one of those housekeeping to-dos people tend to put off, but even if you become ill or disabled for a while, your spouse or adult child might have to help manage that information.
Wisdom and Education as Financial Gifts
We aren’t born with the innate knowledge of how to manage our money. Money behaviors are learned. Involve your children in the family budget as much as possible, and give them the financial gifts of self-efficacy and money competency.
Explain to them why they can’t have that toy, or how you’re saving for that next family vacation. Begin to teach them about investing as they get older, or share some of your favorite money books with them. (Here are some of my picks for books for high school graduates.) That education will long outlive any material gift, and it will set your children up for a responsible, abundant financial life.
About Your Richest Life
Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. Contact Katie today for more information.