6 Ways to Safeguard Your Children’s Financial Future in 2024

Once your child grows up, they take on the responsibility of providing for themselves and saving for their goals. However, you don’t have to let them go it alone. You can help your child start adulthood on the right foot and secure their financial future by following some key steps. Below, we’ll discuss six ways to safeguard your children’s financial future and prepare them for success.

1. Start a college savings fund

College costs can be high, but saving consistently over time can help get there — especially with a college savings account, like a 529 plan. 529 plans offer tax-deferred growth and tax-free withdrawals for qualified educational expenses. This helps your money go further when your child reaches college. Each state has a 529 plan, so saving in the state where your child plans to go to college is a good option.

2. Establish an emergency fund

Your emergency fund is a savings account set aside for unexpected expenses, such as a job loss, car accident, or sudden house repairs. This helps you pay for the expense and, if necessary, replace income without taking on debt. It’s generally recommended to have three to six months of living expenses saved in your emergency fund. Parents should aim for the higher end of that, or even more, since having more family members could increase the chance you need your emergency funds.

3. Consider life insurance

Understanding the answer to the question “what is life insurance?” is crucial for safeguarding your children’s future. Life insurance helps protect your family by paying a substantial death benefit if you pass away during the policy term. Your surviving spouse or child’s guardian can use this death benefit to help with your lost income, cover living expenses, and save for future goals like college.

Permanent life insurance policies, which last for life, also offer a cash value growth component that builds with each payment and grows tax-deferred. Once it grows enough, you can cash out life insurance via loans and withdrawals. This lets you combine financial protection with an additional wealth source to provide for your children.

4. Set up bank and investment accounts for them

Children can’t open their own financial accounts, but you can open certain joint or custodial accounts in their name and manage the account for them. For example, custodial savings and brokerage accounts let you contribute money for your child. These work like regular savings and brokerage accounts:

• Savings: Save your child’s money and let it earn interest, teaching them good savings habits.
• Brokerage: Invest your child’s money into a range of stocks, bonds, and other securities, helping them potentially build wealth and learn investing basics.

A Kid’s Roth IRA is another example to explore if your child has a job. Contributions have no tax advantages, but your child’s balance grows tax-deferred, and qualifying retirement withdrawals are tax-free. This gives your child’s investments more time to grow, helping them get ahead on their retirement savings.

Once your child reaches the age of majority, you can often transfer these accounts to them seamlessly. These accounts require you to act as the custodian and make decisions. However, you can involve your child in decisions so they can learn money management lessons.

5. Create your estate plan

A comprehensive estate plan ensures your assets are distributed according to your wishes and your end-of-life management and care preferences are met. Creating an estate plan can ensure that your children receive your assets and are taken care of. An estate plan includes drafting several documents:

• Will: This document explains your wishes for asset distribution when you pass away. It also designates an executor to distribute those assets and lets you name guardians for minor children if needed.
• Durable Power of Attorney: This gives someone the power to make financial decisions on your behalf if you become incapacitated. For example, it lets them access bank accounts or file tax returns.
• Healthcare Power of Attorney: This gives someone the power to make medical decisions on your behalf if you become incapacitated.
• HIPAA Authorization: This grants designated individuals the power to access your medical records and talk with providers about your health.
• Letter of Intent: This contains non-legally binding instructions and information on miscellaneous matters, such as funeral wishes, to help your executor and loved ones fulfill your wishes.

6. Get them involved in financial planning

Involving your children in financial matters helps them learn money management lessons early on and build good habits. It also helps them appreciate prudent financial management and disciplined saving.

Start by teaching them the basics about budgeting, saving, and investing with age-appropriate materials and activities. This could include things like games and books. As they get older, they may be able to play a part in managing financial accounts you open for them.

Furthermore, encourage them to set financial goals. If they want to buy something, encourage them to save up for it. Show them how small, consistent savings add up and help them reach their goals.

Set your child up for financial security

Parents can do a lot to secure their children’s financial future. Start a college savings fund as early as possible and build an emergency fund to help protect your children in case of emergencies. Meanwhile, plan for the long-term by setting up custodial accounts and considering life insurance. Create and regularly review an estate plan, too.

Try to involve your child where appropriate and teach them personal finance lessons. Not only will you create a secure future for them, but you’ll arm them with the knowledge needed to manage money wisely when they grow up.

Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.

Aflac Coverage

Life (A68000 Series) – In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400. Term and Whole Life (B60000 Series) – In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Group Whole Life (Q60000 Series) – In Arkansas, Delaware & Oregon, Policy Q60100M. In Idaho Policy Q60100MID. In Oklahoma, Policy Q60100MOK. In Texas, Policy Q60100MTX. Group Term Life (Q60000 Series) – In Delaware, Policies Q60200M. In Arkansas, Idaho, Oklahoma, Oregon & Texas, Policies ICC18Q60200M, ICC18Q60300C, ICC18Q60400C.

Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA.  Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions.

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