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Few people even imagine the loss of a job or the death of a loved one, but tragedies happen every day.
Preparing for these tragedies can help ensure that your family has the resources they need to recover and prevent the additional stress of financial hardship that often follows unexpected death, medical expenses or layoffs.
Here are five ways to prepare your family financially in the event of a tragedy. `
1. Have an emergency fund
Having an emergency fund is essential. A survey by US News & World Report Found that 42% of Americans do not have an emergency fund. In fact, 40% of those surveyed said they couldn’t cover a $1,000 surprise expense.
Money experts generally recommend that individuals save for three to six months of expenses. Having strong savings can help a family weather any storms that may come.
2. Determine the beneficiaries
Another way to prepare families for a tragedy is to identify beneficiaries. Designating a beneficiary on most financial documents is fairly simple, but not doing so can cause headaches for loved ones. Determining a beneficiary can help ensure that the estate is protected and the money or assets are distributed.
As explained charles schwabHow and when money or assets are transferred to a beneficiary may depend on the type of account. For example, money from a bank account or certificate of deposit may be payable to a beneficiary upon death, while benefits from an individual retirement account or brokerage account may be transferred upon death.
3. Create an estate plan
While many people believe that estate plans are only for the rich, the truth is that everyone should create a plan. according to Trust and Wills Estate Planning ReportMost Americans do not have any type of estate planning. Only 31% have made a will and even fewer, 11%, have a trust.
Without testamentary documents, loved ones are often left unprotected. The court has to decide how the estate should be distributed, which may take years and may not adequately provide for the deceased’s family.
4. Get organized
In the frantic state following a tragedy, attempting to find financial documents, passwords or other important information can add to the chaos. It is important to organize ahead of time.
Having a safe deposit box, filing cabinet or other place for important documents and information can help alleviate some of the stress that inevitably comes. Make sure information is kept up to date and share location only with a trusted loved one.
5. Update insurance policies
For young people, life insurance may seem useless, but it can provide a significant amount of financial support if a loved one dies suddenly.
A comprehensive life insurance policy can help cover the cost of burial and funeral, which can cost an average of $8,300, reported Choice Mutual. However, life insurance is not limited to just these costs. A solid policy can also provide income replacement and coverage for medical bills.