Discover ways that you can future-proof your finances no matter how the economy changes.
These days, you are likely hearing a lot about a coming recession. For those paying attention, they are taking steps to protect themselves. Being a mom, it can be hard to manage your finances on top of all of your other responsibilities. You are probably wondering exactly how you can best protect your children and your household in the event of an economic slowdown. There are plenty of ways to better save and invest your money, but it’s hard to know where to start. Below is a great starting point for some of the best ways that you can protect yourself and your family financially in the threat of a looming recession.
Step 1: Establish an Emergency Fund
Having money in an accessible account to fall back on is essential in an uncertain economy
You’ll be thankful you started an emergency fund—just in case.
As a mom, it is easy to fear the worst for your family. That is why it is so important to put financial measures in place to make sure your family is never caught in a tough position. The first step you need to take when it comes to planning for a recession is to establish and begin contributing to an emergency fund.
An emergency fund should be an accessible, high-interest account. You should start by looking for an FDIC insured account. These types of accounts allow your money to accumulate interest, while still being accessible enough that you can dip into your emergency fund due to job loss or other unforeseen financial hardships.
It is also important to establish an emergency fund because credit can be hard to come by during a recession. That means, if you are caught in a tough situation without the money to cover lost income, then you may also have a hard time taking out a line of credit as well. In order to avoid having to borrow money at a high interest rate or being denied credit, you should establish an emergency fund.
Step 2: Make Sure You Have a Life Insurance Policy
Having life insurance is essential to protect your children in the future—no matter what happens
Getting life insurance coverage is an important step for any mom.
Part of planning for your financial future is planning for what will happen after you’re or your partner is gone. Not the most fun to think about—but it is super important for your children and other loved ones. One of the great things about purchasing a life insurance policy is that the payout will not change based on the stock market—unlike most other investments.
Life insurance also tends to be very affordable for people who are in good health and on the younger side. For example, if you are in your 20s or 30s, you can secure a cheap term life insurance coverage that will protect your family. Getting affordable term life insurance coverage is the best option for many families because of the cost.
When compared to permanent life insurance, there is a major cost difference. The reason why term life insurance is so affordable is because your policy expires after the duration or “term” is up. After the term, you will lose your coverage—but it is expected that by that point you will have enough savings to provide for your family after you’re gone. Permanent life insurance on the other hand guarantees a payout and some of the accumulated cash value can even be used to cover expenses while you’re alive. Though this is an enticing perk of permanent life insurance, many opt for a cheaper term life insurance policy that offers the same coverage amount.
Step 3: Focus on Long Term Investments
By managing your investments with the future in mind, you can weather the recession
A financial advisor can help you manage your investments.
As the stock market fluctuates, the value of your investments will change. However, you won’t necessarily lose money unless you decide to sell off your stocks and bonds. Because of this, it is best to make sure that you—and your financial advisor, if you have one—are making the right investment decisions.
For example, it is never a good idea to sell when the market is in a recession—unless a specific stock or industry is completely tanking. By holding on to your investments through the ups and downs of the market, you can better strategize to sell when the market is doing well. That way, you can avoid incurring any major losses due to a recession.
As you age and your kids grow up, you will probably want to begin lowering the risk of your investments and making your money as accessible as possible. That way, you won’t be majorly affected by any changes in the economy when you and your children are older.
Step 4: Keep a Diverse Investment Portfolio
By ensuring that no one market can affect your entire portfolio, you are keeping your family financially secure for the future
By making sure your money is in different markets, you can avoid major losses due to recession.
One of the best ways that you can “recession-proof” your finances is by making sure that your investments are diversified and are not strongly correlated. A good example of this is the relationship between stocks and bonds. In general, when the stock market shows signs of instability, the value of bonds will increase. By investing in both, you will keep your portfolio stable when the stock market fluctuates during a recession.
If you aren’t currently invested in stocks and bonds, there are still ways that you can make sure your finances are diversified. For example, if you own your home, that is a real estate investment that can help you stay stable in the event of a recession. On the other hand, should home prices drop, you should also keep money in cash and in your emergency fund to make sure you can weather whatever the economy brings in the future.
As a mom, it can be extremely difficult to manage finances on top of all of the other responsibilities you have as a parent. However, in just a few steps you can future-proof your finances for your family. Whether this article inspired you to get a cheap term life insurance policy or to look into new investment opportunities—you are on the right track. Life can be unpredictable—and so can the economy—but that doesn’t mean you have to be constantly worrying. By using these tips, you can protect yourself and your family from feeling the effects of a recession.
