Millennials are now the biggest generation - but they are ending up in a generational sandwich burdened by taking care of older parents, raising young children, and dealing with student loan debt and other financial issues.
With almost 45 million people working to repay their student loans, we have to remember that these same individuals and families are dealing with a complex system of financial issues. And many parents who have student loan debt look at their children and want to find ways to prevent them from being in the same situation.
With that in mind, we’re partnering with Bestow to share five things that every person repaying their student loans, and has children, must do to protect their own financial future - and their children’s. Learn more about how Bestow can help protect your family here >>
1. Have Life Insurance
For young families struggling with student loans, life insurance may not seem like an essential purchase… but it really is - and it can be a really cheap investment.
Beyond having money to help provide for your children, your student loans can throw an unexpected curveball to your family in case of your early demise.
If you have private loans with a cosigner, your cosigner (maybe a spouse or grandparent who would be caring for your children), could be left with your entire student loan balance to pay.
There may also be taxes your estate has to pay on your student loans.
But life insurance can mitigate this. By having a life insurance policy that covers your student loan balance, you can ensure that your children and family won’t have to deal with the burden of your loans in case of your passing.
See how you can get a life insurance policy for as little as $5 per month with Bestow here >>
2. Check Your Loan Repayment Plan
When you first start paying back your student loans, if you don’t make any changes to your repayment plan, you automatically start on the 10-year standard plan. This repayment plan typically has the highest monthly payment.
That may have been fine before children - but let’s face it, children are expensive. If you’re struggling to make ends meet with your new family, it may be time to reassess your repayment plan.
An income-driven repayment plan may be the best solution. These plans allow your monthly payment to be set at either 10 or 15% of your monthly discretionary income - a calculation that’s based on how many children you have.
This can really help free up extra money each month that you can use towards other essentials.
3. Organize Your Finances And Your Budget
This is a habit that everyone can improve on, but it can be more essential for parents who are also dealing with student loans - make sure you’re checking in on your budget and finances and staying organized.
Children throw a whole new level of chaos into your life, and it’s too easy to let things like your student loans or insurance slip to the back burner.
Make sure you’re setting aside a little time each month to organize your finances, check your account statements, budget, and make sure you didn’t miss any past payments.
Even better if you allocate a little time to automate your payments so that you know you don’t miss anything.
If getting out of student loan debt is one of your goals - then understanding your debt payoff date, timeline, and plan is essential to make it happen. Then, you can check in on your progress towards this regularly.
4. Estate Planning
It’s estimated that only 42% of adults have wills in place - and only 36% of parents have a will in place (according to a Caring.com survey).
Once you have children, you need to make sure you have an updated estate plan in place.
A will is a tool that you can use to tell people who you want to take care of your children in the future. It can also be used to give directions about family heirlooms and other stuff.
A trust is a great tool to pass assets to your children, such as your house. A trust can also be used to house any life insurance money your children may receive for their benefit.
These tools take a little time and effort to set up, but they are well worth it. And even if you do have them setup, you want to make sure they are updated.
For example, let’s say you get a new life insurance policy. You’d likely want your spouse to be your primary beneficiary of the policy. But what happens if you and your spouse go together? Who gets the insurance policy?
If you want your children to benefit from it, you’d likely want to have a trust setup, and then set the trust as the contingent beneficiary.
On Bestow, it’s really easy to set up beneficiaries. Some companies make you fill out paper forms and mail them in, but Bestow offers everything online. Simply click beneficiaries and add them in, no paperwork needed!
Get a quote from Bestow today and see how it can help with your estate planning needs >>
5. Plan Future Savings
Finally, parents need to plan future savings for themselves and their children so that they don’t end up placing their kids into the same path they are on.
Parents need to save for themselves first. Just like the airplane safety warning says “put your oxygen mask on first before helping others”, the same applies to money.
Parents need to save for their own retirement before helping their kids. Otherwise, if parents fail to save, they are just going to burden their children in the future. Do you really want to go to your kids and say “sorry, mom and dad have no money because we didn’t save anything - can we move in with you right in the prime of your life?” NO!
Parents: save for retirement in your work 401k, an IRA, and more. Get rid of that debt - pay it off.
Then, only then, think about saving for your children’s future. We do have this guide to how much you should save for college for your kids - but that’s only after you save for yourself!
Being a parent, having student loans, and maybe even taking care of aging relatives can be a tough spot. But there are simple things you can do to get a leg up.
Hopefully this guide helps you find some quick wins that can help you escape student loan debt while providing for your children and making sure you’re doing right by them.
Don’t forget to check out Bestow and see how easy it is to get insurance to protect your family. Get a quote here >>
Disclosure: The opinions and ideas expressed in the article are not promoted or endorsed by Bestow or North American.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.