You can take steps today to incorporate a future family into your long-term financial plan.
Increasingly, young women are working hard, climbing the professional ladder, and accumulating wealth long before getting married or starting a family.
Today, the median age of a first marriage for American women is 27. That's been on a steady incline since the ‘50s, when the average age was 20. Even more women may be waiting to have children: In 2014, 47.6 percent of women between the ages of 15 and 44 had never had children.
"Even if settling down isn't in your cards any time soon, you can still take steps today to incorporate a future family into your long-term financial plan," says Mollie Seymour, Vice President and Trust Advisor in Birmingham, Alabama.
"It's never too early to start planning ahead," she says. "You'll always benefit from your money compounding interest. Even if the numbers are initially small, it's important to think in the long-term."
Tip 1: Build a Strong Team and Start Investing
First surround yourself with a good team, which should usually include an investment advisor, estate planning attorney, and tax expert. "That team can help you make informed investment and tax decisions, as well as help you protect your assets," Seymour says.
With help from your investment advisor, determine the appropriate amount to start investing now and which vehicles make the most sense, whether it's a 401(k), Roth IRA, Traditional IRA, or something else.
"It's hard to convince young people to start saving for retirement now," she says. "But you have to train yourself to pay yourself first, and that takes practice." Compound interest can help grow savings at a faster rate because not only are you receiving interest on your savings, but you also receive interest on the accumulated interest. That is an advantage to compound interest.
"The life expectancy for women is 81 (compared to 76 for men), and women take more time away from the workforce to care for family members, so it's critical to start taking care of yourself as soon as possible," Seymour says.
Tip 2: Plan Your Future Legacy and Allow Room for Adjustments
A financial advisor can help you to build a strategy around reaching your long-term financial goals, which may include sending your future kids to out-of-state schools, and when and how you want to retire.
"You'll reap the greatest rewards if you create a plan now, stick with it, and make adjustments along the way," Seymour says.
Those adjustments can happen as a result of you simply changing your mind, losing a job, inheriting money, getting married, or having a baby. But Seymour recommends meeting with your advisor at least annually to review your financial plan (and quarterly if you're a new client).
Tip 3: Protect Your Future Legacy
If you're a single woman, you'll probably want to designate specifically where your assets go, whether it's to a college you attended, your parents, or nieces and nephews. Your estate planning attorney can help you protect your assets now and in the future by drafting an estate plan and advising you on what steps to take and when. "Your attorney can help you craft a trust that is as specific as you want it to be, even to include children who do not exist yet," Seymour says.
Your attorney also can help you establish a prenuptial agreement if you decide to get married.
You also might consider a life insurance policy. Should you pass away, the proceeds from a life insurance policy can provide a safety net for any dependents you may have and cover the costs of funeral expenses and any outstanding debt that survives your death, rather than having those expenses fall to your aging parents or other family members if they cosigned a loan or are otherwise legally responsible for your obligations. And because you're young and healthy, a life insurance policy may cost you less now. So should you decide to get married and/or have children in the future, you're already covered.
Tip 4: Think Beyond Financial Goals When it Comes to Your Legacy
Another way to create a legacy for your future family is to give to charity. You can designate bequests in a will to nonprofits you feel strongly about, or create a trust that provides ongoing distributions.
"And once you have children, you can make charitable giving a family activity," she says. "Kids will learn from you about how special it is to keep that legacy alive."
