Few people imagine the loss of a job or even the death of a loved one, but tragedies happen every day.
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Preparing for these tragedies can help to ensure that your family has the resources they need to recover and prevent the added stress of financial hardship that often follows an unexpected death, medical expense or layoff.
Here are five ways to prepare your family financially in case of a tragedy. `
1. Have an Emergency Fund
It’s imperative to have an emergency fund. A survey by U.S. News & World Report found that 42% of Americans don’t have an emergency fund. In fact, 40% of those surveyed said they could not cover a surprise $1,000 expense.
Money experts generally recommend that individuals save between three and six months’ worth of expenses. Having a robust savings can help a family weather any storm that comes.
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2. Set Beneficiaries
Another way families can prepare for a tragedy is by setting beneficiaries. Designating a beneficiary on most financial documents is fairly simple, but not doing it can cause a headache for loved ones. Setting the beneficiary can help ensure that assets are protected and that the money or property is distributed.
As explained by Charles Schwab, how and when money or property is transferred to a beneficiary may depend on the type of account. For instance, money from a bank account or certificate of deposit may be payable on death to a beneficiary, while benefits from an individual retirement account or brokerage account may transfer on death.
3. Make an Estate Plan
While many people assume that estate plans are only for the wealthy, the truth is that everyone should make one. According to Trust & Will’s Estate Planning Report, the majority of Americans do not have any kind of estate plan. Only 31% have created a will and even fewer, 11%, have a trust in place.
Without testamentary documents in place, loved ones are often left unprotected. The court is left to decide how assets should be distributed, which can take years and may not adequately provide for the deceased’s family.
4. Get Organized
In the frantic aftermath of a tragedy, trying to find financial documents, passwords or other critical information can add to the chaos. Getting organized ahead of time is essential.
Having a safe deposit box, filing cabinet or other place for important documents and information can help to alleviate some of the stress that will inevitably follow. Make sure to keep information up to date and share the location only with a trusted loved one.
5. Update Insurance Policies
For young people, life insurance may seem like a waste, but it can provide a critical amount of financial support if a loved one dies suddenly.
A comprehensive life insurance policy can help to cover burial and funeral costs, which can cost $8,300 on average, as reported by Choice Mutual. Life insurance, however, is not just limited to these costs. A solid policy can also provide income replacement and coverage for medical bills.
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This article originally appeared on GOBankingRates.com: 5 Ways To Prepare Your Family Financially in Case of a Tragedy
