1. Get life insurance
2. Start an emergency fund
An emergency fund is the money you set aside for unforeseen expenses, such as unexpected home or car repairs. Most financial professionals recommend you keep three to six months of expenses in a liquid account, but it takes time to accumulate those funds. Even a small amount each week can help you get there. One approach is to instruct your bank to automatically transfer funds to a separate account that you’ll save for emergencies: $25 a week will give you $1,300 in a year.
3. Make a will
It’s hard to imagine you won’t be around for decades to come but don’t use that as an excuse to not set up a will and keep it updated. A will allows you to specify how your assets will be distributed, who will make sure that your wishes are carried out, and, most importantly, who will be the guardian for your minor children. Without a will, the state could decide who gets your children.
4. Protect your paycheck with disability insurance
Statistics show that just over 1 in 4 of today’s 20-year-olds will become disabled at some point in their career. If you were unable to work due to an illness or injury, your family would lose your paycheck, but they’d still have financial needs. Disability insurance can replace a portion of your lost income, typically 50% to 70% of your earnings, helping your family make ends meet until you’re able to return to work.
5. Think long-term
The best time to start saving for long-term goals such as college or retirement is when you’re young. For retirement, enroll in your company’s 401(k) plan, if one is available, and take advantage of “matching funds”, which match your contributions to a certain limit. Ignoring matching funds is like refusing free money, and your contributions will lower your taxable income. For college savings, consider opening a 529 plan—a tax-free savings option. You can instruct your institution to make regular, automatic deposits from your bank account, so you don’t have to think about it.