How to leave a legacy

My three-year-old daughter is just starting to understand the concept of memory, and as a result, about every third sentence begins with, “Do you remember?” as he mentions details about something he and I share. As he asks if I remember the dark rollercoaster we went on in December, the ducks stealing potato chips in April, and the birthday party I threw for him last week, I can't help but say, “How will you remember me?”

Why are you thinking about inheritance now?

My question sounds sad, but as a mother who lost her own mother, I know that life is not always the same. Because of my history, I have always been busy with my finances. I have life insurance and a will, and I am confident that no matter what the future may bring, my daughter will be taken care of.

While finances are an important part of the legacy puzzle, intangibles are just as important — memories, experiences, and values. An estate should include financial and emotional components so that loved ones can take comfort in both the assets you leave behind and the values ​​you pass on.

Here is a guide on how to leave a legacy for your loved ones.

Manage your finances (if you haven't already)

We all know that children are expensive. Whether you're expecting your first child or your youngest, managing a growing family budget can be difficult. According to a recent study, 53% of millennial parents have less than $5,000 in savings.

It's hard to save, but don't stick your head in the sand when it comes to finances. Know what you have, including retirement accounts and investments, and what you owe, including student loans or other debt. The information can help you choose a savings strategy as you find out what's going well and what areas may need more attention.

Create a worst-case scenario plan

If you or your partner get married unexpectedly, how will you provide for your children?

'What if' situations may not be fun to think about, but you should if you want to create a realistic emergency plan to protect and provide for your family.

Life insurance is part of that contingency plan.

A lump sum from a life insurance death benefit can help your loved ones pay for daily expenses, child care, future education costs and more. The peace of mind you'll gain from having a policy may be more affordable than you think, especially as you enter your thirties and may be thinking about starting a family or leaving an inheritance for future generations.

For example, a 20-year, $500,000 Haven Term policy, issued by MassMutual or its subsidiary CM Life, for a healthy 30-year-old woman costs about $15 a month. That's less than your online TV streaming service or two acai bowls for lunch. A 36-year-old man in good health can purchase a 20-year, $750,000 term life insurance policy for as little as $30 a month. Your rates will depend on a range of factors including your age and overall health.

If you want to know how much (or how little) your premiums should be, you can get a free life insurance quote online.

Plan your future

Of course, you want to give your children everything. One of the smartest ways to provide a long-term financial legacy for them after you're gone is to set up a solid retirement savings plan.

Helping with your children's education is a noble goal, but no retirement loans. If you don't have a financial plan for your future, your children may have to provide for you one day. One of the best gifts you can give your children is freedom from future financial burdens.

Check with your employer's IRA or 401(k) contributions, if available. Consider donating at least enough to get a full match if offered.

You can also set up your IRA, either traditional (tax-deferred) or Roth (tax-deferred).

A healthy retirement portfolio offers two benefits: (1) your ability to use the funds in your portfolio to meet your financial needs in retirement, and (2) if your children are heirs, the funds in your portfolio will pass to them if they pass away before you use them. Working with a financial planner can help find the best path for you.

Create a will

Everyone needs a will, especially parents. Not only can a will appoint a guardian to care for your children, but your will also opens the door to an important conversation with your loved ones. When you lay your cards on the table, you will eliminate confusion and clarify what things are valuable to you.

The monetary values ​​of the items in your will are not important. When you leave a vinyl record collection, a treasured guitar, or a collection of journals to a child you are making it clear how much you respect that person and trust them with the things you hold dear.

Build a legacy through charitable giving

While writing your will, you may wish to consider the charitable causes to which you may wish to give assets. Although you may not have the means to give now, legacy gifts are greatly appreciated and keep your name alive beyond your lifetime.

Naming charities in your will can also help family and friends know where to donate in your name to honor you. My mother was the president of a large center in our town, and before her death, she asked for donations to the center in lieu of flowers. I love knowing that his memory lives on in the place that meant so much to him, and whenever I drive by the building, I feel connected to him in some small way.

If you'd like to leave a gift to charity, find out how to make a posthumous donation to a charity, educational institution, or non-profit organization and have the conversation now with your loved ones. Be clear about your intentions and include them in your will now.