There’s one financial task that you can’t afford to ignore: Preparing an emergency file with all your financial information, including account passwords, 401(k) information and investment numbers. It’s a scary question, but would anyone know how to access your money and accounts if something happened to you? If you’re like most millennials and xennials, the answer is probably no. It’s time for that to change. The best gift you can leave your friends and family is an organized and accessible estate, even if it’s just a few thousand dollars in your retirement account.
Here’s everything you need to do to prepare.
1. Compile the documents
The first documents you’ll need are basic. There’s a good chance you already keep them in a secure location. If not, now is the time to make it happen:
• Social Security card
• Birth certificate
Next, compile the documents, passwords and account information you probably don’t have in one place:
• Investment accounts: Your investment accounts include both taxable investment accounts and individual retirement accounts. Whether you have a 401(k) through your employer, a Roth IRA, a SEP IRA, company stock or something else, gather login information and contacts for each account.
• Insurance: If you’re a full-time employee, you might have life insurance or disability insurance through your employer. If you’re unsure, contact your human resources department and get details about what they provide. If you don’t have life insurance through your employer, think about purchasing a policy. The sooner you purchase a policy, the cheaper it is. Also compile information about home or renters insurance and car insurance. This should include information about the plan, deductible, account information and how to log in.
• Bank accounts and credit cards: When it comes to bank accounts and credit cards, the process is simple: Write down the website, login information and any other useful information (i.e. the first and last name of the representative assigned to your account).
2. Make it secure
Now that you have compiled the documents and created a cohesive financial picture, it’s time to secure it. There are three ways to ensure your documents are secure and accessible: a hard drive, hard copy or encrypted file in the cloud.
• Hard drive: Using a hard drive or flash drive is simple. Create a digital file on your computer with the information you’ve compiled. Once you’ve done that, transfer the file to a hard drive or flash drive and store it in a safe. If you choose this option, it would be a good idea to also encrypt the file on your computer.
• Hard copy: If you feel more comfortable with physical documents, you can print your documents and add them to your safe. However, it’s always a good idea to have a secure digital backup as well.
• Cloud storage: If you’re a digital native, storing your emergency file in the cloud with a service like Google Drive, iCloud or Dropbox might be the perfect solution. Before you upload, make sure to encrypt the file so no one else can access it. If you're debating between your options, check out this guide on the best cloud storage for your money.
3. Make decisions
Congratulations, you’ve created your emergency file. Before you celebrate, you’ll need to make a few more decisions. Here are some questions to consider:
• What would I like to do with the money I leave behind? Donate to charities? Leave it to family? Pay off my debt?
• Do I have a will? If not, do I need one?
• Who is in charge of my emergency file?
4. Share the file
Your emergency file only works if you share it with someone you trust. If you don’t tell anyone the file exists, it can’t serve its purpose in case of an emergency. The final step is to share your file with at least one person. This might be your spouse, parent, child, sibling, aunt or uncle. Once you’ve shared how to access the file and explained what’s inside it, you can rest easy knowing you’ve taken care of your loved ones.
Now that you have an emergency file, consider taking these three steps toward a smarter emergency fund.