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From the Editor

8 Financial Gifts for Mom

This advice will help you give your mother a money makeover.

Editor's note: This column was updated in May 2013.

Americans will spend an average of $168.94 on gifts this Mother’s Day, reports the National Retail Federation, with flowers, restaurant meals, clothing and accessories and jewelry topping the list. Also popular: gift cards and personal services, such as a massage or facial. Other surveys indicate that moms appreciate handmade gifts, time with their family, day trips -- and extra sleep.

Personally, I plan to take advantage of several of those treats on Sunday. But if you’re looking for an out-of-the box gift that keeps on giving, I have a suggestion: a financial facelift? Mothers spend so much time taking care of everyone else in their families that they sometimes neglect themselves, not just physically but financially -- sometimes with negative consequences for everyone. In a recent survey by American Express, nearly 30% of respondents who are in relationships say that finances cause the most stress or anxiety between them and their partners. If they had it to do over, nearly three in four of those in relationships would manage their money differently from the start, mainly by putting more into savings and investments and spending more responsibly (see 10 Secrets to Saving and 10 Tips to Build -- and Stick to -- a Better Budget).

So this Mother’s Day, how about getting a fresh start with a money makeover? You could, for example, buy Mom a subscription to Kiplinger’s Personal Finance. Or purchase a couple of hours of advice from a financial planner. In the meantime, I’ll start the ball rolling with eight pieces of free advice that will help bolster Mom’s financial security -- and her family’s, too.

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Talk things out. In the American Express survey, more than 60% of those in relationships say money discussions always or most of the time lead to arguments. I think that’s because instead of discussing things openly and regularly, couples let their worries and annoyances fester until they blow up. It’s better to lay your (credit) cards on the table early, before a crisis develops. If you feel too shy or too awkward about starting what could be a sensitive conversation, try a back-door approach: Sit down together to write down your goals and see whether you’re on the same page. Or let a third-party financial planner mediate your differences.

Start saving for retirement. Small amounts put aside when you're young grow into great gobs of cash when you're older -- and lay the foundation for financial security and independence. Take the case of two people -- one who saved $3,000 a year for ten years (or $30,000) in an individual retirement account (IRA) between the ages of 20 and 30 and then stopped, versus another who began saving at age 30 and faithfully contributed $3,000 each year for 36 years (or $108,000) until retirement at age 66. Assuming an 8% annual return, the person who started saving earlier would accumulate about $778,000, compared with roughly $602,000 for the individual who started later (see our retirement savings calculator).

If you’re in the workplace, sign up for your employer's retirement plan, and aim to contribute at least enough to qualify for any employer match. You can't afford to turn down free money. In 2013, you can contribute up to $17,500 to a 401(k) or other employer-based retirement account, or $23,000 if you’ll be 50 or older by year-end. And never cash out your company plan if you switch jobs.

Set up your own retirement account if you’re not covered at work -- or even if you’re a stay-at-home mom. For women, one of the great features of an IRA is that you can have one even if you don’t have a paying job, as long as your husband is employed. In 2013, he can contribute up to $5,500 of his compensation ($6,500 if you’re 50 or older) to a spousal account for you, in addition to squirreling away $5,500 (or $6,500) in his own IRA. You can open either a traditional IRA or, if you meet income requirements, a Roth IRA (see 2013 Retirement Account Contribution Limites).

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Not only does this give stay-at-home mothers their own retirement stash that they can invest and control, but it also doubles the tax breaks and savings power available to you as a couple.

Buy plenty of life insurance. Once you have children, life insurance becomes a family priority because your kids would suffer financially if you weren’t around to provide for them. Women who are stay-at-home mothers and who are almost completely dependent on their husbands’ income are particularly vulnerable. But even working moms could be at a serious financial disadvantage if they were left to bring up a family alone.

As a rough rule of thumb, figure that insurance coverage should equal eight to ten times your total household income, including any coverage you have through your employer. (For a more precise estimate, see How Much Life Insurance Do You Need?.)

Although women are most often the ones who benefit from life insurance, don’t underestimate your own importance and value -- financial and otherwise -- in supporting your family. If you have a paying job outside the home, add together both your income and your spouse’s to figure your total need for coverage, and divide it proportionately between individual policies on each spouse.

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To keep things both simple and inexpensive, buy term life insurance. You can buy several hundred thousand dollars’ worth of coverage for just a few hundred dollars per year. To price policies -- especially if you have medical issues -- go to AccuQuote (www.accuquote.com) or call 800-442-9899.

Recalculate your life-insurance needs at various points in your life. You may need more coverage, for example, if you have another child. On the other hand, once your children finish college and are less dependent on your income, you may need less insurance -- or none at all.

Write a will. In the absence of a will (intestate, in legal-speak), your state’s one-size-fits-all estate plan kicks in, and it may not be tailored to your needs or your children’s. For example, as the surviving spouse, you may get only a fraction of your husband’s assets, with the rest going to your children. If you and your spouse both die, the state decides who will raise your kids.

With a will, you call all these shots. You can divide your property just about any way you like and design creative trusts for your children that distribute money at specified ages, for example, or tie assets to specific purposes, such as paying for college. Review your will after the birth of each child.

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Choose a guardian. Think of a will as a way to protect your most precious assets -- your children -- if something should happen to you and your husband while the kids are still minors.

Parents are often tempted to rely on informal guardianship arrangements -- “My sister has agreed to take care of our children if we aren’t around.” But an informal arrangement doesn’t have the legal standing of a formal guardianship.

And if both you and your husband should die without having formally named a guardian, the courts will decide who’s going to rear your kids. It’s possible that a judge could choose the one relative you wouldn’t want. Worse, a family battle could ensue, and the cost of a court fight would come out of your estate -- that is, your kids’ pockets. You can avoid all of these hassles by naming a guardian in your will.

Get your fair share. Just as important as setting up a will is reviewing the beneficiary designations on insurance policies, pension and profit-sharing plans, IRAs, 401(k)s, and other retirement plans. These assets go to whomever you’ve named as beneficiaries; they’re not covered by your will.

If you fail to update beneficiaries, you could find yourself in the position of Caroline, who was unexpectedly widowed at the age of 32. Before Caroline and her husband met, he had named his mother as the beneficiary of his retirement account and had never bothered to update the papers after he married. When he died, there was nothing Caroline could do to get access to that money for herself and her young daughter -- except depend upon the kindness of her mother-in-law.

Help out your own mom. If your mother is getting older, starting a financial discussion with her could be as important as talking to your spouse. It’s important that she give you (or someone else) power of attorney in case you have to take over her affairs, and share financial information with her adult children so that they can help her if necessary. (For advice on how to start that conversation, see Managing Your Parents' Money.) That will help give every generation of mothers in your family peace of mind.