The Funeral Consumers Alliance strongly advises people never to pre-pay for a funeral unless they are about to go on Medicaid and assets need to be spent down. Setting aside the funds for a funeral is a good idea, but invest in an interest bearing account yourself. Choose an investment that is safe and one that can be changed or cashed in if your needs change. The interest on your own money in a pay-on-death account at your bank should keep up with inflation and will let you stay in control.
Pre-paid funeral money is not well protected against embezzlement by a funeral home. In addition, if you move, die while traveling or change your mind (from body burial to cremation, for example) you may not get all of your money back or it may not all be transferred to the new funeral home. For more on paying for a funeral, see FCA’s How to Pay for a Funeral, or Other Arrangements.