Follow these tried and tested guidelines to set up a family financial plan—whether with a long-term partner, spouse, or children—that works best for all.
Set Financial Goals for the Family
Setting big-picture and everyday financial goals for the family can help provide the “why” for your plan. It could be things far off into the future, like saving for a home, a college education, or retirement. Or it might be short-term goals, like building an emergency fund, paying off a debt, or taking a family vacation.
Once you have your list of goals, think about applying some rule-of-thumb advice to your plan. “One that often makes sense is the 50-30-20 rule,” says Brandon Robinson, president and founder of JBR Associates Financial Services in Plano, Texas. “It keeps things simple.”
Here’s how it works. You allocate:
50% of your income toward your needs (food, housing, utilities, etc.)
30% toward your wants (entertainment, eating out, travel, etc.)
20% toward investments and savings
You can choose a different percentage breakdown or try a different method altogether—and don’t be afraid to try more than one method until you find one that works best for your family. The key is giving your plan some guardrails.
Create a Family Budget
Why is a budget an essential tool for your family’s financial plan? “You can’t manage what you can’t measure. You have to know where the money is going,” Kovar says.
Considering that nearly three-quarters of parents (73%) report having trouble keeping up with expenses as of April 2023, according to a New York Life Wealth Watch survey, it’s more important than ever to dial into where your dollars are going.
Build an Emergency Fund
Families can save money for a variety of goals simultaneously, but your top-priority savings goal should be an emergency fund, if you don’t have one already. Having an emergency fund for unexpected expenses such as home repairs or a medical emergency can save you from going into debt or even financial ruin.
If you’re starting from scratch, open a separate savings account and set up an automatic deposit on a monthly basis or every payday. If you go with a high-yield savings account, you can earn a little interest on top of your contributions. Transfer as little as $50 to $100 a month to start, but the ultimate goal is to build up enough savings to cover three to six months of your expenses in case of a job loss, personal crisis, or other unexpected event.
Manage Debt as a Family
Debt can slow down the progress you make toward your financial goals. While some debt like a mortgage might be necessary, according to Robinson, a lot of families tend to have debt because they overspend on their wants, running up high credit card bills. Other times, a lack of emergency funds means having to rely on credit to manage unexpected expenses.
Whatever the reason, if you do have high-interest balances, you’ll want to prioritize those payments for a period of time and be consistent. It might require temporarily trimming some areas of your budget or bringing in extra income. If you’re not sure where to start, you can work with a credit counsellor to help you or explore other options.
Protect Your Family with Insurance
If you’re doing the hard work of sticking to a family financial plan, the last thing you want is for unforeseen circumstances to undo your progress. That’s where insurance products come in.
The major types to have include home and auto insurance, health insurance, and term life insurance. With the latter, if you have people who depend on you for income, a term life policy that is worth several times your annual income can help your loved ones financially if you die unexpectedly.
Teach Financial Literacy to Children
Financial education should be a family affair, according to Tyler Meyer, CFP and founder of RetireToAbundance.com. “Consider introducing a ‘Family Finance Night’ where everyone, regardless of age, shares their financial insights,” he says. “This not only cultivates financial literacy but also creates a supportive environment for open conversations about money, reinforcing positive financial habits.”
You can also look for teachable money moments when shopping together or teach kids to allocate their allowance and gift money into spend, save, and donate buckets.
Review and Update Your Family Financial Plan
A family financial plan isn’t meant to be static—it should evolve as your finances and priorities change. “Schedule a monthly check-in with your spouse and/or kids, and then once or twice a year, you can go more in-depth,” Kovar says.
You also might choose to meet with a financial advisor or planner once per year to go over your financial planning checklist, explore other ideas, and keep you on the right track.
The Bottom Line
Setting financial goals with your entire family in mind helps you prioritize and achieve financial milestones. Although it can seem daunting at first, once you create the family budget, tools, and technology can help you put much of your plan on autopilot.
Once you develop a financial safety net through your emergency fund and insurance products, manage debt, and start seeing your savings and investment accounts grow, it can strengthen your family’s financial stability not just today, but tomorrow as well.
174
6
1 Guest(s)