The family finances should be just that—a project that involves the entire family. Far too often, one person in the family is responsible for the finances. While this might seem like a good solution if that person is smart about money and interested in keeping track of it, it means that in the event of divorce or death, the other spouse may be at a great disadvantage. Furthermore, it can mean that kids grow up with little knowledge about how to manage money themselves. This can mean getting mired in overwhelming debt in young adulthood that it could take them years to dig out of. Working together to save money as a family means everyone is knowledgeable and invested.
Get the Data
The first step is to get a clear picture of the family’s financial situation. If no one is on top of this, there are programs and apps that can help track spending. Once you’ve figured out the basics of what’s incoming and outgoing, you can start to make changes. One area that usually surprises families is how much they are spending on groceries and meals out or takeout, and it’s usually fairly easy to rein in some of this spending. Be sure to identify the goals you’re saving toward so that you are motivated. You should also be creative in looking at ways to save. For example, you might not have considered refinancing your mortgage or your student loans to save money. Interest rates on student loans can mean you are paying a lot more than the original loan each month, but if you have good credit and interest rates are low, you may be able to significantly lower your payments, with more available cash by refinancing.
Couples should make an effort to sit down weekly or monthly and have a discussion about money. This ensures that they are both on the same page and that discussing finances becomes a regular, comfortable part of their relationship. From time to time, the entire family should participate in these conversations as well. Your 10-year-old doesn’t need sophisticated knowledge about investing and tax strategies, but kids can participate in some of the decisions about what to buy at the grocery store and what to spend the family entertainment budget on. Kids can also take a look at the cost of extracurricular activities they are interested in and choose the ones they truly want to pursue. Older teens may be able to start earning money to spend on these types of activities. These meetings should not be a source of stress for kids but presented as an empowering opportunity to choose where the family money should go.
To remind yourself and teach your kids that responsible money management isn’t about having to constantly deny yourself, be sure to build rewards into your planning. You don’t want to blow all your savings on a celebration, but it’s okay to splurge now and again. Even better, you can consider rewards that cost little to no money. This can be particularly good for kids, equipping them with the knowledge that they don’t have to spend a lot to enjoy themselves.