Families are expensive. Raising a child today costs $233,610 on average. Although it’s well worth the price, you won’t be able to keep up if you don’t manage money properly. Financial instability is a leading cause of stress for parents, and kids pick up on that.
Fortunately, there are several ways you can empower yourself to take control of your finances and manage your money better. Here are four things you and your family can do to make the most of your financial situation.
Look at and Learn about Investments
Having a diverse investment portfolio is one of the best things you can do to manage money well and build a strong financial future. Investing makes your money work for you and gives you a return that you can use to support your family’s goals.
For example, it’s important to make sure you have a solid set of retirement accounts. Otherwise, you may find you don’t have enough to support yourself in your golden years, meaning you may need to continue working full-time or turn to family members for assistance.
Real estate is another great investment for families. Owning a home provides stability and ensures you have a space where your children can thrive. Moreover, you can sell the house at a later date to upgrade or downsize, depending on your life stage. Look into financing options available when buying your first home.
If you don’t have a 20 percent down payment already saved up, many first-time buyers apply for FHA loans, which may require as little as 3.5 percent down. These loans are typically easier to qualify for, but beware that you will pay more in interest over time, and that there are hidden costs like permanent private mortgage insurance built into the life of the loan.
Have Family Finance Time
Many parents shield their children from the money situation, thinking that money issues will cause the kids stress and anxiety. While this can be true with entirely unmanaged finances, spending and saving with intent is a task the whole family should do together.
Managing money well requires a holistic approach, and modeling the way for your kids is healthy for them and for you.
Set an intentional block of time each week to go over your spending and saving goals as a family. Give your children age-appropriate tasks such as tallying grocery spending or making their own savings goals. These will help them build good money habits that will follow them for their entire lives. Money management skills are not just taught, but caught.
Track Everything
You can’t take control of your money if you don’t know where it’s going. That’s why it’s so vital to make and use a budget. Budgeting your money is a foundational part of properly managing money.
If you haven’t started one already, you can begin by simply tracking what you spend right now. There’s no need to start making changes right away: In the beginning, you’re simply getting a sense of your habits and getting used to tracking how you manage your money.
Once you’ve been tracking for a month or so, it’s time to evaluate your habits and figure out what you can change. Separate inflexible spending, such as rent, food, or medications, from discretionary expenses like restaurants or toys. This will give you an idea of how you can cut overspending and put more money toward your family’s future.
Cut Costs
Once you’ve identified sources of unnecessary spending, come up with ways to reduce the money in those categories. For example, if you’re buying more toys than you really need, consider creating a toy rotation scheme with the toys you already have. This way, your kids still get the benefit of having their toy inventory refreshed without having to spend on extra stuff.
Another great way to cut costs is to cook at home more often. Not only will this reduce your restaurant bill each month, but it’s also another great opportunity to pass on valuable life skills. Have children help by stirring, measuring, or chopping (if they have the dexterity to do so safely) and teach them how to make their favorite recipes. Getting kids involved in the kitchen empowers them to live independent lives as adults.
This isn’t managing money per se. But you are saving money by eating at home and showing your kids how to do important practical things that are necessary for responsible living.
Managing Money Successfully is Not Impossible
Financial literacy skills benefit every member of your family. Focus on finding the best ways to keep track of and use your money, and you’ll be able to keep your loved ones’ futures bright. It may sometimes seem like there is no way out of the cycle of financial difficulties. But financial peace and freedom are closer than you think.
If you need help with financial planning, please contact Financial Coach Seth Connell to help you put together a money management plan that can benefit your family.
Guest article by Sara Bailey of TheWidow.net.
