These are the Financial Planning Tips Every Parent Should Know
It’s hard enough to be financially responsible when you’re on your own, but when you have a family to consider, life becomes even more real. Suddenly, frivolous spending doesn’t seem like such a great idea and you’re thinking about the future more than ever.
While financial planning may feel like an overwhelming process, the earlier you start, the better off you’ll be in the long run. However, that takes a tremendous amount of knowledge. Start by figuring out how much all of your assets are worth, including the value of your home.
Next, there are an abundance of paths you can choose in order to secure what you own, including life insurance, wills and trusts, savings and retirement accounts, and estate documents, so it’s important that you think long-term and avoid living beyond your means and secure a plan to pay off any current and future debt as soon as possible. If you’re lost or have no idea where to start, consider hiring a financial planner who can help you clarify your goals and advise you on the best steps to reach them. Here’s where to go from there.
Set Goals and Create a Budget
Short- and long-term budgets are crucial if you want to stay on track, so implement a plan that works for you and your spouse and make sure you’re both on the same page at all times. Start by tracking where you money is going in order to determine where you can make cuts — there are several apps that make this a relatively painless process. Next, set financial goals for the next month, year, and so on — there’s nothing wrong with planning for a summer vacation and your daughter’s wedding at the same time.
Prepare for Milestones
College and retirement are among the top two milestones that families face when considering financial planning. When it comes to education, it’s never too early to plan. Consider opening a savings account, invest in your child’s talent as it could potentially lead to a scholarship, or go the old-fashioned route by socking money away each month. Stay abreast of current college costs. Look into financial aid, and when your kids are old enough, talk to them about how they feel about contributing to their education later in life depending on your financial situation.
When it comes to retirement, social security and company pensions (if applicable) are not enough to rely on, so you’ve got to institute other measures in order to plan for your financial future. Consider the fact that you’ll need 70 percent of your retirement income to live comfortably later on in life and add up all of the resources you’ll draw from later on to achieve that goal. If you find there’s not enough coming in, figure out how you’ll make a nest egg to fill the gap — like taking on a gig-economy job for example.
When instituting a family financial plan, it’s impossible not to include the fact that you should involve your kids. Educating them about money management and planning for the future are among some of the best lessons you can share. Aside from setting a good example, give them an allowance as soon as it’s appropriate to do so. Show them the power of budgeting and how their resources can lead to obtaining what they desire in the present and the future. And of course, whether it’s a church or a charity, teaching them about the importance of giving by making charitable acts as a family.