You and your family are likely to be facing financial risk in the future. Yes, you read that right! According to a recent study, 25 percent of American families having children under 18 years of age don’t have life insurance. Also, individuals working according to financial planners are three times more financially robust.
You must consider financial planning for family, as it falls under the five stages of the financial life cycle and plays a significant role in securing your family’s future.
Also check out Financial Planning for Young Adults
Table of Contents
What Is Family Financial Planning?
Family financial planning is all about managing your family’s finances to ensure everyone’s needs are met, now and in the future. It involves budgeting, emergency fund, investing, and planning for major life events.
By creating a financial plan, families can set clear goals, track their progress, and make informed decisions. This helps to reduce financial stress and build a secure future for everyone.
Why Is Family Financial Planning Important?
Family financial planning is crucial for maintaining financial stability and achieving long-term goals.
- Reduces financial stress
- Ensures financial security
- Helps in emergencies
- Provides for education and retirement
- Supports lifestyle goals
- Manages debt effectively
Top 11 Financial Planning for Family
Create an Emergency Fund
To achieve different financial goals simultaneously, families should consider saving money. However, your primary goal regarding savings should be to have an emergency fund. If today’s date, having an emergency fund in your savings account helps you stay away from debt or saves you from any financial damage. You can use this emergency fund for unpredictable expenses, like medical emergencies, car or home repairs, etc.
Set Financial Goals
Setting and achieving everyday financial goals is the best thing to follow when managing money for a family.
Such financial goals secure your future by saving money for your home, education purpose, or retirement plans. You can even focus on achieving short-term goals, including paying off debts, planning for a family vacation, or working on building an emergency fund.
Once you check off this list of goals, consider applying some rule-of-thumb advice to your financial plan. The most common one is the 50-30-20 rule.
This rule suggests saving 50% of your money for your needs, 30% for what you want to have, and 20% should account for savings. Also, this saving category encompasses money you’ll need to understand your future financial goals.
Cover Your family with an Insurance Plan
You should never overlook insurance when making a blueprint of a family financial plan. While you might already have the insurance for your vehicles, home, and health insurance at your workplace, it’s essential to consider what you require about life insurance.
For example, Term life insurance offers you a set period of coverage when anything happens to you or your life partner (spouse). You can consider going for life insurance for every member of your family, even when one of you doesn’t work and stays home.
Overall, life insurance can reassure you and provide a financial safety net if any unexpected events occur.
Create a Family Budget
Do you know why the budget is known to be one of the most significant tools in your financial planning for family? The answer is that you must know where your money flows.
You must check how you spent your money at the end of every month. Now, match your budget plan with your actual spending, which will help you identify where you’ve gone wrong or where you nailed your plan. After this analysis, you can make the necessary changes for the next month and achieve success.
Taking that into account, according to a New York Life Wealth Watch survey, approximately three-quarters of parents, which is 73%, face challenges keeping up with daily expenses. Thus, it’s highly important to make a note of where your dollars are making their way.
Start Investing for the Future
Financial planning for family is not just about making a record of your day-to-day or month-to-month expenditures and savings.
Money management for family also refers to planning for your long-term financial goals. Moreover, saving for retirement can help you ensure that you won’t become a financial burden on anyone, especially your children, in the future.
Thus, the earlier you start making investments, the better the possibility of growth will be. Additionally, managing a distinct portfolio with different investment types can help you understand secured growth while lowering and mitigating financial risk.
Invest in Child Education or College Planning
While doing financial planning for family this area can’t be ignored. Raising your kid is not a child’s play, especially when it comes to college education. Whether your kids are small or grown-ups, the most important thing to consider is their college education and how you can get ahead with it when the right time comes.
You can consider opening a tax-advantaged savings account or a 529 savings plan. You can also invest, save your funds in a Roth IRA, and put aside your money in a brokerage account—all of which you can do simultaneously.
These tax-advantaged saving accounts can be helpful if you’ve started late on savings for your child’s college education.
Monitor Your Expenses
Tracking your expenses is challenging. However, the best way to save money or cut costs is to determine what you’re spending money on.
Thus, opening your banking app and monitoring your spending patterns once a week or month is important.
Many budgeting apps, such as Acorns, Goodbudget, PocketGuard, Mint, etc., help you track your spending habits. For example, you can write down your grocery lists and clothes you buy in a month or pay off any monthly bills.
Learn to Manage Debt
Financial planning for family is necessary because debt is a speed breaker that slows your financial growth when you achieve your desired goals. However, a few debts are sometimes beneficial. Many people prefer to have debt because they’re habitual of overspending on their desires and end up with high credit card bills.
On the other hand, when emergency funds are inadequate, it implies that you have to count on credit cards to handle your unexpected expenses.
Retirement Planning
Haven’t you started thinking about your retirement plan? If so, make a move now, especially if you don’t wish to be a financial burden on your children in the future.
You and your spouse can start making retirement plans by discovering the useful resources and savings you and your spouse have on hand or that are available immediately.
First, you can figure out ways to start investing in your retirement, including traditional or Roth individual retirement accounts.
Second, you should consider how Social Security benefits will perfectly frame your financial landscape once you retire.
Estate Planning
If your family is young, then you just can’t relax and stop thinking about estate planning. You and your spouse must think about who must inherit your property or assets and simultaneously name a guardian if you have small children.
You may even think of setting up a trust if there are enough aggregate significant assets in your name. Also, you and your spouse may think of having a power of attorney and healthcare directive in place if any unfortunate or emergency health situation takes place.
Review and Update Your Family Financial Plan
Financial planning for family is not static; it must flourish as your priorities and financial landscape change.
You should work on scheduling a monthly check-in on your budget with your spouse and/or with your kids at least once or twice a year.
Also, you might continue taking advice from a financial planner or advisor once a year to review your financial world, which is the financial planning checklist. This will help you stay on the right financial track and explore other budgeting ideas.
Also check out: 9 Best Family Saving Plans in USA for 2024
Is Anything Left?
Also, financial planning for family helps different families reach their financial goals without any hassle, enjoy the utmost comfort, and gain financial security in case of any unavoidable financial bumps.
Whether you create your own financial plan for your family or use an advisor, the best time to get started is now! Future planning can increase your chances of achieving your financial goals.
So, are you ready to start your financial planning for family? Leverage these useful tips!
