Key takeaways
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What to prioritise when managing your family’s finances, such as debt management, establishing an emergency fund, and investment options to deliver financial security.
In the hustle and bustle of daily life, managing money can sometimes feel like a juggling act. From budgeting, to saving for the future, dealing with the high cost of living, and being side-tracked by unexpected expenses along the way, families can face a variety of challenges when trying to manage their finances.
Managing money as a family requires a delicate balance of collaboration, communication, and careful decision-making.
The current cost of living crisis and multiple interest rate hikes borrowers have faced recently has made it more challenging for families to secure their financial future.
Here, we’ll explore eight key aspects of family financial management to help you navigate the complexities and make informed decisions.
#1 Managing money as a family: Understanding your current situation
Before diving into the specifics, when managing money as a family take a step back and assess your family’s current financial footing so you have a base to work from. This involves understanding your income, expenses, debts, and savings.
Create a simple budget that outlines your monthly income and fixed expenses, such as mortgage or rent, utilities, and groceries. This snapshot provides a clear picture of where your money is going and helps identify areas for potential savings.
#2 Managing money as a family: Setting financial goals
With a clear understanding of your financial situation, the next step to managing money as a family is setting achievable and realistic financial goals. These goals can range from short-term objectives, such as building an emergency fund (more on that next) to long-term aspirations, such as saving for your children’s education or planning for a comfortable retirement.
Communicate openly with your family members about these goals. Ensure that everyone is on the same page, and collectively decide on the priorities that meet your family’s aspirations. This shared vision fosters a sense of unity and purpose, making it easier to stay committed to your financial goals.
#3 Managing money as a family: Emergency fund – your financial safety net
Life is unpredictable, and unexpected expenses can arise at any time. That’s why having an emergency fund is so important. An emergency fund acts as a financial safety net, providing a buffer for unexpected medical expenses, car repairs, or other unforeseen circumstances.
When managing money as a family, determine a realistic amount to set aside for your emergency fund. This fund should cover three to six months’ worth of living expenses in case one or more of the breadwinners in your household loses their job and is out of work for an extended period of time. Keep the money in a readily accessible savings account so you can quickly access it when needed.
#4 Managing money as a family: Debt management strategies
Many families grapple with various forms of debt, such as credit cards, loans, or mortgages. Effective debt management is key to maintaining financial stability. Begin by listing all outstanding debts, including the interest rates and minimum monthly payments.
Consider creating a debt repayment plan that focuses on high-interest debts first while maintaining the minimum payments on others. Priority should also be given to paying off non-deductible debt. This strategy helps minimise the overall interest paid and accelerates the journey to becoming debt-free.
Additionally, explore opportunities to consolidate high-interest debts lower interest loans or negotiate lower interest rates with creditors.
#5 Managing money as a family: Investing for your future
Beyond day-to-day expenses and debt management, investing is a powerful tool for building wealth over the long term.
As a family, explore investment options that are compatible with your risk tolerance, time horizon, and financial goals. Diversification is key to managing risk, so consider a mix of investment assets.
If you’re new to investing, it’s a good idea to consult with a financial adviser who can provide guidance based on your family’s circumstances and specific goals. Regularly review your investment portfolio to ensure it remains on track. Make adjustments as needed.
#6 Managing money as a family: Super planning
Super plays a key role in helping to secure your financial future, especially during retirement. As a family, take the time to understand the superannuation system, including employer contributions, voluntary contributions, and investment options.
Consider contributing extra to your super fund to take advantage of potential tax benefits and maximise your retirement savings. Review your super strategy periodically, especially during major life events, such as a wedding, the birth of a new child, or a career change, when you may need to scale back those additional super contributions to cover other costs associated with those occasions.
#7 Managing money as a family: Teaching financial literacy to your children
One of the most valuable gifts you can give your children is a solid foundation in financial literacy.
Involve them in age-appropriate discussions about money, savings, and responsible spending. As they grow older, introduce concepts like budgeting, investing, and the importance of long-term financial planning.
Consider opening savings accounts for your children and encourage them to set aside a portion of their pocket money or earnings. This hands-on experience fosters a sense of responsibility and financial awareness from an early age.
#8 Managing money as a family: Have regular financial check-ins
Effective financial management requires regular attention and adjustment. Schedule regular family financial check-ins to review your progress towards goals, discuss any changes in income or expenses, and make necessary adjustments to your budget or investment strategy.
These check-ins provide an opportunity for open communication and collaboration within the family, ensuring that everyone is actively involved in managing the family’s financial wellbeing.
Summary
Managing money as a family is a dynamic and collaborative process that requires communication, planning, and ongoing attention.
By understanding your financial landscape, setting realistic goals, and implementing sound financial practices, you can navigate the complexities of family finance with confidence.
By taking proactive steps today, you’re investing in a more secure and prosperous future for you and your family.
The information in this article is current as at April 2024 and may be subject to change. The information in this article is factual in nature only and does not and is not intended to imply any recommendation or opinion about a financial product. You should obtain appropriate advice before making any decisions based on the information in this article.