Building a Financial Foundation: Tips for Growing Families


Building a Financial Foundation: Tips for Growing Families

Overview of Financial Challenges

If you are growing your family, you must spend time working through financial planning. Every financial decision you make today will directly impact your family’s future. You should consider all current and potential costs when budgeting for a growing family including childcare, doctor visits, college savings, and more. 

Assessing Your Current Financial Situation

Gathering Financial Documents

In financial planning, you should first gather and assess any financial documents. Knowing how your family’s finances currently stand will help you plan for the future.   

Calculating Net Worth

Your net worth consists of your assets minus your liabilities. To add up your assets, you should include the value of everything you own. This includes cash in bank accounts, investments, home and car equity, market value of your business, etc. When listing your liabilities, you should include credit card balances, mortgages, auto loans, and student loans. If the result is a positive number, then that means you have a positive net worth and vice versa if it is negative. 

Creating a Family Budget

Identifying Essential vs. Non-Essential Expenses

Essential expenses are basic expenses for things that we need daily such as housing, utilities, groceries, and transportation. Non-essential expenses include anything that is for entertainment purposes such as dining out and personal hobbies. Make sure to allocate a portion of your income to savings for emergencies and future goals like retirement or vacation.

Setting Financial Goals

While you are assessing your current financial situation and where you want to be one day, you could focus on setting short-term and long-term financial goals for your family. If you focus on what is most important to you, you can try to tackle those goals first. Setting short-term financial goals will give you the foundation and confidence boost to achieve the bigger dreams you want to set for your family. 

Utilizing Budgeting Tools and Apps

There is an app for everything these days, even to help you budget! There are apps that will notify you of all your subscriptions that have sneaky fees you might not be aware that you are paying. Many budgeting tools can help your family plan and stick to a daily budget. 

Emergency Funds and Savings

Importance of an Emergency Fund

You never know when a job layoff, a hospital visit, or another surprise can occur. This is why an emergency fund put to the side is a must for you and your family. An emergency fund can be the cushion for an unexpected event. 

How Much to Save

The amount that you choose to save is ultimately up to what works best for you and your family. A general rule of thumb is to have at least three to six months of expenses saved in an emergency fund. Ultimately the amount that you save depends on several factors including the type of lifestyle you live, how stable your job is, your income(s), and more. 

Debt Management

Types of Debt Common Among Families

Let’s discuss the different types of debts that are common among families. This can range anywhere from mortgage debt, auto loans, credit card debt, student loans, and more. Staying in the know about how to handle debt and how to manage your debt will inevitably help your family. 

Investing in the Future

Understanding Different Investment Options

It is important to understand all the different investment options that are available to you and to learn what is the best fit for you and your family. Investment options fall into three major categories including stocks, bonds, and cash. 

Importance of Starting Early

Although investing in the future might not be something you think about often, it is vital to start as early as possible. The work that you put in now toward your finances and your future will work in your family’s favor in the future. Make sure to budget, invest, and plan smart. 

Planning for Education Costs

College education is a major expense, and whether you have one or multiple kids, you need to plan appropriately for the costs. It is a good idea to start saving for your kid’s college funds as soon as possible. 

Recap of Financial Tips

To build the strongest possible financial foundation for you and your family, make sure to stay on top of a financial plan. You can accomplish this by creating budgets, calculating your net worth, investing, managing expenses, and assessing your current financial situation frequently. This will help set your family up for success in the future.
 
If you would like more information about how to build a financial foundation for your growing family at Peach State Bank, contact us today!