The National Association of State Treasurers Foundation presents:
Tomorrow's Money for Young Adults
13 Things Your Family Can Do Today
All parents want their children to grow up knowing how to responsibly handle money – how to earn money, how to most wisely spend it, and how to invest it well for future needs. But how does that happen? Here are 13 things that every family can do together to take control of your finances to reach important family goals. Whether you have young or older children, whether you are helping care for grandchildren or raising them on your own, you can use these ideas to get everyone on the same page about your family’s finances and teach children and teens valuable money management skills at the same time:
Talk about where money comes from and where it goes. It may sound obvious to you, but your kids need to know that you and/or your spouse work full-time jobs, part-time jobs, seasonal work, etc. to earn the money that you use for necessary expenses like your rent/mortgage, utility bills, groceries, insurance, gas, taxes. Begin to help children make the connection between the work you do and how it provides the money to pay for the things that you as a family need and want. Even if you are living paycheck to paycheck, talking about creating an emergency saving fund to cover three to six months of everyday expenses—and making sure that everyone in the family knows how much money you need to save. That exercise can be a good way to teach children that not every penny earned should be spent today.
Talk together about what things are important to your family – for example, being able to spend time together, being able to being able to travel, going out to eat, staying out of debt, donating to a charity, etc. Start to put down on paper how much those things “cost” that you value as a family and how you can work together to meet those goals. Consider making a list of your family’s values and posting it somewhere visible to remind everyone how those values affect your decision-making about money.
Set financial goals as a family based on your values. For example, if you value spending time together as a family then perhaps a financial goal would be for one parent to be able to work fewer hours, or for the family to take a vacation together. On the other hand, if one of your family values is staying out of debt then a possible financial goal would be to pay off credit card debt, or to find additional part-time work to earn more income for daily needs. Once you have begun to brainstorm family financial goals, post them somewhere that everyone can see them and be reminded what you are working together toward as a family.
After you have decided on some initial family financial goals pick one or two of those goals and break those down into short-term steps. For example if one of your values is to spend time together as a family and the related financial goal is to take a family vacation then some possible short-term goals could be:
Research vacation options and compare prices/services to find best possible deals
Create a budget for the trip
Reduce weekly discretionary or “miscellaneous” spending and save money toward trip
Give children an opportunity to earn money or provide them with an allowance. Providing children with a small weekly or monthly allowance, or giving them the opportunity to do jobs around the house for pay is a natural way to help them learn the basics of managing money. Talk with them about the importance of saving some of that money for future wants or needs, and the wisdom in planning their spending according to the money they have. This is a natural way to help children grasp the decision-making processes involved in making spending and saving choices.
Create a visible savings “bank” in your home – something like a clear bank or jar - so that everyone in the family can begin putting money toward your first short-term goal. Watching your savings grow toward your goal is encouraging for everyone.
Think through your family’s banking situation. Do you have a savings and or checking account for your family? If you are a part of a multigenerational family, do the adults in your family have multiple accounts that you might want to consider consolidating or coordinating among you to help ensure that you are maximizing your opportunities to save and pay for everyday expenses? If you do not currently have a bank account, you should look into account options offered at local bank branches or credit unions that can help you, as a family, realize your financial goals to save and invest. Learn more about what banks offer and how credit unions work. Once you have opened an account, consider helping younger family members open savings accounts and help them make regular deposits into those accounts, no matter how small the amount.
Have every member of the family keep a record of what they spend for one week (cash spent, checks written, debit and credit card used) and then get together to add up what you spend in one week. Some families benefit from having one notebook located in a central place where everyone writes down what they have spent; or each family member can keep his/her own record. It may come as a surprise for everyone to realize how quickly expenses (and possibly debt) can mount.
Put together a family budget – it doesn’t have to be exact, just something that is in the general ballpark – and talk about how much it costs for your family to live at your current level or lifestyle. Use our budget worksheet to get an idea of the things you will want to have included your budget. Talk about what areas of your family life cost the most.
Compare choices for spending and saving—Family members, depending on age, may benefit from talking about choices and comparing trade-offs when spending or saving. For example, it cost $100 for a family outing last weekend. Were there other options that would have cost less, lasted longer, been more fun or enjoyed more? What else might that $100 have been used for? What could that $100 have been saved for?
Brainstorm together small ways that you, as a family, could begin to reduce expenses in at least one budget category to save money. Or, depending on the age of your kids, assign each family member a different area of your family budget and have them brainstorm and research how you could save money in those areas. Decide on 2-3 things that you will begin implementing immediately and track how much those habits save you over one month.
Talk about all of the financially-related responsibilities in the family and how you divide those responsibilities up. For example: how will each family member contribute to the family’s financial picture? Who will earn the family’s income? Who will take the lead on paying bills? Who will make decisions about investing money the family has saved? How will children take responsibility for saving toward their personal future goals (i.e. college, a car, clothes, etc.)? How will children help save money on home-related costs (i.e. turning lights off, taking shorter showers to reduce utility bills; mowing lawns instead of hiring someone; clipping coupons to help at the grocery store; looking through store circulars for sales on items, etc.)? Not only is involving the kids in your family’s finances a practical, hands-on way for them to learn money management skills, but it may also ease the burden on you as the kids begin to realize the effort of work and how much things cost and that they too have choices in saving and spending!
Decide on a regular time (i.e. at a weekly family meeting or a special once-a-month family finances meeting) to review how you as a family are doing financially—regardless of whether it is a good time or not so good. Make sure you celebrate your successes (i.e. how much money you have accumulated in your family savings “bank” toward a short-term goal, lower bills, etc.) as well as identifying the next areas you want to work on together and where you think there is still room for improvement.
Your family may be going through a rough period financially or you may almost always feel you are living paycheck to paycheck. Then something else happens--someone loses a job, is sick, there is an accident, the car finally can no longer be repaired, etc., etc. Even if adults work hard to keep financial worries and hardships from affecting the family, it isn’t always possible. In bad financial times, adults need to focus on the “message” you are sending at the family finance meetings as well as what will be done and what can be done. Depending on the ages of the children, you’ll want to explain enough so that children or teens know that family finances are strained and/or what the immediate key consequences are. For example, the family will have to reduce spending or do things another way—taking the bus instead of driving everywhere, not going on vacation this year, etc. Outlining concrete steps that the family can take together or choices the kids can help make about cost-cutting tradeoffs can help them feel less anxious about the unknown and understand more about why things are the way they are.
If good fortune, and your hard work, should result in your family getting ahead of your goals then these meetings are a good time to discuss how to change your goals or use the money in a way that makes everyone feel like they are a part of your family’s successes.