Learning to manage your family money is an essential skill. Ignore your finances and the whole family will in trouble, not only financially but also emotionally. The difference between managing your own money and managing the finances of a whole family is that with a family, new considerations come into play. Different opinions and ideas on how to deal with debt or expenses can cause problems, so it's important to reach an agreement and come up with a plan that works for everybody.
Family Budget
Setting up a budget is the first step in managing your money as a family. To do this, a simple piece of paper is enough. According to personal financial site SayGoodCredit.com, a budget should list all the money that's coming and all the money going out in your household. This includes utilities, transportation, debt repayment and any other fixed expenses the family has. A good budget should have expenses divided into two groups: essential and optional. Essential would be things you can't get out of paying, such as gas or electricity. Optional expenses could include gym memberships, the kids' music lessons and your pottery class.
Kids And Money
Kids should be involved in the management of the family money. According to parenting website FamilyEducation.com, teaching the kids about the importance of money should be a priority for families. One way to do this is give each kid an allowance and then determine what things you no longer will be paying for. For example, you might tell kids that if they want to buy snacks at school, they need to use their own money. Or they can choose to bring their lunch from home. Or teach children the importance of savings by letting them use their allowance for an expensive item they want, such as a game or toy. Not only will you be teaching them to be responsible with money, but you will also freeing some of your own money for other expenses.
Wants And Needs
After coming up with a budget, you should be able to see clearly where your money is going. If the money going out is more than the money coming in, it's time to make adjustments. This is the time to sit down with the kids and discuss the differences between wants and needs. If the kids have five different after-school activities, choose one or two to keep and do away with the others. Parents should be willing to make adjustments too. If money is an issue, consider canceling your newspaper or magazine subscription, and instead read the articles online. Or cancel that unused gym membership and instead go running or hiking. You can also work together as a family to come up with ideas for entertainment that cost little or nothing, such as going camping or taking advantage of free events at your local library.
Saving for Future
One thing that many families ignore when managing their money is to plan for the future. According to financial expert Dave Ramsey, everybody should have at least $1,000 set aside for emergencies. Ideally, the emergency fund should be enough to survive for between three and six months if you suddenly lose your job or money stops coming in for any reason. Parents should also be saving for their children's higher education, preferably in an account set up especially for that.
Money And Stress
Not having a plan for your money can cause a lot of stress for the whole family. On the other hand, goals and a clear path to get to them can make things a lot easier on everybody. Personal financial site Money Crashers recommends keeping track of your finances without obsessing too much about it. Also, it's important to have regular talks about money management so the expenses are agreed upon.
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