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A Guide to Personal Finance for Young Families
by Jacob Evans | Personal Finance Blogger
When you find that special someone you love, you can get caught up in having a wedding, buying a house, or even having children, and your finances can get pushed way down on your priority list. This can really hurt your family in the long run, though.
While personal finance is important for everyone, it’s an especially important part of starting a family. You need to make sure you’re thinking about everyone’s needs in the short term with a budget but also in the long term by putting some money in savings.
Don’t be afraid to talk finances.
The most important thing when it comes to managing finances as a family is to maintain open communication about money. A lot of people just have anxiety around money. Money makes them feel nervous or ashamed. But it really is the first step to getting on the right foot as a family.
When it comes to family finances, one thing that can help is money managing apps. With the same account information, both partners can see what the finances look like at all times from their mobile phone. There are also bill-pay reminder apps so bills don’t accidentally get paid twice and so that everyone stays on the same page.
Live by the budget.
The second most important thing is to stay on a budget. First, it’s important to create a realistic budget that allows you to get all your bills paid but also gives you room to live your life. A budget is sort of like dieting, in that you need to be frugal but also have room to indulge now and again.
If you can maintain a good diet for the whole week, it’s okay to splurge a little bit on the weekend. In the same way, if you can keep the tight budget all week, it’s okay to spend a few bucks on a nice little treat, like a dinner out.
The following tips can also help you stick to your budget.
- Automatically put money in savings. Regularly saving money is especially important when it comes to having a multiple member household, but saving is easier when there is more money coming in! It’s very easy to open a joint savings account and have $10 from each paycheck go right into savings. That could be an easy $40 a month, which adds up to just under $500 for the year! Most banks can set up automatic transfers of money from checking to savings as well. Just ask about it when you set up your account.
- Use cash for groceries. This is huge! Do you know how much extra stuff you add to your basket when you think you have the money to get whatever? And then you get up to the counter, wanting to spend less than fifty dollars for all of your groceries, and then you’re almost at a hundred dollars for a grand total. Here’s the new way to shop, leave the credit cards in the car or at home and just take cash. What you can’t afford goes back on the shelf.
- Discuss large purchases as a family. Even if bank accounts aren’t joint, large purchases should still be discussed. Some people say anything over $100, but anything over $25 is better because four small purchases can quickly add up. If the expense is going to be something like a new television or other appliance, it is best discussed with all parties involved.
Don’t forget to save for the kids.
If you are planning to have kids, starting a 529 plan is one of the best things you can do for their future. After all, the majority of college students are graduating from campus with student loan debt. As a parent, we should work to keep our kids out of educational debt, to the extent that we can.
What’s a 529 plan?
No, it’s not saving $5 for 29 days a month or something crazy (though that might be a good idea!), instead, it’s a college savings plan that’s named after the IRS tax code governing it, 529, though they’re also called Qualified Tuition Programs. The IRS allows you to put money away for your child’s college in this 529 plan. And save on taxes on the interest of this savings as well as get other benefits.
The key to managing your personal finances as a young family is the same as having a happy family–communication! Be open and honest with your partner about what you’re making and what you’re spending. Keep everything transparent by making sure everyone can access the bank accounts and see what’s going on. That way, your family can work together to save money and have a brighter future.
Jacob talks about a variety of personal finance topics at his blog, Dollar Diligence. You can find him on Twitter @DollarDiligence.
Check out Jacob’s blog and our Money Resources page for more of our favorite budgeting tips & resources!