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Invest in Their Future: A Guide to Family Financial Planning

Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.

Family financial planning can help families reach their individual and collective goals, enjoy the material comforts and experiences that are important to them, and achieve financial security for those inevitable bumps in the road. Are you ready to start planning?

Learn more about what family financial planning is, its main components, and some easy steps for getting started.

Why Is Family Financial Planning Important?

Although a lot of households put together a family budget, many don’t take the next step of putting a plan into action, according to Taylor Kovar , certified financial planner (CFP), founder and chief executive officer (CEO) of Kovar Wealth Management, a Texas-based firm. “The plan part is, ‘This is how much we have today, and this is where we want to get to,’” he says.

Working off of a plan provides purpose and allows families to do the things they want to do and explore options they previously may not have had access to, such as owning a home or starting a family business.

How to Create a Family Financial Plan

The steps for creating a family financial plan are simple, but they require some important conversations and commitment from the whole family.

“We don’t say the person who makes the most or the one who is smarter with money gets to make those decisions,” Kovar says. What’s critical is “working as a team, so everybody feels satisfied. It goes a little deeper than dollars and cents.”

Follow these guidelines to set up a family financial plan—whether with a long-term partner, spouse, or children—that works best for all.

Set Financial Goals for the Family

Setting big-picture and everyday financial goals for the family can help provide the “why” for your plan. It could be things far off into the future, like saving for a home, a college education, or retirement. Or it might be short-term goals, like building an emergency fund, paying off a debt, or taking a family vacation.

Once you have your list of goals, think about applying some rule-of-thumb advice to your plan. “One that [often] makes sense is the 50-30-20 rule ,” says Brandon Robinson , president and founder of JBR Associates Financial Services in Plano, Texas. “It keeps things simple.”

Here’s how it works. You allocate:

• 50% of your income toward your needs (food, housing, utilities, etc.)
• 30% toward your wants (entertainment, eating out, travel, etc.)
• 20% toward investments and savings

You can choose a different percentage breakdown or try a different method altogether—and don’t be afraid to try more than one method until you find one that works best for your family. The key is giving your plan some guardrails.

Create a Family Budget

Why is a budget an essential tool for your family financial plan? “You can’t manage what you can’t measure. You have to know where the money is going,” Kovar says.

Considering that nearly three-quarters of parents (73%) report having trouble keeping up with expenses as of April 2023, according to a New York Life Wealth Watch survey, it’s more important than ever to dial into where your dollars are going.

Here’s a general overview of how to do it on a monthly basis.

• Add up all your income : Include your paychecks and any other sources of income you may have, such as child support.
• Add up all your expenses : Start with your fixed expenses like your mortgage/rent, car payments, tuition, utilities, cellphone, etc. Next, list flexible expenses like groceries, entertainment, etc.
• Save and invest the rest : Subtract all of your expenses from your income and see what you have left. This money should be allocated to savings and investments.
• Keep track regularly : Continue tracking your progress, and ultimately make changes where necessary. For example, if one month you notice your expenses reach above a certain threshold that impacts the amount you are able to save, it may be time to make an adjustment.

Ways to Invest in Education

Build an Emergency Fund

Families can save money for a variety of goals simultaneously, but your top-priority savings goal should be an emergency fund, if you don’t have one already. Having an emergency fund for unexpected expenses such as home repairs or a medical emergency can save you from going into debt or even financial ruin.

If you’re starting from scratch, open a separate savings account and set up an automatic deposit on a monthly basis or every payday. If you go with a high-yield savings account , you can earn a little interest on top of your contributions. Transfer as little as $50 to $100 a month to start, but the ultimate goal is to build up enough savings to cover three to six months of your expenses in case of a job loss, personal crisis, or other unexpected event.

Manage Debt as a Family

Debt can slow down the progress you make toward your financial goals. While some debt like a mortgage might be necessary, according to Robinson, a lot of families tend to have debt because they overspend on their wants, running up high credit card bills. Other times, a lack of emergency funds means having to rely on credit to manage unexpected expenses.

Whatever the reason, if you do have high-interest balances, you’ll want to prioritize those payments for a period of time and be consistent. It might require temporarily trimming some areas of your budget or bringing in extra income. If you’re not sure where to start, you can work with a credit counselor to help you or explore other options .

Protect Your Family with Insurance

If you’re doing the hard work of sticking to a family financial plan, the last thing you want is for unforeseen circumstances to undo your progress. That’s where insurance products come in.

The major types to have include home and auto insurance, health insurance, and term life insurance. With the latter, if you have people who depend on you for income, a term life policy that is worth several times your annual income can help your loved ones financially if you die unexpectedly.

There are other insurances that might be beneficial to you as well, from pet insurance to umbrella insurance to business insurance. A financial advisor can help you determine the types of coverage you need.

We don’t say the person who makes the most or the one who is ‘smarter’ with money gets to make those decisions. It’s working as a team so everybody feels satisfied. It goes a little deeper than dollars and cents.”

Invest for the Future

Family financial planning is not just about day-to-day or month-to-month spending and saving—it’s also about planning for the long term. Saving for retirement can help ensure that you won’t become a financial burden to your children one day.

The earlier you start investing, the more growth potential you’ll have. And maintaining a diversified portfolio with different types of investments can help you realize steady growth while lowering your risk.

Long-term investment options include stocks, bonds, mutual funds, or retirement plans like 401(k)s or individual retirement accounts (IRAs). 

Invest in Education

A college education is an investment that can boost your children’s lifetime earning power. As of 2021 (the most recent data available), the median earnings for bachelor’s degree holders were 55% higher than the earnings of those who completed high school.

That said, a college education is expensive. To help lower your children’s future student loan debt burden, special accounts like 529 plans can help you invest and grow funds tax-free. As long as you have a solid emergency fund and are saving for your retirement, putting additional funds toward a college savings plan can be a smart investment.

Ways to Fund Their Future

Teach Financial Literacy to Children

Financial education should be a family affair, according to Tyler Meyer , CFP and founder of RetireToAbundance.com. “Consider introducing a ‘Family Finance Night’ where everyone, regardless of age, shares their financial insights,” he says. “This not only cultivates financial literacy, but also creates a supportive environment for open conversations about money, reinforcing positive financial habits.”

You can also look for teachable money moments when shopping together, or teach kids to allocate their allowance and gift money into spend, save, and donate buckets.

Review and Update Your Family Financial Plan

A family financial plan isn’t meant to be static—it should evolve as your finances and priorities change. “Schedule a monthly check-in with your spouse and/or kids, and then once or twice a year, you can go more in-depth,” Kovar says.

You also might choose to meet with a financial advisor or planner once per year to go over your financial planning checklist , explore other ideas, and keep you on the right track.

The Bottom Line

Setting financial goals with your entire family in mind helps you prioritize and achieve financial milestones. Although it can seem daunting at first, once you create the family budget, tools and technology can help you put much of your plan on autopilot.

Once you develop a financial safety net through your emergency fund and insurance products, manage debt, and start seeing your savings and investment accounts grow, it can strengthen your family’s financial stability for not just today, but tomorrow as well.

Julie Bang / Investopedia

New York Life. “ New York Life Wealth Watch Survey Finds Key Financial Differences Among American Families. ”

U.S. Office of Financial Readiness. “ Emergency Funds: The First Step to Financial Freedom .”

National Center for Education Statistics. “ Condition of Education: Annual Earnings by Educational Attainment .”

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