Balancing Your Family Finances

When you have children, your financial priorities and family finances will change, and it’s important to reevaluate and seek financial advice.

Children are expensive, and it’s vital to create some balance in your life. Of course you want to spend money on fun days out and treats but make sure this is alongside the important protection you need in case you encounter unforeseen problems.

Savings and Protection

Ensure you save regularly for long-term and short-term goals.

Keep an eye on your pension contributions and ensure you have adequate coverage with life insurance, critical illness coverage and income protection. This is especially important if you are self-employed, as you do not have a financial comfort blanket to rely on. There will be no sick pay or financial support for your family should the worst happen.

Throughout my years as a financial advisor, I have seen so many people in their thirties and forties being diagnosed with a serious and sometimes terminal illness who were thankful for the protection they had put in place. This makes even the most difficult times more manageable and bearable.

Every situation is different, so sit down with a financial advisor and get some advice; I offer a free 30-minute initial consultation for anyone needing that.

Teaching Your Child about Money

Once you have learned how to control your money, you can teach your children to do the same.

Handling money is one of the best skills you can teach your children. Showing them strength and constraint regarding money and saving for the future will stand them in good stead throughout their lives.

Schools do not teach enough about money skills; as a parent, it is your responsibility.

If you ignore this, you risk your children growing up financially irresponsible, landing themselves in debt and a cycle of financial issues.

So, where do you start?

Here are some ideas on how to help your children be great with money.

Start Young

Good habits with money start at a young age.

• Set up a system to earn money for chores and teach them how to save. You can start this from as young as three or four.
• From a young age, teach your children the names of coins and notes and play games that involve money. For example, play being a shopkeeper! Use coins to draw around and to make patterns and designs!
• Teach your children about “want versus need” – an important concept to learn. For example, they might want the latest toy but discuss how they can purchase it. It could be using birthday money or savings, but it also raises the subject of whether there is a less costly alternative.
• With birthday and Christmas money, always save at least half. Put this in an account where they can see it grow. For example, if they saved £100 every Christmas and birthday, by the time they were 18, they would have at least £1,800 (could be more, depending on where it was invested). Quite a little nest egg, which could go towards driving lessons or their first car.
• Teach your children that they cannot have everything they want. Setting boundaries at an early age will reap rewards later.

Tweenagers to Adulthood

Once your child is around 9–12, they can quickly begin to learn the pricing and value of goods and services.

• For example, when going out for a meal, discuss pricing.
• Talk about the items they are saving for and where they can look for price comparisons.
• Get them familiar with the concept of checking for the best price for an item or the best deal in a restaurant.
• As your child reaches their teenage years, open an account with a debit card so they can start to learn how to manage money online. By the time they start working part-time, this process is familiar to them.
• It is essential to work with your child before they go off to university and teach them budgeting for food, utility bills and rent. Take your children food shopping so they know and understand prices and how to shop for the best deals.

Being Honest about your Family Finances

Lack of money can be a source of shame and embarrassment for many parents. If your children are aware of your financial situation, they will then start to understand. Saying no to your children is OK!

Transparency is Important in Family Finances

Hiding the problem if times are tough is not the answer. A careful explanation will gain respect from your children. You do not have to share specific numbers, just an overview and a sense of where you are financially. Share the basics of what you can and cannot afford but avoid using the word afford. A good expression is to say, “We choose to spend our money on this instead”. Children then understand there are always financial limits in life. This is not about burdening your children with financial woes but encouraging open and honest conversations.

Plan your children’s financial future with them. Talk about saving for university, driving lessons, a car and a first house. Share your experiences and ideas with them.

Discuss pensions and investments and how money can grow.

My bestselling book She Can Prosper, available online and in all good bookshops, contains more financial tips.

Diane Watson has been a financial advisor for over 30 years. She is passionate about helping people build a secure financial future. Find out more at www.shecanprosper.com. You can also call or email for a free 30-minute initial consultation.