Whether your family is just you and your partner, a family with children, or a multigenerational household, all families have short-term and long-term financial goals.
A highly effective way to ensure financial stability within your household is by learning how to save as a family. Learning how to save as a family can establish healthy spending and savings habits that can result in financial stability.
Saving as a family encourages healthy financial habits in children
Learning about finances and making wise financial decisions at a young age can help foster healthy financial practices in the future. If you have children at home, you can educate them on the importance of saving, allowing them to follow your example when they are older. Similarly, you can incorporate saving habits in your household where your children can learn by doing.
Young children can start with a piggy bank to discover that the more they save, the more money they accumulate. As each child reaches school age, they should have their own bank account to save a portion of their allowance and any money they earn from doing additional chores or jobs for neighbors. Asking them to contribute a portion of their savings towards something extra they want to buy will help them learn the value of money.
Short-term and long-term goals are more attainable with family saving
One of the most effective strategies to achieve goals is using a savings plan. Your family may have short-term goals for a family vacation or long-term goals to buy a new family home. With a financial savings plan set in place, your family goals become considerably more attainable.
A simple way to track your family spending and saving is with a budget. Review your current financial situation to see how much money your family can afford to save each month after bills and expenses. After calculating how much you can afford to save each month, your family can use one of several saving strategies to work towards achieving each goal. If your children would like to go to a theme park or the beach for a family vacation, decide a realistic amount that each child could contribute from their savings or what additional chores could earn them extra money. If they’re old enough to rake leaves, mow the lawn, or wash the car at your home, they could also ask neighbors if they can earn money by doing the same at their home.
A long-term goal of saving for a down payment on a new home can also be a family goal. Once your family establishes a goal amount and a timeframe to achieve the goal, you can determine a saving strategy to ensure you meet that goal within your designated time frame. Children don’t need to know the actual amount of your goal, but you can explain in terms of their age. For example, young children can learn that treats and toys cost money, and you won’t be buying those things while you’re saving for a new home.
Free up cash flow by saving as a family
Saving money by eliminating unnecessary expenses can help free up more cash flow for you and your family. First, subtract your monthly expenses from your monthly income, such as housing, car, student loan debt, and credit card payments. After all your expenses have been deducted, the money that remains is your family’s current cash flow. To free up more cash flow for your family, look at all of your monthly expenses and consider areas where you can save more money.
Can you negotiate better prices for your car insurance, home insurance, phone coverage, and cable coverage?
Create a budget for grocery shopping and eating out to avoid overspending.
Do you have subscriptions for TV streaming services or other services that no longer serve a purpose?
Saving as a family helps to prepare for unexpected financial expenses
As we all have realized, unforeseen circumstances such as the nationwide covid pandemic and inflation can take a toll on our finances. As a result of COVID-19, 58.8% of Americans used all or most of their emergency savings during the pandemic and 67% of Americans have dipped into their savings to deal with higher prices in 2022, according to surveys conducted by YouGov for Forbes Advisor. While tapping you savings is better than using credit cards to pay for every day expenses, many families still struggle to recover financially.
One valuable way for your family to prepare for the unexpected is setting up an emergency savings account. An emergency account holds money strictly for unforeseen events such as car repairs, loss of income, home repairs, medical bills, or a death in the family. Having an emergency savings account can provide your family with financial security in times of uncertainty.
Saving as a family increases overall financial wellness
The most considerable benefit to saving is its impact on your family’s financial wellness. Your family’s financial wellness is the ability for your family to control your finances and have the financial freedom to achieve your goals. By saving, you and your family have the opportunity to prepare for the future, such as growing your retirement savings account or saving for your children’s higher education expenses. Your family can also achieve goals such as paying off debt and improving your debt-to-income ratio. Saving even a small amount of money every month can positively impact your family’s financial health and provide financial stability.
For more tips on these topics, read our blogs How to Start Saving for Retirement and Prepare for Education Expenses With a 529 Savings Plan.