Financial Planning as a Family
November 1, 2021
There are several things to consider when financial planning as a family. The Independent Community Bankers of America (ICBA) provides helpful resources and guidance on this subject. The following articles from the ICBA cover planning a financial life together as a couple; financial decisions to consider as a parent; educating children about the basics of money management; and estate planning.
Couples should plan out their financial decisions together to adequately prepare for present and future expenses. The ICBA suggests couples begin financial planning by developing a budget together. If both individuals already have budgets, these can be used as a starting point to plan one together. For your convenience, the ICBA includes a budget worksheet and budget calculator to get started. A few additional things to consider as you discuss financial planning together include reviewing the beneficiaries on your accounts; revisiting your insurance to make sure you are getting the best coverage and rates for your needs; and thinking through who you need to notify if one or both of you has recently changed your name.
The biggest financial decision many couples make is to have children. Middle-income families can expect to pay over $230,000 to raise a child through the age of 17. As you discuss the topic of children with your partner, a few questions to ponder include:
- What are the benefits of two working parents vs. one stay at home parent?
- What kind of day care do you prefer?
- Are you receiving all the tax benefits you are entitled to as parents?
- Does your company offer a flexible spending account?
Once you have made the decision to have children and they reach an age in which they can grasp the concept of money, it is crucial to teach them the basics of money management. Retention levels will certainly vary from child to child, but the ICBA outlines important subjects to discuss as children age from one group to the next:
- Ages 4-6: Recognizing the difference between bills and coins; saving; earning money for completing tasks; and understanding the difference between needs and wants
- Ages 7-12: How to manage an allowance; keeping track of purchases; shopping around to compare prices; creating and sticking to a budget; and avoiding impulse buying
- Ages 13-17: Finding a part-time or summer job and managing the money earned; setting financial goals; understanding credit; learning how to protect themselves from identity theft; managing debt; and saving toward a goal
One topic that is often overlooked in the financial planning process is estate planning. It is a subject that many people would rather not think about, but it is important, nonetheless. Four things to consider as you go through the estate planning process include wills, living wills, trusts, and powers of attorney.
A will is the first step in the estate planning process, and it is used to determine such things as who will inherit your property, who will become the guardian of your children, and who will manage your financial affairs in the event of your death. A living will is a statement regarding your wishes on artificial life support and instructs your power of attorney on which choice to make.
A trust enables you to choose how the money you leave behind will be used. For example, you can designate a certain amount of funds toward your child’s education and specify that the money can only be used for that purpose. These funds are also protected from creditors because they cannot be used to pay debts.
A power of attorney is someone you choose to handle legal decisions in the event you are unable to make those decisions on your own. The two main types of power of attorney are durable power of attorney and health care directive. A durable power of attorney gives a person, or people, authority to handle your finances and legal matters in the case you are unable to do so yourself. A health care directive is given permission to make health care decisions on your behalf if you are unable to do so.