For Singaporeans, family financial planning is extremely important. That’s due to several reasons.
First, raising a growing family isn’t the cheapest venture. In fact, some sources estimate that as of 2020, raising a child costs several hundred thousand dollars.
Planning your family’s finances can make it easier to deal with such costs. Furthermore, it can help you hit financial goals that you may feel obliged to achieve.
For instance, it can make paying for the kids’ schooling and university costs less of a struggle. It can even help you deal better with tasks like providing for your elderly parents.
Moreover, it can minimise conflict within your family when monetary decisions have to be made.
Financial trouble can be a source of stress that weakens familial bonds. But if everyone’s on the same page and acts accordingly where finances are concerned, friction is less likely. It reduces the chances of quarreling over disagreements due to money.
In short, there’s every reason to plan your family’s finances as soon as possible. If you concur, we’ll show you how to get started by providing the most important tips for this task.
1. Have a Family Discussion
If you have a fairly healthy relationship with your family, this first step is obvious. You need to discuss the matter with them.
In particular, you should talk about your financial status, goals, and plans. Talk about what you think you can save on and what to save for.
This means talking to your spouse or partner about all of those things, of course. But it also means talking to the younger members of your family.
We know that most people are reluctant to talk to their children about money. But provided you keep the discussion age-appropriate, it’s enormously beneficial to have this talk as soon as possible.
You don’t need to talk about figures with them in most cases, so don’t worry about telling them your exact salary or expense numbers. That’s something best kept to the adults—such as between you and your partner.
Rather, talk to your kids about values. Teach them about the value of saving and budgeting, of planning for the long term, and even of generosity.
Try to concretise the benefits of the values that inform your financial planning too. This is so that they understand the values better and appreciate their impact on their own lives.
Say you’re teaching them the value of saving and budgeting. You could talk to them about how you’re giving up dining out for several weeks and buying an expensive toy they want.
Then you can explain that you’re doing it for a common goal: for example, so you can go on the family vacation they’ve been looking forward to. This can help them see the value of sacrifice and exchange.
You may want to talk about non-financial goals too and how they can be worked into your financial plans later.
For instance, a perfectly normal family goal is for the family to spend more time together. The family can talk about how to achieve that while keeping its actual financial expense low.
2. Create a Budget
Budgeting is crucial in planning your family’s finances.
In brief, it means tracking income and expenses, then trimming down the latter until you hit the figures you want. The idea is to ensure that you always have more money coming in than going out.
You should start by collecting all documents/receipts/bank statements showing money going in or out. This gives you a picture of your current finances.
You can then create grocery and household budgets based on that. Check your expense list in particular to see if there are entries where you think you can lower your costs.
Try to find things like subscriptions you’re not using or areas where you’re overspending. A lot of families overspend on food that just goes to waste, for instance, so grocery budgets in particular can help a lot.
3. List Financial Goals: Short-Term and Long-Term
Since planning finances is largely about preparing for the future, it would obviously be wise to determine your actual goals for that future.
That means identifying things you hope to achieve and setting up a timeframe for achieving them. Usually, you can split them up between long-term and short-term goals based on that.
Long-term goals for growing families typically include the following:
They may even include costs associated with major familial decisions like having another child.
Meanwhile, short-term goals typically include things like these:
Usually, short-term goals are more prone to change than long-term ones. You’re more likely to change your mind about getting a new laptop for the kids than about sending them to university, for example.
In any case, short-term goals may change month on month or even year on year. So, when planning for or around them, leave some room for flexibility!
And remember that you can involve the kids here too. For example, say part of your budgeting is about lowering your power bills.
Explain to the kids how they can help lower power bills by conserving energy, then explain the goal for the end of the month.
Next, promise them a reward they’d like if the family hits the goal at the end of the month, such as a family picnic.
Or, for the hilarity of it (because most kids will love this), you could offer the chance to pelt you with water balloons for 1 minute. Sacrifice yourself to the greater good in this case!
4. Form a Debt Management Plan
If you have any debt, you need a debt management scheme to be part of your financial planning.
The idea’s simple: plan how to pay down your debts so that you can keep your credit score up, reduce monthly financial obligations, and evade the cost of interest.
A good tip here is to identify higher-interest debt from the start. That’s because they cost you more per dollar owed every month.
Examples of high-interest debt include credit card debts. That’s why most people in growing families should be wary of letting credit card debt accrue.
5. Check Your Taxes
A lot of people pay more taxes than they really need to. That’s why you want to take a closer look at your taxes as part of your family’s financial planning.
For one thing, there are a lot of relief options and concessions that you may be eligible for as a parent in a growing family. There’s tax relief for spouses, parents, and more, for example.
Even contributing to qualified philanthropic or charitable donations can help: it lets you claim tax deductions.
Look too for possible errors in areas like your tax filing status or tax credits, as further examples. It may help to ask a professional to look it over, by the way, if you don’t feel up to the task of identifying all of these.
6. Prepare for Emergencies
Finally, be sure that you include emergency planning in your family’s financial plans. After all, most emergencies cost money.
That’s why you need to build up an emergency fund. With a fund, you have a ready source of funds for emergencies like these:
You lose your job and need a way to keep paying necessary expenses like groceries and utility bills
You’re forced to relocate because of your job and need to foot the bill for various moving costs
Vital equipment like your car breaks down
You’re forced to leave your home for some reason
We’ve already written a guide to building up an emergency fund, so we won’t go too deeply into it here. Just note that you should aim for an absolute minimum of 3 months’ worth of household expenses in your fund.
Furthermore, you should think of investing in health and life insurance for your family. That means yourself, your kids, and possibly even your elderly parents (at the very least, you may need to set aside a sum for them).
Insurance can help you deal with many of the emergencies that can arise. It won’t always pay for everything, but it can help defray some of the costs.
A Final Word on Planning Your Family’s Finances
While we covered the most important steps to planning your family’s finances in this guide, we certainly haven’t exhausted the list of tips you can use for family financial planning.
If you just practise a bit of common sense married to financial savvy, you’ll be able to come up with many other ways to support your family’s financial planning. That said, you don’t have to do it all on your own.
If you or your spouse decide that you’d like expert advice on your finances, you can reach out to us. Our financial advisors can help you come up with a game plan for your family’s future.
We can even help you make critical decisions like whether or not life insurance is appropriate for your situation. In any case, if you want to get started on family financial planning today, contact us now!
Written in collaboration with our financial advisory partners at Virtus Associates.
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