Financial planning for the family

Whether your family’s growing with a new addition or the kids are heading to college, planning ahead financially can give you peace of mind. A solid family financial plan can help you identify your priorities today, while saving, investing, and building a foundation for the future. We’ve broken down six simple steps to help you start strengthening your family’s financial stability.

You’ve probably heard of financial planning in a general sense, where experts give tailored advice to help people manage their money and prepare for the future. But financial planning is also something families can do themselves.

Financial planning for the family typically covers the following areas:

• Income
• Expenses
• Savings
• Investments

• Estate planning

• Protection (including life insurance)

Without a family financial plan that takes into account each of these areas, it can be easy to lose sight of life goals. Making a plan can start with asking yourself something like: “How much do we need to save for our family vacation next year?” Once you know the rough amount you’re aiming for, you can start figuring out how to get there.

Family financial planning is also about the practicalities of life. Do you have enough money set aside for an emergency? What about retirement? The idea is that you’re in control of your money and using it in a way that benefits the whole family. A little extra planning today can go a long way to building lasting financial security.

A solid family financial plan starts with understanding where you are right now, which means taking a close look at your current financial situation and spending habits.

What are you (and your partner or spouse) working toward? A new home? Helping your kids through college? A comfortable retirement? Setting clear financial goals for your family financial plan gives you something concrete to aim for.

One approach is to break your goals down into short-term and long-term categories. Short-term goals might include saving for a vacation or paying off a credit card within the next year, while longer-term goals could be things like retirement or a college fund. 

The SMART goal framework (Specific, Measurable, Achievable, Relevant, and Time-bound) can help you set realistic targets. For example, if you’re looking to save for your child’s education, a SMART goal might be to save $100,000 by the time they turn 18. Whether that’s achievable depends on your specific financial situation, but having a clear target can make it easier to stay motivated.

Planning for one person is one thing — financial planning for a family is another challenge altogether. Without a clear budget, it can be a struggle to figure out how you’ll cover expenses, save for the future, and still have room for fun. A good family budget keeps you on top of what’s coming in, what’s going out, and where you might need to make adjustments.

Here are three key steps any family can take to budget their money:

1. Know your income: Check your paycheck and focus on take-home pay, which is the amount that actually lands in your bank account after taxes, 401(k) contributions, and health insurance premiums. If your income varies, you could take an average of the past 12 months (ignoring any outliers, like an unusually large bonus). Don’t forget to factor in side jobs, investment earnings, or rental income.
2. Track your spending: Trawl bank statements and receipts to see where your money has gone over the past three months. Include the essentials (mortgage, groceries, utilities) and the extras (movie nights, subscriptions, takeout). A budgeting app can help with this. If you’re spending more than you’d like (particularly on the extras), this is your chance to find ways to put more cash toward family goals.
3. Subtract essential costs from your income: What’s left? That’s where you can start allocating money toward savings, investments, or other financial priorities. Some people use the 50/30/20 rule (50% needs, 30% wants, 20% savings), but if you live in an area with a high cost of living, you may need to adjust the formula slightly to fit your reality.

What would happen if your car suddenly broke down or one of you lost your job tomorrow? Would you have enough savings to handle it comfortably? If not, building an emergency fund could be your top priority when financially planning for the family. This fund acts as your financial safety net, helping you cover surprise expenses without resorting to expensive debt.

Experts recommend saving enough to cover three to six months’ worth of expenses. To grow your fund faster, you might consider a high-yield savings account or a certificate of deposit (CD). CDs let you lock in your money for a set term, earning a solid interest rate while removing the temptation to dip into it for non-emergencies.

You might be wondering how paying off debt fits into financial planning for families. If you’re carrying high-interest debt (such as a credit card balance), this usually takes priority over other financial goals. This is because the interest charges typically wipe out any gains you’d make from saving, even in a high-yield account.

Some budgeting methods factor in debt repayment, too. With the 50/30/20 framework, you can redirect the 20% portion towards paying down debt. It doesn’t have to be forever — just until you have returned to a point where saving money is profitable again.

Once you’ve covered the basics of your family financial plan, you might start thinking longer-term. The first thing that might spring to mind is retirement, but you can also think about your long-term financial goals from step 1.

• Employer-matched retirement plans: If you’re not already contributing, it’s never too soon to set up a retirement account, whether it’s a pension, 401(k), or another savings option.
• Retirement savings you can access: In addition to your retirement plan, a separate savings account can be used to stash away extra funds that you can easily use when needed.
• Long-term investing: If retirement is a way off, you might consider investing to build wealth over time. Long-term investments (at least 10 years) in things like stocks and shares can offer better returns than a savings account, though there’s always some risk. Read more in our guide to investing for beginners.
• Saving for college: A 529 college savings plan can help cover most of your child’s college costs, and it’s tax-efficient. You won’t have to pay federal or state tax on withdrawals, provided it is used for qualified education expenses.

You can think of your family financial plan as a living document that grows with your family. Whether it’s a new job or a big move, your plan will likely need some fine-tuning along the way.

Make it a habit to check in with your partner (and kids) every few months, or whenever there’s a major life change. And don’t forget to review your budget each year to see how close you are to reaching your long-term goals and whether there are any other areas needing attention.

No one likes to think about worst-case scenarios, but taking some protective steps can give you peace of mind that your loved ones will be financially secure if something happens to you or your partner.

Here are some steps to consider as part of your financial planning for the family:

• Life insurance: If your family relies on your income, whole life insurance or a term life policy worth several times your annual salary can help cover expenses if something happens to you. Even if one parent stays home, having coverage for both of you can provide some stability.
• Draft a will: A will allows you to be in charge of who gets your assets and who will care for your kids if you’re no longer around. You and your partner might also want to discuss a power of attorney in case one of you becomes too ill to handle financial decisions.
• Teach financial literacy: You can get your kids involved in everyday money decisions to help them understand the value of a dollar. You might try fun challenges like the 52-week savings challenge, where they save small, increasing amounts of their allowance each week. Paired with a savings account for kids, they’ll soon start to learn how saving and interest work.

You might opt to discuss your family finances with a certified financial planner or advisor. These professionals are skilled at seeing someone’s situation from a broader perspective and coming up with a plan to make their goals a reality. Retirement financial advisors, for instance, can provide invaluable insight into the myriad options available.

This guide is designed as a starting point for organizing your family’s finances, and it’s something any family can tackle to strengthen their financial stability. But, if your family’s situation is more complicated, or you’ve built up a significant amount of wealth, bringing in an expert could be sensible.

Are you preparing your family’s finances for the future? You don’t need to wait for professional advice to start financial planning for the family. One simple step you can take today is checking you’re getting the best return on your savings.

Raisin offers access to multiple high-yield savings products, all managed from one easy-to-use platform. Plus, you can open joint accounts with Raisin by adding a joint owner when adding products, making it easy to share funds with a partner or spouse.

Compare accounts today and see how much you could be earning.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.