Yahoo Finance Financial Planners: Here Are 4 Money Resolutions for the Whole Family
With the start of a new year, many Americans are making — or have made — money resolutions. Whether these resolutions entail increasing your savings, paying down debt or building an emergency fund, they can vary based on your age and your priorities.
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Now, for people who have families, there are other factors to take into consideration and resolutions that should include every member. And in certain cases, these resolutions can even expand to a larger group of extended family members and friends.
For instance, Steve Sexton, CEO of Sexton Advisory Group, said that making time to teach your children about financial literacy and good money habits not only prepares them for life, but also reduces the chances of them being financially reliant on you in adulthood.
“While learning about financial literacy can be a lifelong journey, using yearly resolutions is a great way to set new goals and embrace good financial habits as a family,” said Sexton. “As parents to two adult children, my wife and I introduced the concepts of saving, budgeting, investing and debt to our kids at a very young age — via age-appropriate methods, of course.”
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‘Loud Budgeting’
Some financial experts argue that one of the best resolutions could be to commit to “loud budgeting” — in other words, being more open with each other about your family financial priorities and decisions.
“That doesn’t mean parents have to share everything, but they can share financial decisions that are appropriate for the kids to know about and can raise the bar with their kids to share how they are going to allocate their financial resources this year,” said Bobbi Rebell, CFP, founder of Financial Wellness Strategies and author of “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Become Everyday Money Smart.”
Sexton echoed the sentiment, saying that financial literacy also entails being able to have honest, age-appropriate conversations with your kids.
“When my kids were teens, I was diagnosed with cancer and wasn’t able to work while undergoing chemotherapy,” he said. “We had a realistic conversation about household budgeting and finances during a time when we had limited financial means.”
He noted that it’s also important for your kids to see you and your spouse have healthy and calm conversations around money, so you should model the type of behavior you’d like your kids to emulate in the future.
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Instilling Financial Literacy and Smart Money Habits
Doing this early can set the foundation for a lifetime of financial health and responsibility.
Sean Lovison, CFP, CPA, founder and lead advisor at Purpose Built Financial Services, shared a few examples of how he did this with his own children.
“For my 14-year-old, I’ve initiated a ‘Read and Earn’ program where I pay her $20 to read a chapter of an introductory finance book and then discuss it with me,” said Lovison. “This does more than incentivize reading; it opens up a dialogue about finance, encouraging curiosity and understanding of money management from a young age.”
Lovison added that it’s an engaging way for her to earn extra money while building her financial literacy.
“Working on calming her burning desire to waste the money at Sephora and Lulu will be a project for another year,” he said.
In addition, Lovison said that to make saving more tangible and rewarding for his kids, he set up what he calls a “Bank of Dad” system using Google Sheets.
“Here, I offer a 10% interest rate on their savings, making their money’s growth more significant and visible,” he said. “This hands-on approach familiarizes them with banking concepts and illustrates the power of saving and interest. It’s an effective way to encourage them to save more, showing them how their money can grow over time.”
Making Long-Term Goals for Saving — And Involving a Larger Circle
One of the best money resolutions that can be made for families with children of any age is to commit to making long-term goals, like saving for higher education, a priority and to involve loved ones in the process, said Patricia Roberts, COO at Gift of College and author of “Route 529: A Parent’s Guide to Saving for College and Career Training with 529 Plans.”
For instance, Roberts said, in addition to resolving to make consistent contributions on their own to 529 plan accounts directly from their paychecks or bank accounts, parents can tell their extended family and friends they prefer an easy-to-make contribution to college savings accounts in lieu of a traditional gift.
“As an example, for an infant, if just 10 close friends and family members contributed $25 toward that child’s 529 account for an annual holiday and birthday each year, in lieu of — or to complement — a smaller, more traditional gift, your child could have over $14,000 by the time college rolls around, assuming an estimated annual 5% rate of return,” said Roberts. “If $50 were given, your child could have over $28,000, and so on.”
Contributing Toward a Shared Goal
Taylor Kovar, CFP, CEO and founder of Kovar Wealth Management, recommended encouraging the entire family to contribute towards a shared savings goal, such as a family vacation or a new gaming console.
“This teaches children the value of saving and delayed gratification,” said Kovar.
Creating a family spending log where everyone records their expenses is also a good idea, he added. “Review it together monthly to understand spending habits and discuss ways to save more.”
Finally, Kovar suggested encouraging each family member to set aside a small portion of their money for charity.
“This teaches empathy and the importance of giving back,” he said.
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This article originally appeared on GOBankingRates.com: Financial Planners: Here Are 4 Money Resolutions for the Whole Family
