As a parent, it’s your duty to provide the best foundation you can for your children. Besides offering your love and unwavering support towards them, you should also give them adequate financial backing to ensure that they have a stable childhood.
That said, accumulating enough savings isn’t the easiest thing to do, especially when you’ve got multiple dependents living under your roof. But its difficulty isn’t something you should use as an excuse.
It’s your financial responsibility to build and secure a strong financial legacy for your family. This way, your family can enjoy their lives and focus on growing and developing on their own accord without harbouring constant worry about money.
If you’re seeking out strategies to safeguard your family’s finances, you’ve come to the right place. Here are seven smart saving strategies you can employ to future-proof your family’s finances for years to come.
1. Build an emergency fund
Building an emergency fund is a crucial first step for families looking to build their wealth. It’s a reserve of funds that is different from the money used to pay the bills, as this pool is specifically set aside for emergencies.
Emergencies vary in nature, but they essentially cover unforeseen expenses like medical bills and home repair improvements. They can also be used to support your family’s living expenses in case of sudden unemployment or income disruption.
As a rule of thumb, saving three to six months of your family’s living costs is generally considered a good idea.
This will give you enough of a cushion to pay off bills or finance a medical emergency without having to take out a loan. It also gives you ample time to look for a replacement income source if your income source dries up.
That said, building an emergency fund from scratch takes time. This is doubly true if you’re paying expenses for your family as well. To start, begin by regularly putting money in a separate savings account dedicated wholly for emergencies.
You can allocate a percentage of your monthly income to building this fund.
Have little time to categorise your expenses manually? Consider automating the act of allocating a percentage of your monthly income by contacting your bank or accessing its in-app features. You can even adjust your emergency funding requirements as your financial situation shifts.
Having an emergency fund should be a priority for families as it helps them navigate through financially precarious situations with greater ease.
2. Consider diversifying your investments
Investing your money is one of the best ways to combat inflation and potentially grow your wealth. Entering the stock market is relatively simple, you simply have to pick a stock or index and search for a local stock exchange online or find a broker to invest for you (for a commission).
But instead of merely investing in a single stock, it’s a good idea to hold shares in multiple companies across multiple industries. This can help you weather any sudden downturns while giving you the best chance for growth.
Ideally, the companies you’ve invested in should be well-positioned in the market (or are in the uptrend). This way, you’ll be able to reap some profits in the long term.
This begs the question: how can you predict what stocks perform well? The answer is simple, but the execution isn’t as straightforward: you’ll have to assess a stock using both technical and fundamental analysis techniques.
A combination of these techniques can give you a breakthrough opportunity to score on potentially high-margin growth. That said, you’ll have to be perseverant and thorough with your analysis to truly make the most of your investment.
3. Budget and investigate your financial situation
If you don’t know where your money goes at the end of every month, your financial future will wound up just as ambiguous.
As such, it’s critical for you to formulate a rigorous budgeting system and stick to it. You should track your monthly income, expenses, interests, taxes, and transaction history—your whole financial net worth in a nutshell.
Besides that, you should also create graphs and visual representations of your money’s movements—the profitability ratio, the cost breakdown, and the goal-setting markers, to name a few. This can help you get a more comprehensive view of your budget in real time.
When you get a clear picture of your budget, it makes it easier for you to plan out your financial goals in the future. If you have a running obligation with variable fees, for instance, you can precisely predict future interest rates if you have a formula up and running in your budget tracker.
Alternatively, you can use online tools to help you calculate how much you can earn through deposits you’ve made.
4. Be proactive when it comes to paying debt
Whether it’s your mortgage, a business bank loan, or a car loan, it’s common for families to have some form of debt. If you’re paying these obligations with no delay, keep doing so.
If you’ve got multiple streams of debt, you can consider paying the high-interest ones first. This can lower your total spending over time.
It’s also important to avoid getting into new debt arrangements if you’re finding it hard to keep up with your current obligations. This is to reduce the grip of soaring interest expenses.
Failure to pay your debts on time can be financially disastrous. This is because it can tarnish your credit score and increase your debt repayment value over time, making it harder for you to gain control of your finances.
5. Allocate money for specific milestones
Raising a child is undoubtedly a big financial burden. You’ll not only have to buy baby products, but you’ll also incur regular costs for their daily needs like food and education.
You’ll also have to consider your and your spouse’s future financial needs, such as retirement and pension plans.
The good news is that most of these milestones fall on generally predictable dates, meaning you can plan beforehand how much money you want to allocate to these areas and reverse engineer the target dates for these monthly benchmarks.
If you want to maintain a stronghold over your finances, be sure to allocate money in savings accounts dedicated to these milestones. This way, you can meet your child’s needs when the time comes without having to scramble for money later on.
6. Promote financial literacy within the family
Saving up can be tough if everyone else in your family constantly spends on unnecessary things. This is why it’s important to involve your family in the money-saving process.
Start by teaching them about budgeting and investing. You can use a traditional piggy bank to give them something tangible for them to save up. That said, it’s important that your advise is age-appropriate.
By encouraging your family members to budget and save, they’ll learn to realise the value of money and be able to independently make decisions that can be better for the family’s financial well-being as well.
For instance, your children may be reinforced to hold off an expensive purchase and save it for a “need” instead. They may also be less likely to splurge on new things and opt for secondhand options.
7. Get insurance
Insurance is a must-have for families who own big assets like a house and a car. The right policies can help turn thousands of dollars in medical costs or repairs into services that are essentially cost-free.
There are many insurance providers out there that offer different policies, terms, and rates. Be sure to vet and look around for the one that meets your current financial situation while also being enough to cover potential emergencies down the line.
Furthermore, be sure to stick with a reputable insurance company. You can look at reviews to evaluate their reputation. In doing so, you can have peace of mind knowing that your monthly repayments are truly worth it.
Conclusion
Future-proofing your family’s finances is critical to ensuring that they can enjoy life’s milestones without a hitch. And rather than applying a single, all-encompassing financial strategy, it’s vastly superior to utilize multiple saving tactics to safeguard your family’s wealth.
From building an emergency fund and clearing off debt to getting insurance policies, being mindful of the family finances can pave the way for a happy and financially secure household. This, in turn, helps you stay afloat in times of financial crisis and uncertainty, freeing you from the harrowing likelihood of future financial strain.
Best of luck building your wealth!
