Personal finance tips for moms
As celebration preparations are underway for Mother’s day, it is important to take some time to assess your personal financial knowledge as it is the key to establishing (or achieving) a secure future for your family – and helps ensure that you will have the means to celebrate many Mother’s Days to come.
Here’s what moms should keep in mind when it comes to personal finance:
Teaching Children the Importance of Money
There are two things we try to instill in our children that I hope they will carry on to their own families some day: the need to work and the need to save. They need to learn that things are not free and that with work can come rewards. I began working at the age of 12 in my church's nursery because I wanted my own spending money for various things such as shoes and designer jeans. As for saving, it all starts with paying an allowance for doing specific things and a piggy bank to save one-third.
Learn about Personal Finance
There are many ways to get educated about personal finance. There are numerous sources online. There are also free podcasts and free classes given at Community Colleges and various investment firms. You can find simple budgeting programs online; use them and stick to them. Too many times I have helped people in my practice do a budget only to watch them ignore it after the first month.
Spending on our Children
Many of us admit to overspending on our children. We don’t only overspend on our kids, we overspend – period. I know this may seem simple but I always ask “is this a need or a want?” Investing in needs such as books or braces is essential to your child’s future. However, upgrading your child’s smart phone to the newest generation when the current model is functioning is a want that isn't necessary. Start early teaching your children the difference between wants and needs. Help them understand priorities beginning at a very young age.
As to the question of sharing a checking and savings account with a spouse, that is a tough one. Every couple is different. To me, successful relationships are about communication and trust. If you communicate what the budget is, what you want to spend on non-essential items and agree before you write the check, why not? However if one party doesn’t communicate or has a habit of spending money earmarked for necessities, then the responsible party should have the checking and savings. My husband and I share the same checking and savings account; it works very well for us.
Saving for College or Retirement?
Many clients fear saving for college may be at the expense of saving for retirement. The simple but perhaps not practical answer is you should save for both. If you can put money in a 529 plan and still fund your IRAs or 401ks to the max, that’s great. If not, then compromise and fund each a bit. I suggest meeting with a financial planner or go online and do a budget. See what you can afford and, just as importantly, what you will need to maintain your lifestyle in retirement. I am fairly confident that Social Security will not pay the bills when I retire, nor was it meant to. I am also fairly sure that the cost of education is not going down. So save for both.
To fund education, there are scholarships and loans available. There are even some provisions to borrow against your retirement to fund them. Please check with your tax advisor to see if this applies to you. One suggestion we give our clients is instead of spending X amount of dollars on toys or clothes for birthdays and holidays, spend half that and put the remaining balance in a savings account set aside for education.
Common Money Mistakes
There are three areas where I see moms making mistakes in regards to their personal finances. They don’t budget, they don’t follow the budget if they make one and they forget about the difference between needs and wants. Being a mom is the hardest job in the world. Raising children and instilling them with your values is tough. It’s hard enough to get one child to soccer practice, one to dance, pick up the dry cleaning and plan supper after working for eight hours. But if you can take care of your finances, there will be less stress in the family and you will be setting an example that will guide your children down the right path as they get older.
As a busy mother with a full-time job myself, I understand that it may be hard to juggle everything at once. This is where having a wealth manager can come into play. The right financial advisor would help you set clear and attainable financial goals, work with you to create a strategy to achieve those goals and keep a constant watchful eye over your portfolio.