Love and Money: Families who discuss finances openly are more likely to stay together

By Julie Cole, CFP, FLMI Annuity Product Manager

moneyDuring uncertain economic times, levels of financial stress are sure to be even higher. Families find themselves having to readjust their expenditures and their expectations as a result of the economic downturn. Relationships become strained under the pressures of plunging stock prices, falling home values, and rising unemployment. Times are tough enough without money squabbles adding to the tension. Ginita Wall, CFP® and founder of the San Diego, California based financial planning advisory firm Plan for Wealth, suggests making money talks a regular part of every relationship. Don’t leave discussions about finances to chance. “Schedule meetings to talk about money,” says Wall. “Discuss your financial situation, dreams, and goals, and generate ideas to improve your future. Then do something fun, like watching a movie, afterwards.”

When talking about finances don’t sling the blame. Talk about your financial circumstances and accept where you are. Explore what you need to do now and re-examine the ways you spend. If you’ve always operated in a certain way, maybe that
way has to change. Most of us are due for a change. Discussions that start out with “If only we had….” are not healthy discussions. Don’t second-guess past decisions. Statements like, “If only we hadn’t taken that vacation and put all the expenses on
our credit card,” or “If we had paid down our credit card bills with our tax refund instead of buying a new computer,” should be considered off limits.

Your family discussions should focus on actions that you can commit to right away and without too much disruption. Drastic changes are difficult to make and may lead to resentment. If you declare “We will no longer eat out!” and you don’t participate in planning and preparing the family meals, this can lead to some disputes. Consider making modest changes that you can easily keep. If your family is very devoted to eating out  three times a week, then consider cutting back to eating out just two times a week and make that one home meal preparation part of family time. This can save you up to $120 per month
and help the family spend more time together.

Many couples already know they are spending too much—whether it’s dining out, buying clothes, collecting golf accessories or jewelry. Cut back in those areas. Keep track of
everything you spend for at least one month. This will give you a good idea of where you can cut back. In other words, deal in reality, not unreality. People often don’t know where their money goes. When they see how much they’ve been spending, they say things like, “ I had no idea we spent that much on eating out.” Remember you’re not sacrificing your lifestyle forever; you’re just tightening your belt for a while.

Involve children in finding ways to save money, as long as their roles are appropriate to their age. If you have to economize, explain the situation and ask the child to think of areas in which to economize, too. Otherwise, they might feel like they are being punished. Kids can learn some money management skills at the same time.

A recent decade-long study of San Francisco families found that their happiness depended more on how open they were in discussing financial issues than on their level of income. The worst thing couples can do is to continue to fight about finances and decide to divorce. That is sure to cause more financial distress than anything. Work together toward a solution.

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Seven Tips on How to Teach Kids About Money

Between shopping for presents and buying for parties, now is the time of year for spending money. It could also be the time to look at how your spending habits are affecting your children’s habits. Our financial guru, Julie Cole, has some tips on how to teach kids about spending and saving.

  1. Share information about the family finances. Your child doesn’t
    need to know your annual salary, the amount of the monthly
    mortgage payment or the amount in investments and savings, but
    they do need to know where the family stands financially. They need
    to know how money decisions are made and how parents save for the
    things they need and want. If money is tight, they need to know that
    there is no money for extras.
  2. One of the best tools parents have for teaching financial responsibility
    is an allowance. Allowance isn’t money a child earns for
    doing chores. Children should have age-appropriate chores that
    they do, without pay, simply because they are members of the family.
    The amount of the allowance should be age appropriate. Allowance
    money can be used for gifts for family members and friends and other
    needs. This is a good way to teach kids to give to charity, save for college,
    or other long-term goals.
    Allowances should be paid with small bills. If the monthly allowance
    is $10, they should receive ten $1 bills so that they can allocate
    appropriately to short-term and long-term goals.
  3. Show your children how to plan for purchases by always making
    a shopping list and purchasing only those things on the list. Use
    regular shopping trips as an opportunity to teach children about
    good shopping choices. It is estimated that impulse buying results in
    wasting 20% of our money. Your unplanned purchases will influence
    your child’s future spending habits.
  4. Teach kids about borrowing money when they are young. Let’s
    say your daughter wants to buy dad a Father’s day gift that costs
    $20, but she only has $15 saved. Advancing $5 from the next
    allowance may be a good idea if you make it clear that this will be a
    one-time event. If you advance money frequently, then they won’t learn
    about credit and budgeting.
  5. Take your child to a bank or credit union to open their own savings
    account. Beginning a regular savings habit early is one of
    the keys to financial success. Don’t refuse to let them withdraw
    when they want to make a purchase. This may discourage them from
    saving at all.
  6. Have your children set goals by making lists of needs and wants
    or necessities versus luxuries. Review the lists with them to help
    reassign items from necessity to luxury. Explain that no matter
    how important a video game is to them, it’s not a necessity, but may be
    a realistic goal that they can attain through saving.
  7. Allow your children to make spending decisions. Whether good
    or poor, they will learn from their spending choices. Encourage
    them to do research and open a discussion with them regarding
    the pros and cons of their spending choices.