Teach your children 7 secrets to a financially healthy family

It's never too early to teach your children about money management. Rather than just tell them that “we can't afford that”, show your child how you manage your family's money. You might start with these 7 secrets to a financially healthy family developed by life coach Lori Radun. ¹

Step One―Have a monthly budget.

You need this to see where your money is being spent. If money seems to be creeping out the cracks, then try keeping a spending journal for a month. You might be surprised where your money is going. Then list your obligations, like housing, food, healthcare, child care, and car expenses. Create a household book keeping system to track your expenses.

Step Two―Keep your housing expense to 30-35% of your income.

Try to include utilities in this category. That means that your rent or mortgage, insurance, and utilities should equal no about a third of your gross income.

Step Three―Stop using credit.

If you already have consumer debt, start a plan to pay it off. Don't take out new credit cards. As the recent financial crisis has proven, living on borrowed money has serious consequences.

Step Four―Save ten percent of your income.

Make this part of your budget. Consider a bill for money you owe yourself. This will give you the safety net against unexpected expenses like repair bills. Or let you build up reserves for big purchases.

Step Five―Never spend more than one income.

With unemployment at record levels, no one can rely on job security. It might take a little time to reach this goal. Did you start using the second income for extras, then realized you needed it to cover your expenses? Start cutting back and paying off debt until you can make ends meet on one income.

Step Six―Keep no secrets.

Mom and Dad need to work together on family finances. Talk to each other about your financial goals, problems and concerns. During crisis, like a job loss or unexpected expense, let your children know in appropriate terms what is happening and how you are handling the problem.

Step Seven―Put money in its appropriate place.

As adults, we should know that money is not the key to happiness. However, with so much advertising and marketing aimed at kids, they need to be taught that money is just a tool.

Let your children practice these principals by giving them an allowance to cover their necessities, including such necessities as school lunches, supplies and fees for special classes or activities. Let them work through their mistakes. The lessons they learn today will make pay off as they grow into adults.

References

• 1. 7Secrets to Having a Financially Healthy Family, Lori Radon

photo by Marc Garrido i Puig