Family Financial Planning – A Step by Step Guide for 2021

financial planning for families

68% of Americans experienced a significant financial setback during 2020 due to the pandemic. A survey of 3,011 people conducted by Fidelity reveals that: 

  • 23% lost their job or additional stream of household income
  • 20% experienced an emergency
  • 18% had to offer financial support to friends or family
  • 16% had a health emergency within their own family. 
Family financial planning

With many households now acting in ‘survival mode’, family financial planning will be essential to keep American families on track throughout what could be another tumultuous year.  

Follow this guide to learn:

  • The typical challenges facing American families in 2021 
  • The importance of budgeting 
  • How to start a side hustle 
  • Actionable tips to help trim your expenses 
  • How to keep meal costs low or access support 
  • How to keep communicating with your family 

Challenges for blended family financial planning

Blended families may have an increased need for financial support during this time. This may be heightened where additional adult children including college students have moved back into the family home, or if there is another baby due during 2021. 

If you are struggling, it’s essential that you have a discussion surrounding financial planning for families to determine how everyone will contribute towards the upkeep of the household, or multiple households as applicable.

If you have been furloughed or lost income during the pandemic, this may impact your ability to pay child support. In this case, it’s important to take action by going to court to seek a modification order

If you fail to arrange this, then you may end up being charged interest on your missed payments.

Trimming your outgoings

Some positive news with regards to family financial planning is that the pandemic has made it easier in some ways to cut back on outgoing expenses. 

With restaurants, bars and other entertainment or leisure facilities closed or operating on a reduced basis, there is much less scope to spend beyond your means. 

If your budget needs to be trimmed during the pandemic, start by taking a thorough look at your income and expenses. 

Remember to include any expanded unemployment benefits under the government’s federal stimulus package as part of your income and then work out how deep you’ll need to cut back on outgoings to make ends meet.

Feeding your family

Putting food on the table is one of the greatest challenges facing American families with nearly 1 in 4 people facing food insecurity during 2020, according to NPR. 

If your grocery budget is too high, there are plenty of delicious and nutritious meals you can make for less than $5. 

Research recipes online and plan your shopping list around them.

The key is to bulk up your meals with more affordable ingredients such as rice or pasta and buy larger quantities of these to save money in the long term. 

Stews, soups and pies are all excellent ways of repurposing extra vegetables or meat so that nothing goes to waste.

If your financial situation is really tight, Feeding America offers a nationwide network of over 200 food banks, 60,000 pantries and meal service programs to help those most in need.

Start a side hustle

If you’ve had a great business idea on the backburner for a while but have never taken the leap, then now may be the right time to put your plans into action. 

55% of Americans are interested in setting up a side hustle to make extra money during the pandemic, according to a Vistaprint survey. 

Even if you’re currently still in employment, adding an extra income stream to your family earnings could be a shrewd move as job insecurity threatens many Americans. 

Although 2021 might seem like a crazy time to launch, there’s nothing like an international health crisis to create some new business opportunities. 

Whether you’re interested in offering educational assistance to homeschooling parents, or want to freelance as an online children’s entertainer for Zoom birthday parties, why not explore your business idea? 

Of course, if you need to quickly turn a profit on your new venture, then you might feel overwhelmed about getting your start-up fully operational within a short space of time. 

The key here is to start small and break your business down into small, manageable steps.

Make use of other members of your family, as well as your friends and other contacts to test out your business ideas and products to check that they’ll be a great money earner for you.

If you need to invest some savings into your side hustle, which might feel like the opposite of what you should be doing in 2021, then remember to put a firm price tag on how much you’re willing to spend to get your business off the ground. 

Setting financial boundaries on your venture is essential when you have a family to support. 

Renegotiating insurance

If you’re sitting at home working out how to tackle your family financial planning, then one positive step you can take is to call your various insurance providers and renegotiate your premium. 

Taking auto insurance as an example, many providers have already adjusted their prices due to fewer drivers on the roads during Covid-19. 

If you haven’t yet been offered a discount, then this is a great opportunity to make contact and request a review of your policy. 

To cut your monthly costs further, you can also consider raising the deductible but be aware that you’ll need to find the extra cash upfront in the event you need to make a claim.

Identify recurring payments

Going through your bank statements carefully is a critical part of financial planning for families. 

As part of this process, look for any recurring payments such as subscription services that are listed and determine if they’re essential or whether you could cut back.

This should be done as a family for the best results. 

You may discover that each family member has been paying for various subscription services such as Spotify, Netflix, Apple Music or Amazon Prime. 

By cutting back on these services and switching to a family plan instead, you can massively cut the amount you’re paying per individual in your household.

Free kids entertainment

Keeping your children occupied without access to the usual entertainment venues is a challenge that all American families will empathize with. 

But the pandemic has also provided an opportunity to embrace a more traditional approach to parenthood, enjoying activities together that don’t need to break the bank. 

Instead of shelling out on cinema trips, bowling tickets and take-away food, you might consider Zoom parties with school friends, building dens at the bottom of the garden, or going on a nature walk together. 

How about letting your kids paint some recycled containers or build an assault course around your home? 

There are plenty of inventive indoor and outdoor activities that will help to keep kids of any age busy during this difficult time.

Saving for college

Parents often begin thinking about saving for college whilst their kids are still in kindergarten, and for good reason as college is notoriously expensive. 

Looking at the 2020-21 academic year, the average cost for combined tuition and fees at private college is $41,411 or $11,171 for state residents at public colleges.

This rises to $26,809 for students who are out-of-state at state schools. 

Clearly, it’s best to save for college as early as possible, but if the pandemic has hit your finances hard, then what’s the best thing to do? According to Fidelity Investments, many parents are seeing Covid-19 as a short-term challenge but aren’t losing sight over their long-term goals. 

If you are able to continue saving, a 529 plan represents sensible financial planning for families as it is effectively tax-free. 

It’s also flexible in that if your child decides they don’t wish to attend college, you can switch the plan to another beneficiary or even use it to pay for your own tuition if required.

Keep communicating

Family finances can be stressful enough without having to navigate your way through a pandemic.

It’s important to keep open communication with all family members throughout 2021 and be honest about any difficulties you’re facing together. 

This might be due to a drop in income, a loss of hours, decreased investments or if you own a business, then the inability to trade due to restrictions. 

Remember that the stress surrounding finances can negatively impact the mental health of everyone in the household, particularly your children. 

Peggy Olive, University of Wisconsin Financial Capability Specialist explains, 

“Adults can easily feel overwhelmed by the added stress and sense of reduced financial security. It is important to remember that children sense the tension in the family and may feel less secure, but don’t know what to do about it.”

Take the time to talk through your feelings, showing respect to everyone in your home and setting family goals together.

If you’re one of the two-thirds of Americans whose finances have been negatively impacted by the pandemic, then The Finances Hub offers essential advice to assist with your family financial planning. Learn how to keep your household on track during 2021 by reading our blog articles.

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