There’s no time like the present to review how your family is spending money. Heather Ettinger, CEO of Luma Wealth, lays out why it’s important to put this out on the table and also explains how to do it. Here are some key points from our interview:
Clarify Your Values.
It’s not about how much money there is but about how it is being spent. To this end, values are “caught” by children. Our kids see what we do and reflect the same behaviors we project. If, for example, you buy every new gadget out there, don’t be surprised when your child wants to do the same thing.
Here are some great questions to ask your family to start a dialogue about what you value:
- As you think about our life as a family, what are you most grateful for?
- Name something meaningful that you saved for or wanted for a long time that still has value for you? (or something that you had to have and no longer holds value)
- What’s an experience you’ve had that you value?
Focus on Priorities.
Right now, it’s a good time for families to come together and revisit what their priorities are. That’s best done through the budget.
Consider the “big buckets”:
- Fixed expenses
- Discretionary expenses
- Rainy day funds
Discuss whether the items in your fixed and discretionary buckets match your values. Identifying non-negotiables — those must-haves that you are committed to no matter what — will alleviate stress for kids who are worried about losing things that are important to them. At the same time, you can discuss what you can do to tighten up in other areas in order to save money if necessary.
Make Charitable Giving a Family Affair.
Having conversations with your family about organizations that have meaning to you will help reinforce the values you share. At the end of the day, it’s about expressing gratitude and helping others. In these times, families may want to consider people and organizations who have been impacted by the changes brought on by COVID-19.
Let Your Kid Make Mistakes.
The biggest reason kids drop out of college is debt. They get credit cards and overspend. If we let them have a credit card in high school and manage their budgets, they will learn. Even if they make a mistake, they will learn that in order to balance their budget and pay off their debt, they will need to cut back on something else, which is a great lesson.