Starting a Family & Teaching Kids to Save
Newlyweds Need the Right Financial Infrastructure
Money issues and financial surprises are among the biggest stressors in a young marriage. At the very least, couples need to have the “money talk” before tying the knot. And, ideally, they take some deliberate steps in building a financial infrastructure that can carry them into all of the phases of their marriage. The cornerstones of that infrastructure should consist of the following:
Make it a partnership: In most families, one of the spouses manages the money and plans the budget, and the other one follows the lead. As it turns out, most of the time it’s the wife or mother who becomes the family bookkeeper. It doesn’t matter who takes that responsibility as long as the other spouse is made an active partner in the process. At a minimum, that means scheduling a monthly sit down to go over spending and budgets and talk about the month ahead.
Pay yourselves: The most effective way to manage the household budget is by using a joint checking account. But everyone needs their own account to manage some of their personal expenses. It eliminates hassles and friction and allows you to maintain a degree of independence in your spending. Agree upon an amount that each of you can take from the budget to put in your personal accounts.
Keep your identity: Once you’re married much of the new credit you obtain home mortgages, car loans, new credit cards will be established jointly. It’s important to maintain credit in your individual name as well. You should keep your existing credit accounts separate and in your own name to ensure you maintain your own credit history.
Keep your priorities straight: Pay down debt, build a 12 month emergency fund, save for retirement, and then set up a college savings plan when the little tykes come into the picture. Many young families make the mistake of rushing into a college savings plan when their children are born. Take care of first things first. Shoot for 15% of income to plow into retirement savings. If you have excess cash flow, look into college savings plans.