Family is society’s most fundamental unit and most significant determinant of community success, which is why family financial literacy is essential. Unfortunately, not all families practice proper monetary habits and planning, struggling with cash and credit handling issues.

Chamberlain Global Tokyo Japan’s review reveals that people need help managing financial products with complex terms and high interest rates despite efforts to increase financial inclusion. Learning more about personal finances can improve the entire family’s monetary literacy.

Global Financial Literacy Statistics

According to a study called Financial Literacy Around the World: Insights from the Standard & Poor’s Ratings Services Global Financial Literacy Survey by Klapper et al., only one in three adults globally understand basic financial concepts, which is particularly concerning for women, low-income people, and those nearing retirement.

The study above found that 95% of millennials are saving less than the recommended amount, 84% are underinsured, and 66% still need to start their retirement savings. 34% of Americans have no savings, potentially impacting their retirement age and lifestyle. Additionally, 69% of American households have less than $1,000 in emergency savings, leaving them vulnerable to financial shocks, and 72% need a written financial plan. Only 2.5% of households have college savings accounts. 

Debt is also a significant issue, with 38% of households carrying revolving credit card debt and nearly 100 million Americans owing around $1.3 trillion on auto loans. Student debt is staggering, with 44.7 million Americans owing $1.56 trillion. Addressing these challenges requires a proactive approach to financial education and planning to secure a stable financial future.

There is a growing retirement crisis due to inadequate savings and financial skills among European older adults. Policymakers should prioritize consumer protection measures and targeted financial literacy programs to improve economic decision-making and protect individuals from financial risks.

Family Financial Plan

Family financial planning is crucial for achieving short-term and long-term goals, ensuring monetary stability and security, and enabling families to enjoy their desired lifestyle. However, according to Chamberlain Global Tokyo Japan, most families need help moving from budgeting to creating a comprehensive financial plan.

You may be familiar with having a budget, but you should also create a family financial plan that outlines your current financial status and goals. It provides purpose and direction, allowing families to make informed decisions and pursue aspirations such as homeownership or starting a business.

Teach Financial Literacy

Family plans should involve a group effort. Promote financial literacy within the family by discussing money management and involving children in monetary decisions. Consider organizing a Family Finance Night to share insights and reinforce positive financial habits.

Create a Family Financial Plan

A family financial plan should be a group effort, especially if you have working teenagers or adults. A family financial plan may include estate or legacy plans and other details that apply to your unique situation.

A plan involves looking at your current situation and looking into the future:

Set Financial Goals

Every journey needs a destination, so you should create a map for your financial journey. You can define various short-term and long-term financial goals for the family, especially for those with working adults and young children. 

These are some relevant financial goals for your family:

  • Debt elimination – create a spreadsheet of all your debts and make repayment strategies.
  • Retirement preparation – plan for retirement by outlining how much you will need in a specific number of years.
  • Home or car purchases – you should prepare for significant acquisitions like houses or vehicles. 
  • Education plans – include your children’s education in your planning.

Remember that your objectives should be clear, measurable, achievable, relevant, and time-bound to ensure you can attain them.

Produce a Family Budget

A family budget lets you understand more about your household’s finances by knowing how much money you should allocate to specific things. A family budget is unique to every household which can differ from personal budgeting.

Suppose you are developing a budget from a fixed number (for example, every working family member will contribute a certain amount each). In that case, you can use the 50-30-20 rule to allocate income toward needs (50%), wants (30%), and savings/investments (20%).

If you have debt, you can use the 20% to eliminate the debts before you start saving. Prioritize high-interest debt payments and explore options to reduce loans or debts, such as budget adjustments or additional income sources.

Track Income and Expenses Collectively

Track income and expenses to manage finances effectively to help identify improvement areas and ensure wise money allocation. You can set a fixed monthly amount if your family is uncomfortable with complete financial transparency.

Build an Emergency Fund and Get Insurance

Families may incur debt due to hospital bills or calamities, so you should create an emergency fund to alleviate this possible burden. Save for unexpected expenses: a good amount covers three to six months of your average family budget.

Obtain essential insurance coverage, including home, auto, health, and life insurance, to safeguard against unforeseen events. You can partner with financial firms like Chamberlain Global Tokyo Japan to help with your family’s plans or asset management.

Invest for the Future

There are several ways to improve your future through insurance, retirement, and education plans. Plan for your and your spouse’s retirement while maintaining a diversified investment portfolio to achieve steady growth while minimizing risk. Save for your children’s education using tax-efficient accounts to reduce future student loan debt.

Review and Update Your Family Financial Plan

Family financial planning is a collaborative effort that provides stability and enables families to achieve their dreams. By following these steps and continuously reviewing your plan, you can secure your family’s financial future and enjoy peace of mind.

Regularly review and update your financial plan to reflect changing priorities and circumstances. Schedule check-ins with your family and consider consulting a global financial firm to help with your decisions. Several generational wealth studies found that the third generation often has less than 30% of the original amount. Therefore, family financial literacy is the first step to leaving a successful legacy.