Family financial health check-up
IT’S an age-old adage that money can’t buy happiness but a new report has revealed a family’s financial health could greatly affect a child’s development.
The AMP.NATSEM Income and Wealth Report: Little Australians measured the difference in the development of Australian children aged four and five across three different areas.
The report looked at physical health, social and emotional functioning, and learning and cognitive development, as well as an overall development measure which incorporated all three domains.
One of the key findings of the report was that children growing up in families suffering financially did not perform as well as those from households financially better off or managing their finances more effectively.
The report found 20% of four and five-year-olds live in a household that reported at least one type of financial hardship, such as not being able to pay the rent or heat the home and going without meals. Children in families facing multiple financial hardships recorded the lowest average overall development levels.
Duane Potter, chief executive of the Noosa-headquartered Vine Investment Planners and father-of-four (soon to be five), said he found the results of the report surprising.
“A balanced family lifestyle can really affect kids in a positive way,” he said.
Mr Potter, whose children range in age from three to 14, said despite the report’s findings, it was not all doom and gloom.
“With a little planning, there are a few simple strategies all families, regardless of their income levels, can follow to improve their financial wellbeing,” he said.
He said the first step for families to take control of their finances was to establish a realistic budget.
“It’s one of the most important things a family can do to ensure their finances are under control,” he said. You need to ensure you have more income than expenses.”
He recommended using one of the many budget trackers available online or sitting down with a financial planner to work through some budgeting tools.
Duane Potter’s financial health checklist for families:
Do you have a budget? It is essential to have a household budget and stick to it. If you spend more than you earn, it can quickly land you on the rollercoaster of debt. Learn to differentiate between needs and wants. Look for ways to reduce spending such as using discount petrol dockets, buying generic brand groceries, taking your own lunch to work and cutting back on take-away.
Strategy for paying off debts: One of the biggest threats to family budgets is credit card debt. Credit cards are fine if they are paid off in full each month before interest is incurred. But if there is a large amount of debt sitting on a card, it could be costing you big time as interest rates can be as high as 20% or more. To pay off this debt as fast as possible, you will need to make more than the minimum repayments each month. If you have several cards maxed-out, consider rolling all the debt into one low-interest card.
Savings plan for education: If you have young children, start saving for their education in the early years, so it’s not so much of a financial burden when they start school. People with children already in school can also try to regularly set money aside, so the costs are not as much of a strain at the beginning of each school year.
Have an emergency fund: As a contingency for life’s unexpected expenses, it is essential to have an emergency fund or access to cash through a mortgage redraw facility or offset account. A good rule of thumb is to have at least three months salary in the kitty.