This unit on family finances is intended for use with seventh and eighth grade students. However, the material may be appropriate for elementary and high school. It is the instructor who can best judge its usability.
The family is a basic social unit and most families do have a core of parents and children. There are seven C’s of family. In family living,
cooperation
is important. It means that every family member has a position and fulfills the duties it implies. Each respects other members of the family. Cooperation is a two way deal, you give a little, take a little and everybody benefits.
Communication
channels should always be open. Two-way communication helps a family avoid misunderstandings and hurt feelings. Some families keep communication lines open by setting aside a special time when everyone can get together to exchange ideas and contribute to decision making. Other families get together casually as problems arise. However they go about it, families need to get problems out in the open. In a healthy family atmosphere, the channels of communication are always open. Communication is always easier when family members share interests.
Confidence
is honesty, trust and dependability. Confidence of family members grows as each shows that he or she possesses these above characteristics. If a family member needs to talk to someone outside the family a friend or a professionally trained counselor should be used. Such a person can be trusted to treat the family’s problems confidentially. Any member of a family may from time to time find his or her load too heavy to bear alone. At such times it is support and
concern
that is shown by other family members which makes each one feel a worthwhile part of the family. The concern which family members show for one another is an indication of the strength of a family.
Commitment
is the acceptance of a charge or trust. In family life this means the acceptance of lifetime concern for other family members, acceptance of all the burdens and joys which come to the family. parents generally understand that commitment is necessary for happy family living. Everybody likes to feel independent to some degree, but in family groups which are committed to the well-being of the family, everyone pulls together during life’s difficult times.
Teenagers think of
companionship
as the paring off of two people in a friendship. They see their parents as companions of one another and feel that they must look beyond the family circle for companionship. In one way this is right. In the search for companionship, many friendships outside the home are usually desirable. There is a companionship within the home which members of families experience. Certainly there is companionship in family life and the family which shares with each in this form of companionship knows a great deal of the happiness family life can bring.
Consideration
, as applied to family living, means that family members are thoughtful of the rights and feelings of others. Perhaps, if there is one place where children as a group fail in their contribution to family living, it is in consideration. This may be caused by thoughtlessness. Family members are considerate when they sympathize with others who are in trouble. When their concern is deeper than sympathy, they have empathy. This means that they understand how other family members feel.
Different families have different resources. For example, their incomes vary. Money usually comes to the family as wages or salary earned by family members. The ways in which the family spends its money often make the difference between a successful family and one which founders.
The family with an eight-thousand-dollar annual income lives quite differently from the one with a twenty-thousand-dollar annual income. Family possessions are different, too. Some families depend upon social agencies for their money, such as to families with dependent children and welfare.
For many people, money is the biggest source of trouble in life. Some people will do without true necessities to save money, but others spend their money as soon as they get it, with no thought for future needs. Like time and energy, money is a basic resource which can be used poorly or well. It is valuable because it can buy goods and services. Individual goals affect people’s attitudes toward money. The ease with which money can be obtained is also a factor in each person’s attitude. Money may be spent freely when jobs are plentiful. But a business change that makes jobs hard to find may change a family’s spending habits. People who think of money in relation to the time and energy they must spend to earn it will probably have a different attitude than people who think of the things that money can buy.
At some time in their lives, most people must consider the basic question about money: “How can I get money I need?” People work to earn money. Time and energy is spent to furnish goods or services that other people buy. Most families depend on the money they earn from their jobs for their basic income.
Teenagers within the family have to consider special sources of income as they plan to spend their personal money resources. They are given money from the family income and they may earn extra money for special jobs or receive it as a gift. Many teenagers operate on an allowance. Some parents feel that an allowance gives a teenager a chance to learn basic responsibilities that go along with money management. The size of the allowance depends upon the individual situation and the goods and services it is expected to provide. The number of people in the family and the total family income need to be considered in determining each allowance. The age of family members and individual needs usually affect the amount of the allowance. Family needs and goals will help determine the items each allowance is expected to cover. Money is valuable because of its buying power, and it’s function as a credit-establishing commodity, not to mention its use in obtaining security. The reason for learning how to spend it wisely is to make life more satisfying. It is equally as important to know how to spend money as it is to earn it.
In order to be able to spend money wisely the family should devise a spending plan. Some people appear to be afraid of the idea of planning how to spend their money. They may fear that such planning will prevent them from using their money as they wish. Having a spending plan is a way of using available money to reach the family’s goals. The spending plan should agree with the actual income. If the plan does not agree an adjustment should be made.
A realistic spending plan for managing the family’s income will begin with a list of available resources. The list should include the sources of income, the amount of money from each source, and the times when each amount can be expected.
A spending plan is known as a budget and a budget should give a clear picture of where the family stands financially. The basic budget is a four-point plan for spending.
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1. Spending for comfortable daily living. This includes having enough money on hand to pay for basic items that keep the family going from day to day.
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2. Spending for major purchases.
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Major purchases includes household appliances, a house, car, or special vacation.
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3. Spending for financial security.
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Savings accounts, insurance, and investment are a form of spending and one of the most rewarding. The family is buying peace of mind, and the ability to borrow money inexpensively. It is getting extra value for every dollar spent. The family receives interest from the bank, insurance companies and corporations for placing their dollars with them.
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4. Splurge spending.
There is an occasional “throw caution to the winds” buy in each of us. With splurge spending the family can dine at a superb restaurant; go to an unplanned baseball game. Keep splurge spending in proportion to the overall budget.
There is a check list to begin the family’s budget.
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1. Open a checking account.
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2. Start a savings account.
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3. Total net income (income after taxes) 4. List all expenses (those that are constant, those that can change).
Opening
a Checking Account
Your budget will work best if your money is where you need it when you need it. Checking accounts have several advantages. The family will not have to keep a lot of cash in the home. Cash in the hand has a habit of dribbling away, and there is always the danger of theft. Checks are a convenient way of paying bills and they are a written way of how and where the money was spent. They also serve as receipts of payment.
Paying bills and making purchases by check instead of cash has it advantages: you don’t have to carry around lots of money; you can send checks by mail with no danger of loss if the check fails to reach its destination; your cancelled check is an automatic record of payment in case there is a misunderstanding; and cancelled checks are valuable records of income tax deduction claims. All in all, checks are safer and more convenient than cash in many cases.
There are two kinds of checking accounts: special and regular. The best one for you will depend on how many checks you write in an average month and the amount of money you keep on deposit in your account.
When you have a special checking account, you pay a fee for each check you write. Usually this is 15¢ per check. You may also be charged a monthly service fee of about $3.00.
When you have a regular checking account, no fees are charged as long as the balance on deposit earns enough income for the bank to cover the service costs. Some banks may charge a monthly maintenance fee or add a service charge for transactions (deposits and withdrawals) beyond a specified number. For example, the bank may allow you to write ten checks per month at no charge; for all checks written in excess of ten there will be a small fee.
Which kind of account is best depends on you. If you have to write only a few checks per month, a special checking account is usually cheaper. However, if you write ten or more checks a month regularly, a regular checking account may save you money. Since charges vary from bank to bank, and from community to community, you should investigate several banks to see which offers the best arrangements.
Whether you have a regular account or a special, here are some suggestions for using this service:.
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1. Be sure you do not write checks totaling more money than you have in the account. This sounds elementary, but people do it frequently, simply because they forget the next rule.
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2. Always enter the amount of the check and to whom it is being paid on your check stub before writing the check itself, and keep an up-to-date calculation of the balance left in the account. This means that your check stubs will record each deposit you make, and the amount of each check will be subtracted from the balance on hand.
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3. Avoid writing checks to “cash” or “bearer”. There are two good reasons for this rule: (a) you have no record as to what you used the money for when you write checks to “cash” and (b) anyone can cash such a check, so if you lose it, someone can pick it up and cash it without your knowing. So always make your check payable to a specific person or to a specific organization.
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4. Learn to use your checkbook as an “instant” record of how much you are spending, for what, and how much you have left to spend before the next paycheck comes along. After you acquire some experience in spending and in using your checking account, you can do as many people do: use your checkbook as a running budget to manage your spending.
Your checking account will serve as your personal accounting system. Every month or two you will receive a statement from the bank itemizing your transactions and showing the balance left in your account. With the statement will come all your cancelled checks which have cleared the bank by the time your statement was prepared. When you receive your statement compare your checkbook calculations with the banks calculations.
Opening
a Savings Account
A savings account is most helpful. The family collects interest on the money in their savings account.
Your success as a saver will indicate your success as a money manager. A savings account furnishes a way to separate money from the general flow of your day-to-day spending so that it can accumulate for emergencies and for your long-range plans, while at the same time earning for you by drawing interest.
Saving money is simple in theory, but seldom simple in practice. You have to make up your mind you are going to saver and stick to it. Here are some suggestions that may help:
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1. Set specific saving goals: a new car, a stereo, college tuition, a vacation trip—whatever you would like to have in the future. You will find it is easier to save regularly when you know exactly what you are saving for.
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2. Pay yourself first. With each paycheck, set aside a certain amount in your savings account. Do it regularly; put aside as much as you can, but don’t overdo so that saving becomes a burden. A little saved regularly is better in the long run than larger sums saved sporadically.
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3. Select a saving institution that pays a favorable rate of interest. In this way, your money will be working for you as it earns interest. Your account will grow faster, and you will achieve your “wants” more quickly.
Over a period of time, the interest rate can result in a substantial addition to your account. The number of times that the savings institution computes the interest during a year can also make a difference. Each time the interest is added to your account, the interest then earns more interest. Bankers call this “compound interest”.
Lets say that you save $5.00 regularly each week for five years. At the end of five years you would have deposited $1,300., but your account will total $1,438.94 if your bank paid 4% interest compound quarterly. At 5% interest, your account would be worth $1,474.49.
For all-purpose use, a regular savings account is the most suitable. Some banks also offer special savings accounts that you may find convenient for particular purposes.
Before a family can begin to spend its money they need a total figure, which is the net income or the take home pay. That is the actual amount received after deductions have been withheld. Gross income is the income before deductions. After the total, add up expenses. There are three types of expenses which should be listed.
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1. Fixed expenses.
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2. Fixed expenses.
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3. Occasional and emergency expenses.
Fixed expenses are the ones that must be met first and on a regular basis. They are those such as rent, utilities (gas, telephone and electricity), insurance (life, auto, tenant’s and homeowner’s). These expenses usually remain fairly constant.
Flexible expenses are often cash items and are usually paid for on a daily or weekly basis. Some of these expenses are: food, lunches, savings, laundry and cleaning, carfare and general transportation, and household operating expenses.
Occasional and emergency expenses will occur. They lie between the first two types. How much the family will have to pay is a variable figure. These expenses include: home appliance and auto repairs, uninsured medical and dental bills, large clothing outlays and continuing education.
