Deciding how best to manage our finances requires a long learning curve even in the most tense of situations. It’s difficult to tackle this when we’re confronted with an increase in inflation, rising interest rates, and the possibility of recession.
When you’re managing your savings account or sharing costs with a spouse financial counselors, owners and founders of Trinity Financial Coaching Weslia Echols and Willa Williams are available to assist.
Make it a habit and then forget it automate the payment process into your savings accounts
Saving to save for savings is a great start however, if you look ahead to goals or requirements then you’ll be able manage your savings plan more efficiently.
Williams and Echols suggest opening at minimum three savings accounts. One for short-term goals, another for emergencies, and the third to fund retirement.
Saving money for the future will enable you to enjoy that getaway you’ve been wanting or even get rid of that old couch you borrowed from her during college. A savings account for rainy days will provide you with security in case you lose income or experience an emergency medical situation. Whatever your age it’s never too late to begin saving to retire.
Once you’ve opened the account, Echols advises the initial step to make automated the payment into the accounts. “Start with putting a set amount in each account” every time you get paid, Echols says. “[Your savings] could increase quickly…because it’s automatically happening and already a part of your financial plan.”
Save for a reason
Do you want your savings to accumulate cash that is easily accessible? Save it in a conventional savings or checking account in which it will not grow as much however it is simple to access. If you’re looking to grow over the long term – for instance, 20 or 10 years – investing in the market for stocks is something you should look into.
If your aim is to equip your kids with a financial security that they can access once they get older, an investment account can grow the amount that you invest faster than traditional savings accounts. For saving or investing in the future, you can establish custodial accounts that is both in the child’s and the parents’ names however it is managed through the parents until the kid no longer an adult.
Williams says that one of the benefits to opening an custodial account for your children is the ability to demonstrate how compounding interest, or, the interest earned from interest – can help grow the amount of money. The way it works is that interest “compounds” through earning interest on both the funds you invest and the interest money earns.
There are custodial accounts for your children to prepare for college, such as 529 plans, which allows your funds to increase tax-free. Once the funds are used to pay for college, the withdraws can be tax free. Also, you can encourage your children to think about retirement before they are ready with Custodial Roth IRA.
Be honest and open about how you’d like to split costs with your partner.
“There’s no set, unchanging method of sharing costs,” says Echols. “It’s the level of communication you’ve established and the knowledge of your partner’s preferences that will aid you in answering the question.”
Echols says it doesn’t matter who is earning more. Instead, she says , think about the other’s “financial practices, administrative habits and paying close attention to detail such as this.”
Honesty is essential, too Honesty is essential, according to Echols. She suggests that every partner be aware of any accounts the each has. Transparency with finances can foster healthy confidence in the relationship.
A certain amount of financial autonomy is beneficial for a healthy relationship Williams says. Williams. “My spouse and me have a fixed dollar amount at which I can purchase something and I don’t need to contact him; he is able to make a purchase and he doesn’t need to contact to me.” Williams says. “When we make that choice we are able to see ourselves as grown-ups.”