If you’ve been battling to pay the bills and it’s getting to you, you’re clearly not alone. Cape Town psychologist Peter Gilchrist says financial stress is widely recognised as one of the biggest contributors to depression and anxiety and, of course, a deterioration in the quality of family life, including the lives of the children.
‘The main impact on kids must be because of the eternal arguments debt tends to bring with it. Older kids may even worry that expenses are their fault and therefore blame themselves for their parents’ stresses,’ he says.
Much of this stress and concern can be avoided, says Gilchrist, ‘if families start early on to work together and communicate well’. Although it will differ from family to family, depending on the family members and how they can work together to achieve their goals, there are several ways you and your loved ones could start to take control of your financial challenges.
How to take control of your family’s financial management system
Create a ‘household’ bank account that both partners, or all adults in the household, contribute to each month. This is to be used for day-to-day expenses which the whole family shares, such as food, electricity and entertainment. A shared account is also a good way of allocating budgeted money to a specific area of the family’s living expenses to help with your money management.
Assign certain expenses to each adult member of the household. For example, one person could be responsible for paying your monthly medical-aid premiums while another could be responsible for the household or car insurance.
Let your children participate and learn to make a contribution. Pocket money should be earned by doing certain chores every week. It could be as simple as raking leaves or washing your car, or involve a project called Half-an-hour-a-day where they do something to improve the quality of life of the household, like tending the vegetable garden, for half an hour. All of this teaches responsibility and the value of contributing, improves quality of life and saves everyone money.
Have an emergency fund
Open a separate savings account for unforeseen expenses. ‘Saving consistently is the key to long-term financial independence and freedom. Unfortunately, this is a lot easier said than done,’ says Lizl Budhram, Head of Advice at Old Mutual. ‘You need an investment plan built on the right vehicles and funds.’
A retirement annuity is not a good option as an emergency fund, as your savings generally won’t be accessible before you are 55, she explains. ‘A money market unit trust investment is better suited for emergency savings. It is usually not exposed to big market fluctuations, the rate of return is fairly stable and your money is immediately accessible.’
Disclaimer: This article does not replace financial advice. If you’d like to speak to an Old Mutual financial adviser, call 0860 468 378.
This article originally appeared in Today issue 1 2019 magazine.