Building wealth can lead to financial stability. This doesn’t necessarily mean how wealthy you are, but that you have as much money as you need to live comfortably and cover unexpected expenses.
Growing your wealth while covering your family’s needs can pose a challenge, especially in today’s inflationary environment. After all, it isn’t easy to save when you are tempted to spend on items or activities that will make everyone’s life more comfortable.
Finding a happy medium is a struggle for many parents who put their retirement savings on the back burner. While there is nothing wrong with putting the welfare of your kids ahead of your own, it can cause more harm than good in the long run.
What will it cost you to raise a family in the U.S.?
According to data from the U.S. Bureau of Labor Statistics, you need to earn an average of $7,749 monthly or $92,989 annually [MU1] to cover expenses for a family of four.
The amount you spend will also depend on where you choose to live. For example, if you want to live in a large metropolitan area like New York City or Los Angeles, you should expect everything to cost more.
For the average American household, it may be tough to save money if you need to spend a healthy amount each year to fund a comfortable lifestyle. But it isn’t impossible and it’s something that more families should be focused on.
According to a report from the Federal Reserve, the net worth of American households increased by 2%[MU2] in the first two months of 2023. Higher stock prices are a big part of the reason why.
The report shows that net worth increased by $3 trillion in the first quarter, from $145.8 trillion in the fourth quarter of 2022.
This serves as a prime example of why it’s possible to build wealth while also supporting your loved ones. You simply need a realistic plan to make it happen.
Tips to make wealth and family building simultaneously possible
Here are a few steps you can take to remain on track when it comes to growing your wealth for financial stability while raising a family.
Revise your budget plan
Be sure to include savings or investments that will help you reach your goals. If you are currently in a tight financial spot, you shouldn’t allow it to hinder you from saving. Even a small amount will do.
The important thing is to put it in your budget so you can identify any expenses you might have to forgo to meet your obligations. Once you have revised your budget share it with your family to get them on the same page.
Set financial goals
The second task is to set financial goals. They don’t have to be earthshattering, but there’s nothing wrong with starting small – especially if your current finances are tight.
You can initially set aside $100 every payday. As you consistently contribute towards your savings and watch the balance grow, you might be surprised how motivated you are to continue the good work.
Anticipate expenses before they happen
Many of those who fall into debt are usually unprepared for emergency expenses they should have expected. For instance, that expensive medical bill from an ER visit could have been covered or reduced if you had planned ahead with an emergency cash fund.
And what about college? If this is in your son or daughter’s future, it’s never too early to start saving. You can also teach them to put money away when they reach a certain age and not be burdened with so much student loan debt later in life.
The same is true for birthdays, annual vacations, and holidays. Instead of putting these costly expenses on your credit card, you can save up for them in advance and avoid going into debt.
Prioritize expenses
Not everything you spend money on is a necessity. This is why it’s important to categorize your priorities, especially if you are struggling to make ends meet. By doing so, you can minimize wasting money on unnecessary or impulse purchases that can derail your budget.
Learn to say NO
In an interview published in Scholastic.com[MU3] , David Walsh Ph.D., founder of the National Institute on Media and the Family, revealed that many parents have a hard time saying “NO” to their children.
While this may seem like good parenting – it can be destructive in the long run. Instead, we should teach them that they can’t always get what they want. But if something is particularly important to them, saving up money is the best way to get it.
Saying NO can also teach children to do things for themselves, which allows them to be more independent and resourceful. Apart from character development, this is also helpful when it comes to your own personal finances. For example, don’t give into buying your screaming kid a toy when you have just enough money to get by for the week.
Know when to splurge and when to save
While it is important to save money, there are also instances when it is okay to splurge to create a fair balance. This way, being financially cautious won’t feel like too big of a sacrifice.
Your priorities should dictate when to splurge and when to save. If your family enjoys an annual vacation, this should be a goal you work towards well in advance.
Deciding to have a single or dual-income household
As we all know, building wealth can provide more financial security for the family. Of course, it is easier said than done. Therefore, strategizing a plan can help you achieve the results you want.
Since the cost of raising a family can be high, you might have to opt for a dual-income household. That means both parents will work to financially support the family. While it is possible to increase your savings while living on one income, you could save twice as much with two.
However, this is not always possible if your children are still young and require your attention. Here are some tips that can help you decide your best course of action.
Compare childcare costs against possible income
Weighing your options is typically the best way to decide if both parents should work. If the childcare costs will be higher than what you will earn (less travel and lunch expenses), it makes more sense to rely on one income.
But if the earnings are bigger despite expensive child-care costs, you might consider it beneficial for both of you to work.
Opt for a part-time job
Living on one income doesn’t necessarily mean that the stay-at-home parent can’t financially contribute. You can opt to get a flexible, part-time job—especially if the child attends school during the day. As long as one parent is home when required, this is a smart strategy.
Work from home
Thanks to the Internet and as the pandemic proved, it is possible to work remotely and still be productive. You can ask a former employer if they will allow you to work from home so that you can continue bringing in money while tending to your responsibilities.
FACT:
According to Pew research, 43% of employed parents say they have jobs that can be done from home. Of those who have the option, roughly seven-in-ten say they are working from home all or most of the time.
Part of saving should include investing
So far, we have basically discussed ways to increase your savings and make smart spending choices.
Of course, that is only half the battle. Another key component to increasing your wealth is deciding how you will earn money on the money you save.
By investing it, you can build generational wealth. One positive of inflation is that you can currently earn a higher rate on your money.
Common questions about building wealth
Question: What does building wealth mean?
Answer: Wealth building is the process of accumulating long-term income through multiple sources. This refers to more than job-based income and includes savings, investments, and any income-generating assets like renting out a home.
Question: How do you start building wealth?
Answer: You can start building wealth by defining what it means to you. Is it an accumulation of assets? Is it owning a business? Is it investing in various stocks, bonds, and mutual funds? Defining your goals will keep you motivated to stay on track.
Question: Why is building wealth so important?
Answer: Remember that growing your wealth is not about being materialistic, it is about being financially stable. This means you have enough money saved to cover unexpected expenses along with your regular ones.
Question: When should you start building wealth?
Answer: As soon as you can. In fact, you should begin as soon as you earn your first paycheck to stay ahead of the game. When you start investing in your youth, compound interest can help your money grow faster.
Question: What are wealth-building assets?
Answer: Wealth-building assets are those that appreciate over time. A perfect example is a home. If history is any indication, the odds are that it will increase in value over time while providing a roof over your head now. Other assets that appreciate include gold and jewelry.