Being CFO of Your Family

I don’t know about you, but having kids made me especially stressed about finances.  How can I save more? What should I be doing for my kid’s future education? How can I get more financially organized? Should we try to buy a house in the crazy Bay Area or keep renting?

I had the chance to chat with a finance expert, mom, and writer (who also happens to be my sister!): Kimberly Palmer. She just published a book on this that you may want to check out called Smart Mom, Rich Mom.

How did motherhood affect the way you thought about your finances? 

It changed everything about my finances because it completely changed my priorities. I wanted to make sure we were completely financially secure, making good decisions for our daughter’s future. I didn’t want to risk that we could lose our jobs and then be unable to pay rent – so I made it a priority to make sure we had an emergency fund and more savings. I also wanted to start saving for her future college costs, but it took me longer to figure that part out since all of the other expenses of having a new baby were overwhelming at first. 

What inspired you to write your recent book, Smart Mom, Rich Mom?

When I became a mom, I started noticing that so much financial advice about investing and saving is aimed at men — and the stuff for moms is all about couponing. That really bothered me, since making smart money choices for your family is about so much more than couponing!  Since I was a money writer and a mom, I wanted to write the book for moms that I wished I had — one that would help answer all my questions about managing our household finances, from taking out life insurance to investing for the future. 

What role should moms play in their family finances? 

A big one! Basically, we have to be the CFO of our households. Most of us already are, and the fact is, because of our longer lifespans than men and the high rate of divorce, there is a really good chance (90%) that we will be the ones in charge of our household finances at some point – so we have to be prepared for that. Also, our kids look at us and learn so much from us. We have to set a good example for them, so they can grow into adults who know how to manage money, too. 

What are the top three suggestions you have for moms to improve their finances?

1. Get organized – half of the challenge of managing household finances is making sure you know where your money is and what accounts you have. Spend an hour or two collecting the paperwork you need, shredding what you don’t, and putting everything in an organizational system – I like using a binder — so you can easily track your money and keep things up to date.
2. Check up on workplace benefits — a lot of us leave money on the table because we don’t sign up for things like flex spending plans through work, which can save hundreds or even thousands of dollars on health insurance, child care, and transportation costs. Check to see what you’re eligible for. 
3. Plan for a rainy day – make sure you’ve created a will and taken out life insurance for you and your partner so if the worst happens, your family is prepared. 

What are some daily things we can do? 

When you’re making financial choices that your kids can understand, start explaining to them what you’re doing. This can start around age 3 or 4, just talking them through how you’re comparing prices at the grocery store or online. Or with younger kids, even something simpler, like when they ask for something, taking the time to explain why we can’t have everything we want; that money is limited and we have to make choices and sometimes wait or go without something. 

I love lattes! Is it really not a good idea financially to buy one a few times a week?

It’s fine! Especially if it helps you be a better mom or get through your day. Investing in yourself is important, whether it’s with food choices or exercise. As long as you’re also saving for your emergency fund, retirement and college, you can splurge on treats sometimes too.

My husband and I haven’t yet figured out a good way to organize our family finances, and we have multiple accounts in different places. Do you have any suggestions?

I like keeping things simple by picking one or two financial institutions that can handle all your various needs- banking, investing, saving, retirement, etc. Some couples opt to combine accounts but others prefer keeping things separate, that is an individual choice. The main thing is you both have to know where your money is and how to access it. If you have many accounts spread out over multiple institutions, you might want to consider combining them or at least come up with a system to track them easily (like my binder system). 

What do you think of 529 plans for our kids?

529 accounts are a great way to save for college. The earlier you start, the easier it will be to save enough by the time they’re ready to go. You can check out your state’s plans or open one through the financial institution you already have a relationship with. The main thing is to save regularly – you can even set up for automated deposits on a monthly or quarterly basis, for example. 

Looking back, what would you say is the best financial decision you’ve made? 

For me, it was to keep working even though it was so hard after first becoming a mom. Having a steady paycheck and benefits through my job has really helped our family and, hopefully, will continue to do so over time.

What are some ideas for activities to do with kids to help them learn about money?

The best thing is just to talk about money with them – and an allowance can help start those conversations. I try to explain the choices I’m making, like saving  money by cooking instead of going out, or why we’re not going to do some expensive activity. I also have my daughter sit next to me when I pay the water bill so she can start to understand that we’re paying for different resources we’re using too. 

The Bay Area’s housing market is crazy and a lot of us are renting instead of buying, which seems like this is a growing trend in our generation. What do you think of renting versus buying? 

There is absolutely nothing wrong with renting and in some ways it can be very beneficial financially. You have more flexibility to move if your needs change or your job changes location and someone else is responsible if there’s flooding or a major appliance breaks. Owning a house has a lot of hidden costs.

I hope you enjoyed and learned from this interview as much as I did!

Check out her recent book Smart Mom, Rich Mom for more!

Photos courtesy of Kimberly Palmer