A new survey suggests that this faith in our collective financial planning skills might be misplaced. The survey indicates that nearly two thirds of UK households are unaware of their monthly budgets, despite the fact that many parents place a priority on financial education.
The research, which has been conducted on behalf of the multi-user spending account Soldo, found that 64 per cent of families in Britain report that not all members of their household know their monthly or weekly budget.
Carlo Gualandri, the chief executive of Soldo, said: “With more evidence emerging that British people are preparing to tighten their belts, as the effects of a turbulent 2016 start to materialise, we are urging families to take a more inclusive approach to managing their day to day finances.
“It’s clear that families’ intentions are good, with a financial education starting on average at nine-years-old. However, if a family budget is not discussed and managed openly, the practical experience of money management for the entire household is not shared.
“There are huge gains to be had by learning from experience where budgeting is concerned, and we would like to encourage families to make inclusive money management and household budgeting a joint resolution for 2017.”
Figures from the British Bankers’ Association (BBA) showed that personal deposits grew by 4.8 per cent year-on-year in November 2016 to £32.4bn, Soldo’s report said.
It’s a sign that people may be preparing for a tougher year of weaker economic growth by putting more of their money away.
Mr Gualandri said that a failure to keep control of your family’s finances can have wide reaching consequences, with the most obvious being the immediate monetary problems that can follow, such as debt that spirals out of control.
He added: “Unpaid debts grow and if you don’t address them they can seriously damage your financial, mental and emotional health as well as overall family life.”
Nigel Clemit, the York-based chief executive of JWP Creers, the accountants and business advisers, said that setting budgets is easy when you do not have an emotional attachment to the outcome.
He added: “Most parents want to provide the best standard of living they can for their children and partner. Emotions are always a factor in family budgeting.”
As a result, setting a family budget usually starts well with the numbers, and is then adjusted when emotions creep in.
Mr Clemit said that the person who is responsible for the family budget must prepare an essential item expenses budget to cover costs linked to things such as rent, heat and food.
He added: “Whatever the result of that initial process, build in at least 10 per cent for ‘rainy day’ saving. Then agree to put the 10 per cent in a separate savings account.”
“Families should then agree a luxury budget for nights out, holidays, and so on, and save for that. They should then add the two budgets and evaluate the results. If they are spending more than their income they should trim the luxury budget.
“If there is still a deficit they should trim the essential budget. A golden rule is to always try to avoid impulse buying on credit cards.”
*Poor financial management can hurt the entire family, according to Carlo Gualandri, the CEO of Soldo.
Children learn from what they see at home, and if they are exposed to positive money management from an early age, finance is not seen as unchartered territory, he said.
In time, this will influence the way they handle their own finances.
Mr Gualandri added: “With so much market uncertainty at the moment, now is the perfect time to turn attentions towards proper household budget management that involves the entire family.”