8 Financial Planning Trends for Families in 2021

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The COVID-19 pandemic disrupted every part of life, with our individual and collective finances facing major changes. With some businesses closing and others unable to keep up with demand and unemployment levels at their highest, most families had to review and possibly adjust their financial planning strategies. 

 

These truths are reflected in the financial planning trends families are following in 2021. Families are evaluating their financial plans, life insurance policies, and portfolio management as well as re-prioritizing their cash management and investing time in financial know-how. These are some of the most notable financial planning trends for families for this year.

Financial Planning Trend # 3: Investing in Life Insurance

Nobody wants to face their own mortality — or worse, that of their loved ones. But 2020 made facing this reality a necessity, as well as considering how tragedy often walks hand-in-hand with abrupt changes to finances. 

 

Life insurance is a popular way to prepare now for worse-case-scenarios in the future. Life insurance can be looked at both like traditional insurance and an investment. But overall, the  best life insurance protects your family from financial hardship and added stress after the passing of a loved one. Whether you lose a source of income or take on expenses related to your loved one’s passing, the monthly premium you pay toward life insurance offers a financial safety net as you navigate an already trying time.

 

Families are buying life insurance for the first time or reviewing their existing policies. Some are choosing to expand their coverage, even including their parents in their policies.

Financial Planning Trend # 2: Using Tech to Track Financial Habits

Depending on the structure of a family, the collective financial health may rely on coordinating several budgets and a wide range of financial accounts. With many reevaluating their finances in 2020 and into 2021, both individuals and families are tightening up their approach to budgeting. 

 

Families are evaluating their financial habits — and the market is responding, with personal and family financial management platforms popping up left and right. Whether you’re tracking your expenses in a shared Google spreadsheet or using an app, families are syncing their budgeting using technology to monitor habits and make necessary changes. 

 

Most apps automate budget tracking and many allow data sharing, so families can stay updated on their spending behaviors. Shared transactions create both accountability and awareness of spending habits. Savings calculators, many built directly into our personal and linked bank accounts, enable families to set goals depending on their income, lifestyle, and expenses.

Financial Planning Trend # 3: Portfolio Management

The pandemic and the resulting economic fallout means some industries are flourishing while others are still struggling. And individually, those whose industries benefited from the pandemic and were able to hold onto their jobs found themselves with more cash to invest as quarantines and lockdowns meant less spending. As a result, there is a great need to monitor and adjust investment strategies and portfolios. 

 

While things are starting to look up in 2021 for some countries, other economies are still struggling to recover. This means paying attention to both domestic and global markets is important, as well as weighing the value and risk of different asset classes.

 

Some individuals and families are taking this time to jump into investing for the first time, especially as retail investment apps become more popular. Those with extra cash are putting more into their retirement schemes and investment accounts to boost their portfolio. Those who make the right choices now will see a positive effect on their portfolio as markets and economies stabilize as we continue to recover from the pandemic.

Financial Planning Trend # 4: Restructuring Cash Management Strategies

A year and some change into the pandemic, there’s no clear marker for when, or if, all will return to pre-pandemic conditions. Thus, it is necessary for families to have a cash management strategy in place. 

 

Primarily, identifying both short and long term goals and structuring your cash balance around these needs is the main goal. Many families found ways to cut down on expenses and are funneling their cash into savings. For example, while working from home may cause an increase in your electric bill, savings on gas, transportation, parking and so forth has saved families a ton of money. 

 

Also, more families are moving in together, and young adults who may normally be heading off to college or signing the lease for their first apartment are seeing their plans pushed back by our current circumstances at this stage in 2021. While this is likely a disappointment for younger people, remaining in their household is a way to save money, possibly setting them up for a better financial future than other generations, like Millennials. And, more people are eating at home over in restaurants — the trend is noticeable across many industries. A new savings-focused culture is emerging, and it’s reflected in the cash management strategies of families.

Trend 5: Taking Advantage of Low Interest Rates

Interest rates across banking, real estate and other sectors dropped to historic lows as a result of the pandemic. It’s been necessary for large institutions to adjust to the needs of their customers, many of whom saw a severe reduction in their income. Families can use this opportunity to restructure their debts, refinance their homes, invest in life insurance and more — all at lower rates than pre-pandemic levels.

 

It’s also been a good opportunity for families thinking of transferring their wealth, assets or entities to grantor trusts under the prevailing circumstances. Families are also looking at the low-interest rate on their credit card liabilities.

 

The Federal Reserve has considerably lowered the mortgage rates as well, which is good news to families financing a mortgage. With low interest, families are refinancing their mortgages and saving thousands of dollars. In addition, they are benefiting from a shorter repayment period which means it could take less time to finish paying their mortgage repayments.

Trend 6: Moving House

2020 was a big year for the housing market, and 2021 has been much of the same. The pandemic has changed the way people live and interact. Some are choosing to exit big, crowded cities for more spacious areas. Others, no longer geographically bound by their job or their kids’ schools as we transition to a semi-permanent state of work (or learn) from home, are taking this time to move to their dream location. 

 

Many families took their extra savings and put it towards a down payment. Others took this chance to sell and turn a profit, with housing prices rising rapidly. And we can continue to look out for this trend as more people return to work — and others are priced out of their area by a lack of affordable housing.

Bonus Trend: Philanthropy, Mutual Aid and Community Care

While many of the effects of the pandemic were negative — and we saw some serious division occur in our societies among different groups — we also saw connections between individuals, families and communities foster. Social activism became the norm on social media, with calls for donations, mutual aid and community resources to various causes populating our feeds.

 

Many families chose to put their disposable income toward helping others, both locally or globally, whether in the form of cash donations or direct support through supplies or volunteering time. Economic disruptions also deeply shook business communities, with many families rallying around their favorite businesses and makers and showing support through their dollar.

The Future Is Bright for Families Post-Pandemic

Depending on your culture and which stage of life you’re at, building familial wealth may be something you’ve always thought about or a new concept. The benefits of working on a family financial strategy are clear: you always have a support system and you ensure that generations to come are equally secure. 

 

Though some financial planning trends, like investing in term life insurance, are tried-and-true, other, newer trends deserve a chance, too. Consider reevaluating how you manage your cash and if your investment portfolio is optimized. And use the rest of these tips and tricks to help your family stay on track financially in 2021 and for the years to come. 

 

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