How to Save Money and Still Help Your Family Financially
“Make yourself a priority once in a while. It’s not selfish. It’s necessary.” — Karen A. Baquiran
For many first-generation college graduates, the most shocking aspect of post-graduate life is not work-life balance, work commute, work relationships, or work promotions — it’s simply the first paycheck.
If you managed to get a satisfactory paying job after graduation and you’re a first-generation graduate, it might be the first time you experience a surplus of monthly income. Your first reaction may be to give the money to your family to support them or to simply say and celebrate “I made it”.
Unfortunately, graduating and getting the first paycheck is not the “I made it” moment. It’s not the time to start giving all your money to your family.
Do not give the majority of your monthly income to your family
As tempted we feel to show our family compassion and celebrate our first paycheck, as first-generation graduates you’re doing them a disservice by not taking care of your personal finances first.
When I first heard the idea of “have two months’ rent saved”, I was annoyed. Why couldn’t I enjoy the moment in my life where I had money. If anything, life is too short to save.
Just recently, I realized this isn’t the case. I found myself between quitting my job or taking care of my mental and physical health and achieving personal freedom.
Unfortunately for me, I had only saved 3 months’ rent and had given all my savings to my family the month prior. All my savings. Gone. I had felt like a hero at the time, only to find myself mourning a month later.
I went from the family’s savior to potential dependent.
Understand your family’s finances
I propose a new way to reach a happy medium. Your family will probably expect you to start helping them out if you are the first graduate in your family. Here is what I suggest:
- Look at your family’s bills closely (credit card, phone, electric, etc).
- Discuss with your family which bill has been the most difficult to bring down or meet.
- Dedicate 15–25% of your monthly income to that bill. Don’t pay the bill all at once. Their credit score is not suddenly your responsibility after graduation.
- In the meantime, open a savings account that lets you accrue interest. This will be helpful for any large expense emergencies. A $500 bill is not an emergency. A medical bill is an example of an emergency.
Have this amount in your savings account
I would argue that you need to go beyond the “two months’ rent” in savings. To calculate how much you should have in your savings account before you make any changes to your family contribution are the following:
- Save the amount of two months rent
- Save the amount of two months of groceries
- Save the amount your health insurance deductible
- Save the amount your health insurance maximum out of pocket
Add all those amounts and that is what you should have in your savings account before you make changes to your 15–25% contribution to the family. If something unexpected happens, you always need to cover rent and groceries. If you have a medical emergency, you need to make sure you have any upfront health care costs you are responsible for covered.
It’s not selfish to make sure you have the above amounts in your savings account. Imagine a scenario where you lose your job or have an injury. Will you ask your family to cover your monthly rent? Will you ask your family to cover your medical bills?
Think hard about those answers and pause next time you have an urge to give a substantial amount of money to your family. I know the urge is there. I know the heartaches when we can’t help them enough. But helping yourself is not selfish. It’s being responsible and considerate of your family’s ability to help you.
Calculate the amounts stated above and have an honest conversation with your family about how you’ll contribute to the family’s finances after graduation.
The Mini Post-Grad Survival Guide
A 5-day email course with tips on budgeting, investing, and productivity for 20-somethings. Sign up for free.