An investigation of the relationship of farm families' financial security to family living expenditures and net income

Includes bibliographical references.This is a study of forty-two farm families in Northern Illinois who were interviewed in the winter of 1964-1965 to find out how much they spent on their security in comparison to their family living expenditures and net farm income. In studying the relationship, recognition was given to their savings, investments ether than farm, insurance, farm investments, Social Security taxes, retirement funds, family living expenditures, and net farm income. In deciding on these areas, this author projected future needs, family goals, and special values of all of these farm families. Long range financial planning is vital for farm families. However, two of the characteristics that make this planning essential also make it unusually difficult. First, the incomes of farm families are likely to be highly seasonal and also to fluctuate markedly from one year to another. Second, these incomes must be allocated, not only among the many needs and desires of farm families as consuming units, but also between the consumption uses and the needs of the farm business. Financial security was thought of as a provision for present and future needs. This provision was measured as to their dollar expenditures in savings, investment program other than farm, life insurance, Social Security program, health insurance, property and liability insurance, and farm mortgage payments. These forty-two farm families' liquid savings program was small in dollars. Only fourteen families indicated a small savings program to meet quick emergency expenditures or future plans. Only thirteen families made any investments in industrial or cooperative stocks or bonds. These investments were, primarily, patronage dividend stocks issued to farm families buying supplies from a farm cooperative. A majority of the families had a life insurance program. They expended $444.00 annually for an average of fourteen thousand dollars life insurance on the husband, nineteen hundred dollars of insurance on the wife, and five thousand dollars insurance on all of the children. Whole life insurance was mostly commonly bought while term insurance was least used. All families interviewed paid Social Security taxes; however, only four families paid the maximum tax of $259.20. This would indicate that thirty-eight families would not get maximum survivor, disability, or retirement benefits. Seventy-six per cent of these families had health insurance; however, they were very unfamiliar with the general purpose of true insurance protection. Some form of property and liability insurance was held by all of these families. The families that were farm owners were paying an annual principal payment of two thousand dollars. These forty-two families have established security planning as a very important short term and/or long term goal according to their $1,688 expenditures. The very basis factor affecting family living expenditures is the income available for this purpose. Income expenditure studies of these farm families show that expenditure patterns of families are different at different levels of income. In general, as income increases, expenditure increases. It follows that the higher the income, the higher is the dollar expenditure for each category of family living expense as this was true with these families. The younger families had an income of $5,984 and had a disposable family living expenditure of $4,307 while the older families had an income of $6,828 and a family living expenditure of $5,245. As the financial security expenditures are compared to family living expenditure and net farm income, a conclusion is that these families are investing in the present or future security one dollar for every four dollars earned and are expending one dollar for security for every three dollars spend for day-to-day living necessities.M.S. (Master of Science