Budgeting for Young Families
By Debbie Fletcher
There’s no doubt about it, having children is a life-changing experience. Your responsibilities and priorities will shift instantly as soon as that tiny person enters the world. There are many areas where you’ll find you need to make a change, but the biggest change will be how you manage your money. It’s no secret that parenting is a costly business, so it’s key to get on top of core skills for managing your finances, such as budgeting, life insurance and savings.
With a few precautionary measures in place, you may be surprised to find you can actually afford the things you want as a family.
Why do I need to budget?
Budgeting is a good way to monitor all your day-to-day living costs and helps you match your income to your outgoings. It’s also a helpful way to agree your long-term goals and ambitions for your family. As you put together your budget, you should think about what’s most important to you as a family. For example, are the memories more important than your possessions? Are flexibility and time together more important than a fancy holiday? Or, is having one parent at home with the children more important than maxing out your retirement savings?
The answers to these questions and how much or how little you spend on various aspects of your budget will be a reflection of your values. It will also set the stage for money-related conversations you’ll have with the little ones in years to come.
When it comes to dividing your money up between paying for your outgoings and saving for your family goals, the 50-20-30 rule is a popular method for saving and budgeting that you may want to apply. This helps you build a budget by using three spending categories:
- 50% of your income should go towards living expenses and essentials. This will include your rent, utilities, food shopping and transportation for work.
- 20% of your income should go on financial goals such as savings, investments and debt payments (if you have any). Whether you’re paying off a small loan or an overdraft, you need to budget to account for these payments on top of your savings.
- 30% of your income should be used for flexible spending and disposable income, meaning everything you buy that you want but isn’t necessarily a need.
Financial experts often give the advice ‘pay yourself first.’ This essentially means that you should save money when you first get your wages, not once you’ve paid other expenses. A budget will help you build up your savings, whether that’s for the perfect holiday, putting money aside for emergencies or saving for your child’s future university expenses.
Sit down once a month and review your budget with your partner to make sure you’re both on the same page, take stock of any changing priorities and plans, and give yourselves peace of mind on how everything is going.
It’s a good idea to make plans, but re-evaluate them regularly. Look at what’s coming up in the years ahead as well as focusing on just the next few months. This will help you create a balanced budget and financial plan – allowing you to enjoy yourselves as a family today and in the future.
