Even before that bundle of joy enters the world, your responsibilities as a parent begin to mount.
Not only do you have to ensure you have a place for your baby to be safe, warm and fed, but you need to provide for their future because the sleepless nights of babyhood soon turn into the sleepless nights of teenagerhood – it flies!
Getting your finances in order is necessary to ensure your family can thrive as it grows, and parents should take stock of their family finances several times a year.
Changes in income, buying or offloading assets, adding new family members to the mix and other life changes all impact the household bottom line.
But budgeting for your family doesn’t have to be a drag, nor do you need to create a strict budget with no wiggle room.
When it comes to family money management, you can even get the kids involved and build a solid foundation of financial literacy – win/win!
Money management with kids
You’re cruising along in life, possibly even on a double income with plenty of discretionary cash to move around as you please and suddenly your grocery list includes nappies, your water bill skyrockets and your energy costs start to feel the impact of keeping that white noise machine on all night!
Evaluating your expenses as a parent is a constant necessity as your financial situation will inevitably change as your children’s needs change.
A great way to approach budgeting as a parent is to base the budget on goals.
What are you most likely to use your future savings for?
Working towards a goal is the best way to kick motivation into gear and, if your kids are old enough, they can be involved in the process too.
So how do your family savings goals intersect with a do-able family budget?
Here are three things you’ll need to tally up to get a good idea of where you stand, financially, as a family to construct a basic budget.
- Your after-tax income – include here any full or part-time work salary and government benefits you may receive.
- Your outgoings – these are your unavoidable expenses such as your mortgage repayments, utility bills, petrol, food costs and other basics. It is most likely this will account for about 60% of your income.
- Your plans and goals – are you hoping to invest? Do you have educational aspirations for your children? What about leisure and holidays? Always dreamed of owning a boat, perhaps?
A financial adviser can assist you in providing you with some insights into how your income and expenditure work together, and what you might have left over to invest or ‘play with’.
Budgeting for your children’s future
Does it look like one of your children is destined for NASA?
What university will they need to go to in order to fulfil their dreams of aerospace engineering, for example?
Children begin to display their interests fairly early on in life, so it makes sense that parents need to begin budgeting for their children’s future from the get-go.
Some things to consider when determining how much you will need to put aside to safeguard your family’s finances in the future include:
- Educational and extracurricular
Where will the kids go to school?
Where will they go after school?
What other activities will they participate in after school?
Educating the future generation costs money, as do swimming lessons, ballet class and tennis club.
Make a mud map of the possible costs you will incur as a parent in the next few years, taking into consideration educational and extracurricular needs and interests.
- Medical and care costs.
Are you staring down the barrel of a few sets of braces?
Do your children have other medical considerations you should plan for?
Do you have sufficient health insurance for your family?
These costs may feel as if they are encroaching on the basics, but most families will find they are quite often blindsided by these additional expenses and it is necessary to ensure you have enough money aside to cover them.
- Housing and transport costs
Again, having a roof over your head is a basic necessity, right?
True, but will that roof be able to grow and expand as your family does?
Were you hoping to move closer to the beach by the time the kids were in high school?
Are you going to have to buy a car for a learner in the next few years?
Your future aspirations for your family require prudent financial planning – something your financial adviser can assist you with.
- Leisure
A trip to Disneyland every other year may not be realistic, but most families will enjoy getting away from it all at least every now and then.
What are your leisure goals for yourself and your children?
How will these goals change as the kids grow?
Planning ahead financially is paramount to ensuring you and your family can live the type of life you have dreamed of for them and for yourself.
Plan for your own retirement
Speaking of leisure time – what do you plan on doing when the kids are off your hands and your working hours have ground to a halt?
Retirement planning is a necessity to ensure a secure future for yourselves and your loved ones.
Ask yourself how much money you will need to retire.
Will you be able to afford to retire when and where you wish to?
What retirement scenario is most likely on the cards for you?
Can you consider a transition to retirement before you fully cease working?
The earlier you start retirement planning, the more secure your future will be, and that will give you and your children the peace of mind they deserve.
At First Financial, we believe it’s never too early to start planning for retirement.
Ask us about how to start taking steps towards building your wealth to set up the comfortable retirement you deserve.
Make your money work for you
Any good financial adviser will remind you to live within your means, but there’s no better way to determine what your means are than by taking stock of your finances on a regular basis, and budgeting!
At First Financial, we are committed to helping you to navigate life’s big milestones and arming you with the financial knowledge you need to not only survive but thrive.
For more information about how we can help you to maximise your financial success, give our team a call today.
