Why a family budget

A family budget is an essential part of a healthy family financial plan. A budget can help a family put their money in the right categories, help them to save, and help them understand where their money needs to and ends up going each month. A family has many needs (such as food, shelter, clothing, schooling, entertainment, etc.) and having money can help the family satisfy these needs. But if a family does not have a budget they may end up running out of money before they can satisfy all of their needs.

Setting up a budget

To set up a budget, the adults of the household should sit down and discuss all of their sources of income. This can help the family see where they get their money and exactly how much they get. From this point the family should right down all of their payments that they have to make each month. It would be a good idea for the family to first list the payments that stay the same from month to month. Payments such as the mortgage or rent payment, the phone bill, gas, car payment, utilities, etc., would be examples of these types of payments. Sometimes these payments vary a little depending on the month or season, but generally they stay pretty close to the same amount each month.

After listing the payments that are similar from month to month and that have to be paid each month, the family should list the payments that change each month. Payments such as entertainment, subscriptions, gifts, etc., can be included in this list. Some months a family might not have to pay for these payments, and other months they may have to.

After creating a list for each month of the year with the payments that are in each month, a family can then insert the amount each payment is. It is also important for them to include a savings column. Actually paying a savings account can help a family save more money than if they hope to just have some money leftover at the end of the month for savings.

Involving the family

When a family is setting up a budget for the first time, or they are adjusting their current budget, it is important for the entire family to take part in it. Parents need to take the time to explain to their children about any cut backs that may need to be made in the spending the family does each month. Of course parents should use certain words and vary the amount of information they give their children concerning the family budget depending on the age of the child.

Parents should not alarm children about the financial situation of the family, but they do need to know that changes are going to be made. If a child is used to getting things right when they ask for them, or if they are used to getting a certain amount of allowance each month or week, they have a right to be told that that will be changing.

As children get older, parents can ask the child what they would be willing to give up in order to help the family save money. They can also be involved in paying for their own clothes or extra things they would like that are not in the family budget. Teaching children how to budget their own money and to use it wisely will help them to better use their money as they get older.