The Smart Way to Budget for Your Family

Budgeting For Your FamilyBack in BK (Before Kid) time, you were an expert budgeter. You were on top of where every dollar went, set ambitious financial goals and felt good when you treated yourself to the occasional dinner and drinks with friends, because you knew you had room for it, since you'd set up a budget.

But things are different when your family depends on you. It can be harder to keep track of what exactly you’re spending on when there are more variables. And you’re probably facing more expenses than before … despite the same level of income.

In other words, when you're a mom, it gets much harder to answer: "How to budget my money?"

According to the most recent data released by the U.S. Department of Agriculture, the average middle-income family spent $17,520 in 2010 on expenses relating to children between the ages of zero and two. Yikes.

“In general, for a middle-income family, child-rearing expenses increased 37% from 2000 to 2010,” said Mark Lino, Ph.D., economist with the USDA. Double yikes.

And a lot of the budgeting problems actually happen within higher- and middle-income households: “If the average middle-income household spent what lower-income households spent on their children, based on this data they’d save $3,700 per year per child, which, at 4% interest, would yield over $150,000 by the child’s 25th birthday,” says Tere Stouffer, author of "Everything Budgeting Book."

Making Your Budget

Your optimal budget shouldn’t change all that much once you have kids. Your main expenses should stay relatively the same, including rent or mortgage payments, utilities, transportation, savings, debt repayment and health care.

RELATED: Set Up a Budget to Start Building Your Savings

After accounting for those fixed, unchanging costs, you should have about 22% of your budget left over, and it’s that chunk that has the most wiggle room. That’s also where you’ll cut costs in your own spending to fit your child’s expenses.

Here’s what a healthy mom budget might look like:

*Debt Repayment: If you’re using less than 10% of your budget for debt payments, put whatever is left over toward retirement savings or college savings for your kid.

*Healthcare: If you’re not paying a whole 10% toward healthcare, put whatever is left over toward maxing out your retirement; put anything left over from that toward college savings for your kid.

Although this might paint a stark picture for some people, your child can (and should) start helping out with his own expenses once he hits a certain age.

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When Your Kid Should Pitch In

Around the time kids are able to start helping you around the house or the yard, they’re old enough to start contributing in small ways. If your kid wants something that you deem a luxury (or just don’t think is worth the cost), have her pitch in.

RELATED: How to Budget My Money - Set Up a Baby Budget

For example, if she wants overpriced trendy rain boots, have her pay the difference between her pick and what you’re willing to pay for regular boots. She can either pay the amount from her allowance, put in the work for something you deem worthy of $10 or simply get the lower-priced boots.

The same goes for extracurricular activities. Once your kid becomes a bona fide preteen, she’s old enough to pay for part of her expensive activities. Say she wants ballet lessons—you might ask her to pay for half or do "work" worthy of the expense, like watching her brother for a few Saturday nights.

Find Out How to Save More Money With Children

Learn how to avoid going over budget at the grocery store: Read this.

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Save more money on childcare costs with this tip.

Tell us: Do you make your kid pay for his own expenses? If so, when?

  • Gormanlisa1

    We made our sons, ages 5 and 7, save birthday, holiday and allowance money for an entire year to use as their own spending money on a 2 week family vacation. I felt a lot more comfortable when they wanted souvenirs at theme parks, etc. because it was THEIR money.

  • Shannon

    This is super idea in an ideal sense.   My husband and I pay close to 30% of our net income in alimony and child support.  We also have older children who participate in extracurricular activities which can be pricey (but are essential for potential scholarships).  I would like to see budgets that are for atypical situations.  I am sure there are families that are in similar situations or have other non negotiable expenditures such as medical bills, legal bills, etc….

  • Holly

    I don’t see retirement, short term savings, entertainment, or vacations represented at all, which is amazing. Not everyone can afford those things, but they should be represented in a sample budget that is presented as “healthy.”

  • Sarah

    This “ideal” budget is nuts.  I live in the NYC metro area.  Daycare for one child in our area costs around $1200-1500 per month, per child.  (Good daycare is more expensive, and a nanny is at least $500 per week.)  In order for child care to constitute 7% (7%!!!) of our expenses, a family with one child (spending roughly $1,000 per month on child care) would need an annual after-tax income of approximately $150K.  A family with two children (spending roughly $2,000 per month on child care) would need an annual after-tax income of about $286,000.  I wish your budget was more realistic.  It’s financially important for both parents to stay in the workforce when their children are small, so that they can have well-paying jobs when the children get older.  (A woman who drops out of the work force risks financial catastrophe if her husband divorces her or dies before the children are grown.)  Working parents are working because they’re trying to be financially responsible, not because they don’t want to be around their kids.  Working parents need realistic budgeting tools that acknowledge the tremendous financial challenges, not pie-in-the-sky pie charts that seem to mock us…

  • Holly

    Sarah, you can’t expect a one-size-fits-all budget like this to reflect the cost of goods and services in the most expensive metro area in the United States. As a NYC resident, you must be used to that by now. Their numbers are certainly averages, which is appropriate for an article like this.

    As to the point of it being “financially important” for both parents to stay in the workforce when their children are small, I have to agree to disagree with you on that point. Having a “well-paying job when the children get older” isn’t all that important to every family. My husband stays home with our kids while I work out of the home for all the family income. This arrangement does impose risk on him, in case we divorce, as you point out. We’ve addressed the risk of my death (and his) with adequate life insurance.