When you’re pregnant and busy preparing for maternity leave, childcare arrangements, your baby registry, and so on, thoughts on how to set a family budget may not be foremost in your mind — but it’s a good time to get started. While we’ve talked about family budgeting in more specific ways such as budgeting for your maternity wardrobe, how much to spend on kids’ activities, and saving money on baby gear, we haven’t looked at the topic in a more general way. We thought it’d be interesting to chat today about the decision-making, planning, and discipline that come with creating a family budget. What are your best tips for how to set a family budget — and stick to it? How have your budgeting techniques, priorities, and philosophies changed since you became a parent?
Here’s a few topics to discuss with your partner:
Parent roles: Who will take on the budgeting role in your family, and why — and how much input does the other person have? Are the two of you usually in agreement on personal finance issues, and how do you make joint decisions? How has this changed since you became parents, if at all?
Budget categories: What are your budget categories beyond the basics such as food and housing, e.g., retirement, childcare, vacations, and so on? Do you set limits (or saving goals, such as through automated transfers) for each area, or simply keep an eye on things and take note when your spending gets out of hand? How much do you have left each month after the critical costs are taken care of?
Retirement: How has your thinking on saving for retirement changed since you became a parent, and what do you designate each month? Has becoming a mom changed your mind about the age you’d like to be when you retire (or is that something you haven’t considered yet)?
Insurance: How has your philosophies on various types of insurance been affected by having kids? Have you adjusted your life insurance policies? As you enter the “sandwich generation,” how do you feel your parents’ approaching needs affect your own budget, if at all, e.g., have you discussed long-term care insurance with them?
College costs: Have you set up a 529 for your child? How do you balance planning for your retirement vs. saving money for college? (Note that we’ve discussed 529s from a parent perspective in 2015 — we’re probably due for an update — and from a going-back-to-school perspective in 2018, including general info.) Have you come to any agreements with your partner, such as “We’ll pay for all of (or part of) our kid’s tuition,” or “Our child will go to a state school to get a cheaper education”? Note: I made a startling discovery by using The College Board’s College Cost Calculator today. A decade from now, when my son goes to school, tuition at a private university will cost about $270,000.)
Here are some free tools and resources that are helpful for families looking at their budget:
- Family Budget Calculator from the Economic Policy Institute
- Household Budget Worksheet from Kiplinger
- The Cost of Raising a Child (infographic) from the USDA
- College Savings Calculator from Savingforcollege.com
- College Cost Calculator from The College Board
Readers, what are your tips on how to set a family budget? Are you happy with how you and your partner manage money? If not, what changes do you hope to make?
anon says
01/09/2020 at 1:57 pmour financial advisor told us that if we save $50k in a 529 by the time our kid is 5 that would be enough. should cover a public college, or part of a private college we can supplement at the time. he advised us to save $25k by age 5 for the second kid, with an idea that we can move beneficiaries around a bit as they develop their plans. we paid the money we expected to spend on daycare for #2 into #1’s 429 before #2 was born so we reached $50k by age 3, when #2 was born. we are taking #2 slower, $500 per month now that we have two kids to pay for. i would def advise ppl that can to frontload 529 savings before daycare kicks in if possible, paying for both at the same time no fun.
also i had a grand plan of having fewer expenses as the kids came out of daycare but in the meantime we found a k-12 private school that i loooooove. so i’m sticking in biglaw longer than i planned. i dont love the biglaw but to me it’s worth it to have my kids in that school. i’m glad i built up the goodwill for this to be an option.
Anonymous says
01/10/2020 at 9:25 amRight — but saving $50k per kid can be difficult by 5 given that only a few states allow you to give $10K a year — and in NY state, for example, that’s the limit for ALL 529s, so if you have 2+ kids you have to split that money up. I just checked and my 5 year old only has 33K.
Anonymous says
01/10/2020 at 10:53 amTo be really clear, you are not capped at $10K per year. In NY state, $10K is deductible from your state taxes but you can put in up to $14K per year per beneficiary or do a lump sum of $70K (which prohibits you from contributing again for 5 years). It’s just that the excess over $10K doesn’t have tax implications for the deposit – but it still has the benefit of being untaxed on the growth when you take it out.
anon says
01/10/2020 at 5:11 pmyeah in california we dont get any tax benefits from the deposit in the first place. :-/ but actually i support this, we use our 529 but they are pretty regressive so i dont vote to increase the benefits/usage.
Anon says
01/10/2020 at 1:58 pmRe: saving for college. Our son will be making an arrival this winter, and our plan is to start saving, if even small amounts, in a 529. Our approach will be to save consistently and to adjust as needed as the family budget allows; our goal is that we will be able to put him through the state flagship school.
My husband gets tuition benefits through his public (not flagship) school, so our child could go for free and commute in, if necessary; costs would only be books. If he wants to go that route and then use the money for grad school, we’ll support that.
My biggest goal is just to be consistent about saving for him so that he has the ability to go to college without hardship, even if it’s not his dream school, and will know that it was important for us, from the beginning, to give him what we got. I also want to be very upfront with him as he hits high school and thinks about college; I think parents go astray when they encourage their kids to have “dream schools” that they can never possibly afford, or think only of college for very bright kids who are almost certainly bound for graduate school, etc. If he knows about what we can afford, he can choose to make up the difference in scholarships or grants; he can aim high but know that we might not be able to afford a top-flight private.