by guest blogger Lora Fickett, Financial Stress Reduction®Coach, of Fickett Financial Coaching
The glorious day has come, you are now a parent and you didn’t realize how much love you were capable of until you laid eyes on your little bundle of joy. Along with having a child is not only the task of raising them to be responsible adults, but also the act of supporting them financially. A recent survey in 2017 stated that the average cost of raising 1 child is $1 Million. So how can you possibly keep your family budget in line, and not go broke? Here are a few simple steps you can take throughout your children’s lives that will not only help you stay afloat and continue on the path to building your wealth, but also assist your child in learning about finances throughout their childhood. This is not a complete list, but it will get you started in the right direction.
The younger years, ages 0-5
Everything small is cute, little shoes, little shirts, little sunglasses and as parents we want to buy all of those cute things for our children. There are 2 reasons I’m going to encourage you to “just say no” to these purchases. One is that your little one will grow faster than you ever thought possible and while those $50 sneakers may look cute, in 2 months they won’t fit! Secondly, and most importantly, now that you are a parent you have to learn some lessons that maybe you haven’t learned yet and one is the difference between WANT and NEED. If your child cannot walk, they don’t NEED shoes. If your child is constantly being sheltered from the sun because of their fair skin, they don’t NEED sunglasses. If you only have the same 7 days in the week that everyone else in the world has, your child doesn’t NEED 52 outfits! Are you getting the picture? So although you WANT to buy these things for your child, they don’t NEED them – put the money you save into their college fund.
School Aged K-6
Backpacks, holidays, field trips, new shoes every 3 months, play dates, birthday parties, presents for friend’s birthday parties…the list is of expenses can be long and exhausting. So how do we keep our finances in check with all of these unexpected events? First ask yourself, are they unexpected? Probably not. So pull out a piece of paper and list the 12 months of the year. Under each month, estimate what is going on in your child’s life and how much each of those events will cost. Total up theses months and add it to your family budget, does it fit or does it make you go in the negative. If it fits, great! If it doesn’t there is some bartering that needs to happen. If you absolutely want to spend $500 on their birthday, but the budget says $250 is all you can afford, where can you cut $250 during the year? How can you make an extra $250 during the year to afford your $500 spending spree? Once you have balanced your budget, stick to it. Your child is having a meltdown in the store and WANTS a $40 toy, they don’t NEED it and actually purchasing it may calm them today, but it teaches them to make a scene to get what they want. So simple say, “it’s not in the budget today honey, let’s put it on our list though for your birthday” (or some other special occasion you have budgeted for). If you do not know how to budget, seek a coach to help you learn how to budget, it’s truly a very valuable skill everyone should have.
Help your child at this young age find fun in FREE. There are many things to do that do not cost anything, after all, your child truly just wants to spend time with you. In addition, you can spend hours or a day donating your time to an organization and have some fun while giving back to the community. If you teach your child now, that fun and happiness doesn’t have to come from being a consumer, but can come from being a contributor to the community, you will never be sorry and it will serve them well in life.
Tweens and early Teens – Ages 10-14
You thought babies were expensive with strollers, car seats, formula and diapers…welcome to the tweens and teens of 2017. With the age of technology have come some very expensive gadgets that all kids WANT (are you seeing a lifelong pattern of want vs. need??? I hope so). Some things, it’s hard for kids to do without because as school books are not being handing out and everything is online, your child will need access to a computer. Do they want a $1,000 computer or can they settle for a $400 computer built by a private technician? If they “have to have” the $1,000 one, what can they do to help you come up with the extra cash? I’m not a fan of paying children to contribute around the house for simple chores, like dishes, laundry and cleaning their room, but there are some things they can do that will save you a lot of time. You or your neighbors could pay them for these larger chores as a part-time job. Mowing the lawn, cleaning the entire house or picking up the entire house, cooking dinner, doing laundry other than their own, babysitting, snow shoveling, cleaning a garage, perhaps they are good at organizing, or have another special skill. Be creative, teach them that money is abundant; all you need to do is go out and get it. We are doing our children a huge disservice in life if we give them everything they want and they don’t have to work for anything. If you start now, at the next phase of their life, they can really start to contribute. Read on.
Are you doing well so far? You didn’t overspend when they were little and won’t remember. You started to budget for expenses when they started school. You are teaching them to pitch in and make some extra money for things they want, while perhaps learning some business and budgeting skills of their own. Now they are in high school and just a few short years away from becoming an adult. Big ticket items are coming your way, sports fees, perhaps bus fees, car, car insurance, college applications and visits, college tuition, clothes for school and (hopefully) after school work, phone, and definitely an increased food bill! If you taught your child to start making some extra money on the side at the last phase, then chances are they are getting a part-time job after school or maybe are even running their own small part-time business. There is no reason why they should not pay a portion of the expenses mentioned above if they can.
Use the tools you have now been practicing for years to keep finances in check during this time. Use these tools with your child too, not behind the scenes. Have your child sit down and forecast out what expenses they will have every month. Total them up together and divide by 12; this is the amount every month that needs to be set aside. Does it fit in the budget or doesn’t it? Agree together on what they will contribute and what you will contribute. Make sure they have some money left over so they can learn how to budget that money. A good rule is a percentage for you, a percentage for the future you and a percentage to give back. So teach them about donating, spending responsibly, and developing a saving habit. If they are earning income, help them open up a Roth IRA and put the extra in retirement savings.
The goal of these years is the help them learn to stand on their own 2 feet and pass the torch to them. You are moving from taking care of them to them taking care of themselves.
I hope you enjoyed some of these tips to avoid bursting your budget when you have children. If you’d like to learn more about how to further reduce your financial stress and increase your financial IQ or perhaps how to enroll your teen/tween in a 4 hour workshop that will help them become more aware of managing finances, contact me at www.LoraFickett.com
for a free consultation.
Lora Fickett, CPA, MBA is a Certified Financial Stress Reduction® Coach. For years she has worked with Corporations to coach employees to reduce their financial stress making them more productive at work, increasing retention thus decreasing the turnover rates, and allowing employees to be happier, healthier and loyal. She works with executives and business owners to increase their sales, focus on better money management and make better business decisions. For individuals, Financial Stress Reduction is a must in order to lead a happy, healthy, successful life.