The Simple Financial Decision That Makes Raising a Family Cheaper

Raising a family is expensive. There’s no way around it. It’s been estimated that it costs a little over $230,000 to raise a child to the age of 17. This obviously doesn’t include sending that child to college, paying for their wedding, or any of the other costs we still expect as the parents of adult offspring.

There is, however, one simple way to potentially reduce and simplify the cost of raising a child:

Give your children their own money, and teach them how to use it.

If you make a decision early on that your child has a set allowance, and everything they want comes out of that, it can have a real impact long term.

You can still buy the things they need, but they buy the things they want. All of them.

This might be collectible toys when they’re little, or a new iPhone when they’re teenagers. Sure, they can ask for bigger things for birthdays or holiday gifts, but outside of the birthday/holiday season, they’re responsible for their own purchases.

Here’s what you do when you make that decision:

You Set Them Up for Life

Handling their own money teaches kids to budget, plan, save, and delay gratification. It teaches them that there are trade-offs in life and consequences to their spending decisions. Most importantly, it teaches them the value of money. Slowly they learn that they can have this thing or that thing, but not both at the same time. They learn to weigh the pros and cons of ownership and make more measured, sensible decisions about money (and other things).

Alongside this, kids who have to make decisions about money start to define their own values. They have to decide if they really want to spend money on things or experiences, for example. Interestingly enough, a major regret parents have about money is spending it on stuff versus experiences. It doesn’t hurt a teenager to have to decide whether she wants to spend money on a new outfit or a day out with her friends.

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You Take (Most) Negotiations Off the Table

Part of the stress of middle-class parenting stems from constant demands from offspring. This is simply part of modern-day middle-class life. There’s a lot to spend money on as a child or teenager, and parenting can sometimes feel like a constant negotiation with your kids about what they can and can’t have. If your child has a set allowance, a financial plan, and good budgeting skills, they’ll still ask you for stuff, but not nearly as much.

Here’s What You Need to Do to Make This Work

Be Fair

If you pay for most things for your kids, you can give them a small allowance. If you’re taking this stance, however, you’ll need to give them a fairly generous allowance. It may seem counter-intuitive to give your child more money in order to make raising them cheaper, but if you stick to the rule (they pay their own way, with the money you provide), it will not only tend to work out cheaper, but you too will be able to budget more effectively.

What a generous allowance means will vary greatly depending on where you live and other circumstances. Just be aware you’re trying to teach them to budget, save, and delay gratification, so their allowance should allow them a reasonable lifestyle, but one with choices. A lifestyle where making sensible decisions about how to spend and save becomes second nature.

Teach Your Child Good Financial Skills

Your child will need a lot of guidance, especially when young. Teach him or her to save for the future by setting up saving pots. Maybe your child needs a pot to save extra spending money for a family vacation, money for entertainment during summer break, or money to buy holiday gifts for friends. You can also teach your child about money by guiding them through various scenarios. This could include:

• Doing price comparisons on things they want to buy
• Looking at alternatives to ownership (like borrowing something from the library)
• Selling stuff they no longer need at a yard sale
• Supplementing their allowance with paid work (as they get older)
• Interest and compound interest (when they’re old enough to open a bank account)

Be Clear

Talk to your child about what you will and won’t cover, or help with. As they get older, their phone contract and subscriptions will generally come out of their own money, but maybe it makes sense to include them on a family plan.

Things like saving for college also need to be discussed. It doesn’t hurt teenagers to save for college themselves, especially once they have a part-time job, but make it clear what you will and won’t pay for, and what student loans, bursaries, and scholarships will cover.

If your teenager wants a car, will they need to pay for it themselves, or can you put something toward it? There are no set rules here. It’s just important that whatever the rules are, both parties know how they work. That helps you and your child budget effectively.

The younger you start with this, the easier it will be, but you can definitely start when your kids are a little older. Once the groundwork is set, you may actually find that your child enjoys the satisfaction of running their own finances and balancing their own budget.

Find a Financial Advisor

Do you have questions about financial planning for your growing family? Find a financial advisor who can help you enjoy life with less money stress by visiting Wealthtender’s free advisor directory.

Whether you’re looking for a specialist advisor who can meet with you online, or you prefer to find a nearby financial planner, you deserve to work with a professional who understands your unique circumstances.

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Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.