Adopting Effective Money Management Practices: Budgeting for the needs of Custodial Grandchildren Ontario Edition
Caring for your grandchildren, especially when you don’t expect it, can present unforeseen challenges. Many grandparents experience difficulty managing their finances and budgeting from their income appropriately, particularly because they have retired, are unable to work, or did not think they would have to take care of their grandchildren.
You may be unsure about how to budget your monthly income to raise your grandchild. You may find that, financially and socially, raising children today has changed substantially from what you experienced when you raised your children. This pamphlet is designed to help you budget and manage your money, and prepare for the costs of raising your grandchild.
Why do I need to budget?
- Budgets can help you manage your money effectively. This can be very helpful for reducing the stress associated with unexpected financial needs, like medical needs or important school trips, arising from caring for your grandchildren.
- Budgets can help you prepare for costs you know will arise. As a grandparent caregiver, you can plan for birthday presents, activities, or lessons that your grandchild may need.
- Using a budget helps you see exactly how you are spending your money so that there are no surprises.
- A budget benefits you, so it is important to be honest with yourself and realistic when you are creating your budget.
How do I create a budget?
A budget contains a list of your planned and actual expenses and your income, which includes all of the money you receive from work, government and investments.
- ½ Income does not include sources of credit (for example, credit cards or lines of credit).
A good principle for budgeting your money is the 50-30 20 rule.
- 50% of your income should be spent on needs, including housing, heating, food, etc.
- 30% of your income should be spent on wants, including entertainment, gifts, and eating out.
- 20% of your income should be put toward savings. It is always a good idea is to put some money away for emergencies, and some for expected purchases.
- If you cannot save that much money, aim to save at least 10% every month in an emergency fund. This can help you deal with unexpected expenses that will come up.
Step One: Track Your Monthly Income and Expenses
- Keep all pay stubs, bills and receipts for cash purchases to help you figure out what your monthly income and expenses are. About six months’ worth of paperwork will give you a good picture of your income and expenses.
Step Two: Record Your Monthly Income and Expenses
List all of your monthly income sources and your expenses.
- Use a budget worksheet to add up your income and expenses for the last month.
- If you have certain expenses that are paid annually, divide the number by 12 to determine your monthly cost.
- Continue tracking your income and expenses in this way every month.
Step Three: Calculate Your Total Money Available
Subtract your total monthly expenses from your total monthly income to get your Total Money Available per month. Finally, subtract any loan and credit card payments from your Total Money Available per month to see if you have money left over or not.
If you do not have enough income to pay your expenses, you need to look over your budget and see where you could spend less money.
We have created a sample monthly budget you can use to help you balance your monthly income and expenses. You need only input the information and the spreadsheet will help you calculate your budget and help you balance it properly. You can access the spreadsheet at www.nicenet.ca.
How Do I Stay On Budget?
Be honest and realistic. Spend less than you earn. Make sure you list everything. Set short-term (like paying off your total credit card balance) and long-term goals (like an account for planned savings). Learn to say no if you cannot afford what someone is asking you to spend.
Tips for grandparent caregivers
Grandparents who care for their grandchildren sometimes find that what children require for school and social activities has changed since they last raised children. These tips may help you stay within your budget as you raise your grandchildren.
- It’s okay to say no to your grandchild. You can use this as a chance to teach your grandchild about saving up for something he or she wants.
- Get your grandchildren involved in budgeting if you can. Teaching your grandchildren how to budget can help them understand how your family decides to spend money.
- Your grandchild may participate in clubs or sports that require uniforms or have higher start-up costs, like hockey or music, or scouting. Contact the group administrator or leader to see if there are subsidies you can access or a uniform clothing swap that parents organize.
- If your grandchild is part of a sports club or other group activity, or wants to join one, find out if the group offers reduced or subsidized costs for lower-income families. Don’t forget to claim these expenses on your taxes- the Federal government offers tax credits for children’s activities, and your provincial government may also offer tax credits for these activities.
- If your grandchild attends a school where students wear uniforms, contact the school to find out if and when they have a clothing exchange, or if some pieces do not need to be official uniform pieces.
- Plan ahead for expenses you know are coming. For example, put money aside regularly for your grandchildren’s new school shoes, or sports equipment.
- Give your grandchild a small allowance if you can afford it. Depending on what you might have them budget for, fifty cents to one dollar per year of age, weekly is a good rule. Help them learn about saving up for things they may want, like toys, outings, or other fun ‘wants’. Instead, you may want to encourage them to earn money by doing chores that are not ordinarily expected or by working as they get old enough.
- Public libraries and community centres may offer subsidized or free activities for lower income families. Check your local community centre or library for information about reduced cost or free activities.
- Your municipality may offer subsidized child care. If you can’t afford day care for your grandchild, you may be able to get assistance from your city. You may also be able to share child care responsibilities with friends or relatives, by taking care of children in exchange for child care time.
- Some communities offer subsidized dental care for lower income families. If you cannot afford to pay for dental care for your grandchild, your city may offer a subsidized dental care program.
- Where applicable, consult your city’s Internet page for more information, or talk to your grandchild’s doctor or school. If your city has a municipal helpline (311), you may be able to get information from there.