Money Spent on raising a kid

Where is Money Spent : Expenses of the family

Money is limited and it just does not grow on trees and there are so many expenses. We don’t want to scare you but the idea is to make you aware that parents have lots of expenses and they are providing for them as best as they can. When kids walk up to the parents demanding, “I want, I want…” parents can’t satisfy all their wants. Wishes are unlimited. Today a child might want a new toy, tomorrow a new dress. As it is said, “if wishes were horses’ beggars would ride them.” As a parent, one has to decide what is required, one has to spend money wisely. Before we buy a thing, we have to realize whether it is a ‘need’ or a ‘want’. So paying school fee is important than buying a new dress or a toy.  We should also not get tempted by the tricks used by sellers, such as Advertisements and sale/ discount, to make us spend our money.

Expenses of a family

Mr Sharma resides in Pune with his family. His family consists of four members his wife, a son and daughter and (Who is 4th member?)

  • They pay rent of Rs 10,000 per month.
  • Their electricity bill is Rs 600 per month.
  • Mr Sharma, son’s school fee is Rs 1000 per. month and daughter’s school fee is Rs 1500 per month.
  • They have a maid for cleaning house for Rs 700 per month.
  • Mrs Sharma buys her vegetables and groceries for Rs 1200 every week.
  • Mrs Sharma and Mr mobile bill together is Rs 500 per month. Mr Sharma goes to office by car for which he spends every week Rs 500 on petrol.
  • Every second Sunday, the family goes on an outing. They watch a movie in the theatre which costs them Rs. 500. After movie, they eat outside for Rs 500.

Find out how much does Mr Sharma spends every month?

Description Amount
Rent
Electricity bill
Son School Fee
Daughter’s School Fee
Maid
vegetables and groceries
Mobile Bill
Movie
Restaurant

Dollar Street

The things we all have in common. Everyone needs to eat, sleep and pee. We all have the same needs, but we can afford different solutions. Imagine the world as a street ordered by income. Everyone lives somewhere on the street. The poorest lives to the left and the richest to the right. Everybody else lives somewhere in between. Welcome to visit all homes on Dollar Street!

Dollar Street was invented by Anna Rosling Rönnlund at Gapminder. She wanted to show how people really live. It seemed natural to use photos as data so people can see for themselves what life looks like on different income levels. Dollar Street lets you visit many, many homes all over the world. Without travelling. A team of photographers have documented over 264 homes in 50 countries, and the list is growing. In each home, the photographer spends a day taking photos of up to 135 objects, like the family’s toothbrushes or favourite pair of shoes. All photos are then tagged (household function, family name and income).

Dollar Street How People live in world
Dollar Street How People live in world

You can checkout Beds, Teeth, Toothbrush in these homes

Dollar S

Types of Expenses

Most of the money is spent on meeting the needs of food, clothes, house, education, transport, helper services- the list is endless. The expenses can be divided into following categories:

  • Fixed expenses: Regular expenses which are fixed in amounts such as rent or the maid’s salary.
  • Variable expenses: These expenses come up regularly, but with varying amounts, for example, electricity bill, money spent on petrol for vehicles.
  • Incidental expenses: Expenses that arise because of some incident, such as someone falls sick or there is a friend‘s birthday party that one needs to attend.

Let’s see how the money gets spent, in a family.

  • If you live in a rented house, you need to pay rent to the owner. You might be living in your own house. But if your parents might have taken a loan (more on this in the banking), then they must be paying the home loan.
  • The amount of money that one pays for rent depends on the city one lives in and also which locality one lives in. A house in the city would get more rent than one on the outskirts. A similar house would be available for lesser rent in Delhi than in Bangalore.
  • With the house, come the bills that need to be paid. You use electricity, so you need to pay the electricity bill. You use water, so you need to pay the water bill. These need to be paid to Government agencies such as BESCOM and BWSSB that takes care of electricity and water for Bangalore City. These bills are monthly. The bill amount depends on the usage. The more you use, the more you have to pay. So switch off lights, fans, air conditioners while leaving the room. You will not only be saving electricity but also your money!!
  • If you have a telephone (landline) in your house, then you need to pay for it. If your parents are using mobiles or cell phones, they need to pay for it.
  • You might also have a maid to clean the house. The maid also needs to be paid. If you have a driver/cook, they also need to be paid.
  • One needs to pay for the food that one eats. The milk one drinks, bread, vegetables, cereals, fruits one eats. When you eat at the restaurant, you pay for the food. The basic function of food is to provide energy. Roti or rice is as good as a slice of pizza to satisfy your hunger. Also, roti and rice are healthier and cheaper than a slice of pizza! Eating at home every day is healthier and cheaper than eating at the restaurant.
  • We use different modes of transport to go to different places. Children go to school in the school bus, so the bus fee needs to be paid. The father may go to the office in his own vehicle such as a car or a scooter. A Maruti car costs around Rs 4,00,000. A Bajaj Auto scooter costs around Rs 80,000.  Buying a vehicle is not sufficient; to run it one needs to fill petrol. Petrol costs.
  • Kids go to school to learn new things; the parents pay the fees for it. They pay for school books, uniform, school bus.
  • The clothes you wear including your school uniform were bought with money. We need different types of clothes based on the season. In summer we wear light, cotton clothes. In winter we wear woollen clothes. The basic purpose of clothes is to cover our bodies. It may be a designer dress worth Rs 1500 from a shopping mall or Rs 100 dress from the roadside.

These are the regular expenses! BUT One needs to plan for the incidental expenses and emergencies for example if someone in the family falls sick or the car breaks down or to attend a marriage or for going on a vacation.

Needs and Wants, Why parents say Money doesn’t grow on Trees explains the difference between needs and wants

Relationship Between Income and Expenses

Income is any money that comes in; money that goes out is used to pay for expenses –things we need and want.

Income = money comes in (jobs, gifts, allowance, etc.)

Expenses = money goes out (goods and services you buy)

A very basic and extremely significant financial concept is that your income must exceed your expenses to avoid debt (owing money).

If your income is greater than your expenses, that’s great – you’ll have money left over to save, spend and share. 

Income > Expenses = Good (savings)
Expenses > Income = Bad (debt)

Expenses differ from family to family

  • As vegetables are cheaper than meat, a family which eats vegetarian food generally spends less on food than a family which eats non-vegetarian food.
  • “Toyota Innova” is more expensive than the “Maruti 800”. So, a family which has Toyota Innova has spent more on car than the family which has Maruti 800.
  • A family which has two children has to pay for school fees, books, clothes for two children versus family which has a single child.
  • A family with grandparents has expenses that are different from a family with no elderly member staying with them.

Keeping up with the Joneses

Keeping up with the Joneses” is a popular English phrase. It refers to getting the things which our neighbours or friends have. As if one is in a race with Jones running before and we have to run equally fast to keep up with them. If a friend or neighbour buys a flat LCD TV, we should also buy it or if a friend or neighbour is going on vacation to Singapore, we should also go.

Budget

Budgeting involves understanding how much money you earn and spend over a period of time. One has to make sure that one is able to pay for what one needs before using the money for things that one wants. When you create a budget, you are creating a plan for spending and saving money. A budget is a tool that helps in becoming responsible for the money. Good planning helps us to organize our expenses so that we have sufficient money. But remember, it is not a magic cure for irresponsible money management. Even with a budget, it still takes discipline and smartness to be able to enjoy life without worrying about money.

Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” –  James W. Frick quotes

Here are some guidelines for how much of take-home monthly income one might budget for various expenses in the house:

Housing (rent or home loan)                                                              20 to 35%

Utilities (gas, electric, water, telephone)                                            4 to 7%

Food (at home and at a restaurant)                                                      15 to 30%

Family necessities (laundry, hair care)                                                2 to 4%

Medical (prescriptions, bills)                                                               2 to 8%

Clothing                                                                                               3 to 10%

Transportation (car loan, petrol, repairs, bus fare)                            6 to 30%

Entertainment                                                                                     2 to 6%

Saving                                                                                                 10 to 15%

How much does it take to raise a kid?

The following image shows how much it takes to raise a child.

Money Spent on raising a kid: Expenses
Money Spent on raising a kid

Breakup is given below

Money spent on raising kids by category expenses
Money spent on raising kids by category

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