Raising children comes with various expenses, and managing these costs while striving for a debt-free lifestyle can be challenging. The 1st step is to establish an emergency fund as it is crucial for a debt-free lifestyle. By setting aside a years’ worth of living expenses, we have been able to avoid taking on debt during unexpected situations like hospital bills and a new car battery. Below are some strategies on how we practice debt-free parenting and I hope they help you in your financial journey as well.
Budgeting and Tracking Expenses
Everything begins with budgeting and tracking expenses. We have a comprehensive plan that includes all our expenses, including child-related costs. The plan, or budget – outlines our income and expenses over each month. By tracking the spending, we identify areas where we can cut back and save. Going over the finances per month also helps us to prioritize what is a need vs. a want. It’s essential to distinguish between needs and wants when it comes to children. Focus on providing the necessities â such as food, clothing, shelter, and healthcare â before indulging in discretionary expenses. Monitoring our finances this way helps to allocate our resources more effectively and avoid unnecessary debt. By showing our children financial responsibility and the value of prioritizing needs over wants, we can instill a debt-free mindset early on.
Buy Secondhand
Children outgrow clothes, toys, and furniture quickly, so we regularly consider buying secondhand items. Thrift stores, online marketplaces, and community groups often offer gently used children’s items at a fraction of the cost. For our 1st born, we purchased a new convertible crib and a new mattress (unopened/still in plastic) from an online marketplace. The original owners never used the items and posted the price as a bundle for around $150. That crib has lasted over 5 years. This approach not only saves us money but also reduces the environmental impact of excessive consumption.
Incorporate Minimalism
Along the lines of reducing our environmental impact is our embrace of minimalism. Adopting a minimalist lifestyle can be beneficial for debt-free parenting. The focus is on quality over quantity, avoiding unnecessary purchases and accumulating less clutter. This tactic is on the more difficult side for us – here’s looking at you, Santa! However, we try to encourage our children to appreciate experiences and relationships rather than material possessions with an emphasis on money management.
Involve Your Children
The kids are still in their toddler era, but they can definitely learn about money management at their ages. Instilling responsible financial habits by involving them in budgeting decisions, encouraging savings goals, and discussing the consequences of debt is quite enjoyable to watch. Full discloser, they’re little and there are major frustrations when a concept is not grasped immediately – but hey, they’ll eventually get it. By fostering financial literacy, they become equipped with essential skills to make informed decisions about money as they grow older.
Plan for Major Expenses
As children grow older, so do their costs. Anticipate significant expenses such as education, extracurricular activities, medical needs or milestones like a wedding in your savings plan. We started saving immediately after each child was born by setting up two types of custodial accounts (529 Plan and an UTMA). Regular contributions to these accounts will ease the financial burden in the future. There will be roughly $423,000 between the kids by the time they are of college age. Even if they chose not to attend college or receive scholarships, the money can be taken out of the accounts at a penalty and used for whatever they wish.
Remember, debt-free parenting is about making conscious choices, setting financial goals, and adapting your lifestyle to align with those objectives. By incorporating these strategies into your parenting approach, you can raise your children in a financially responsible environment, fostering long-term financial stability for your family.