Family and Money - Tips and Answers

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Household plan

Allowance Rules

How much does a child cost?

How much pocket money?

Family account or separate accounts – what works for us?

Who pays what? Managing the household is a central issue in family finances. About four out of five married couples have a joint household account; among unmarried couples it is just under half. But even couples with separate accounts usually agree at least on a fair distribution of the monthly fixed costs. The rest is a matter of trust and willingness to talk: each family must decide individually which method of household management works for them. This also includes addressing worries or dissatisfaction and, if necessary, looking for alternatives.

What options are there for managing accounts?

Family account:
The salary / salaries are paid into a joint account from which all incurred costs are settled. The money that remains afterwards can, depending on the agreement, be spent by both partners or, for example, deposited as savings into a savings account.
Separate accounts:
Both parents have separate accounts into which their salary or a monthly household allowance is paid. Depending on the level of income, monthly fixed costs, living expenses and extras are paid from these by the partners in roughly equal shares.
Separate accounts plus family account:
For many families with two incomes this variant is the most convenient: both parents pay part of their salary into the family account from which all fixed costs and living expenses are paid. The money remaining in the separate accounts can be used for personal items, gifts or extras.

Cost distribution should be clearly defined

Regardless of whether there is a family account, separate accounts, or both, it should be clearly determined which fixed costs are paid from which account. The best way to do this is with standing orders, but you can also set fixed monthly amounts for groceries, clothing or leisure activities.

Clearly arranged: How household management works without arguments

Fixed pocket money amounts:

The amount of pocket money should not vary with the child’s behavior. A fixed, age-appropriate amount per week is best for learning how to handle money. It also spares you endless discussions about the amount. In our article about appropriate pocket money amounts you can find out how much pocket money your child should receive.

Use a household budget:

At first it takes some work to create a household budget or ledger, but it pays off. When you have all the month’s income and expenses at a glance, financial decisions become much easier and there is less money-related conflict. You can download a printable household budget here or use a household ledger or software.

How much does a child cost?

At first many parents resist even thinking about this question. Who would want to associate their child with a rational cost calculation? But it cannot be denied: children cost a lot of money from birth onwards.

The Federal Statistical Office surveyed and analyzed the current consumption data of parents. According to this analysis, a child costs their parents from birth to the age of 18 on average 130,000 euros.

Toys, food, clothing — and what else? People without children often say that small children don’t need much. And indeed, children from birth to primary school age cost less than older children — but still about 6,200 euros per year.

This also includes the costs for initial equipment and children’s furniture as well as childcare costs. Not included is the loss of earnings that parents will likely have in the first years: the actual loss is therefore even greater.

Children between 6 and 12 years cost around 7,200 euros annually; between 12 and 18 years the costs amount to 8,200 euros. Not to forget the years after that: many children today continue to live and eat for free with their parents even after the age of 18.

Education, insurance and ancillary costs also add up. Those who have children know that food, clothing and toys alone are not enough: hobbies cost money, as do liability, travel or supplementary dental insurances. In addition, many parents contribute to their children’s education costs, pay for tutoring and not least cover the costs for electricity, water and heating.

All in all, considerably more than 130,000 euros is likely to add up — so much the better that a cost–benefit calculation simply does not work for children.

Should I pay my child for help around the house?

Money must be earned and good work deserves a reward. Of course parents want their children to learn to value money. But is it okay to pay them for help around the house? Shouldn’t that actually be taken for granted?

Educators advise not to pay extra for everyday tasks like setting the table or emptying the dishwasher, but to regard them as a normal contribution to family life. If your child asks for an advance on pocket money or is saving for something specific, you can offer them the chance to earn some extra money with additional tasks like mowing the lawn or washing the car.

Providing for the family — what do I need to consider?

A family means a lot of responsibility, both day to day and in the long term. You may occasionally wonder what else lies ahead and how you can protect yourself and your family. Nobody likes to think about the worst case, but it makes sense to have made provisions for it.

Family protection:

Family liability insurance is absolutely essential. You should also consider disability insurance for one or both parents, as payments from the statutory pension insurance usually do not cover the need. The same applies to a term life insurance that provides protection for survivors in the event of an emergency.

Education fund:

Up to the age of 18 a child costs its parents around 130,000 euros. But that is not the end of it, because parents often at least partially finance their children’s education — be it the costs for a degree or rent and living expenses during the training years. So it all adds up. Many parents therefore start early to set aside money for their children’s education. Whether with an investment fund or the classic savings book depends mainly on how flexibly you want to pay in.

Retirement planning:

The statutory pension will hardly be enough for many parents today. Therefore an individual private retirement solution is highly recommended, and not only for working parents: especially mothers who stayed at home for many years to raise their children are often at risk of old-age poverty despite the mother’s pension. You can get non-binding advice on possible retirement models for example from your bank, from an insurance broker, or partly also through your employer. Read more here about the risk of old-age poverty for mothers.

Additional financial provision for the child:

The driver’s license, the first car or your own apartment — someday your child should be able to afford the things they want. Often a savings book for the child is opened at birth or a home savings contract is taken out. But long-term investment contracts are also an option. It is important to think in advance about when your child should have access to the savings and whether you want to specify the use (e.g. for the driver’s license).

Tips for dealing with money in the family

Create a financial structure:

A household budget or ledger helps to keep finances in view and can reveal saving opportunities. With the monthly figures in front of you, it is also easier to save for something specific, such as a vacation.

Set basic rules:

Partners should be aware of their approach to money. If one parent spends money thoughtlessly and the other is very frugal, arguments can quickly arise. Better: address expenses and, if necessary, set an upper limit.

Pay pocket money:

Children should receive a small allowance early on so they learn how to handle money.

Learning to appreciate:

Children should learn that you have to do something to earn money. Therefore it makes sense that from a certain age they can do small additional tasks (in addition to the usual household duties) for pay.

Don’t forget insurance:

In addition to the usual insurances you should also look into appropriate retirement provision models. This is especially important for parents who stay at home or work part-time.

Openness and honesty:

Your child does not need to know exactly to the euro what you earn. But you should always be honest about money matters and be able to tell your child when there is no money for something.

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