Choice of methods of Handling money

Family Economics And Consumer Education 3 (2+1)

Choice of methods of Handling money

A method of handling money has to be chosen which will give all members of a family a feeling of satisfaction. This is of major importance in the life of any family. Necessary thought has to be given in making the choice and the decisions involved in it.
The various methods are as follows

  1. The allowances or apportionment plan
  2. Fifty-fifty system
  3. Equal salary method
  4. Hand out method
  5. Budget
  1. The allowances or apportionment plan:
  2. In this method, a certain portion of the money is allocated for all or a part of family living expenses. The husband generally gives wife a stipulated amount which is to cover specified expense items in family living. The reminder of the income is used to cover other living costs, such as payments on a house, investments, insurance, taxes or any other items for which the husband wishes to carry the responsibility. This system is likely to be used by business or professional people with irregular incomes.

    A+B= Total income
    A= Income kept under control of one person
    B= Income allocated to part or all of living costs

  3. Fifty-fifty system:
  4. This system is a method in which the total income and expenditure are divided into two equal; parts. The system operates by the husband to assuming half of the expenditure and paying them from his half of the income; the wife assumes responsibility for the other half and pays for expenditure from her half of the income.
    This system is often used when the wife has had an independent income before marriage and wishes to maintain a fifty-fifty system.

    50-50 System income-
    B represents equal income
    A is allocated to one of two person B to the other.
    Each person assumes equal shares of expenditure.

  5. Equal Salary Method:
  6. In this method all family expenses are paid from the total income and the part of the income which is left is then divided equally between husband and wife as a salary for the contribution of each to the enterprise.
    The system assumes not only the income is large enough to have a surplus but also that each division of the surplus represents an appreciable sum.
    The plan makes no provisions for managing the portion allocated to family living. Thus, that part of the income can be operated as a handout or as a highly planned system of spending.

    The entire area,
    A+B+C, represents the income
    A is the income portion going to family living.
    C are the surplus divided into two salaries
    wife and husband.

  7. The Handout method
  8. In this one person usually the husband, although sometimes the wife maintains complete control of the income and hands out small or large sum of money as need arise or as wants are insistent enough to interest him in making the dole (use).
    The system is a carry-over from patriarchal family life when the father was controller of his domain and dealt out money and in all areas of family life.
    The handout method is likely to be used in a family that has little knowledge of its exact income or one that still operates under patriarchal system. It represents the crude form of family finance.

  9. The family finance plan/Budget:
  10. The family finance plan or budget is the method of using income as a planned and shared family budget. This plan or system of family finance works under the direction of the father and mother who shares jointly in planning and distribution of income into the expenditure pattern. Later when children become old they will share in the planning along with adults.
    This aspect has been discussed in detail in separate chapter


Last modified: Saturday, 31 March 2012, 7:27 AM