Family Economics And Consumer Education 3 (2+1)

Lesson 06 : Family Budget

Importance Of Budgeting

Advantages of Budgeting:

• Family budgets have useful role in managing money income wisely.
• Budget making in a family gives direction to use money income properly and to the advantages of the members of the family
• Family members are made to think collectively regarding the use of money income in a planned way on a priority basis.
• Budgets are useful in adjusting, regulating or modifying the expenditure in case of shortage of income/ irregular income.
• Budgeting helps the family in making savings out of its income.
• Family members learn to live according to their income through budget making.
• Planned budgets help in good buying habits in order to balance income and expenditure.
• Children and youngsters get some experiences in spending money income in a planned way. It gives them some pleasure and also they get confidence in handling money
• Family member get motivated to cooperate with each other and interact and adjust among themselves.
• Family budget making helps members to learn how to enjoy leisure and spend money.
• It encourages conscious decision making which may help in reflecting long term goals in the budget. Budget also forces one to decide what one wants most out of life.
• Family budget indirectly determines the use of other resource and the kinds of interest which the family is developing.
• There is no scope for tension and stress in managing money if budgets are prepared for expenditure and savings out of the income during a particular period.
• The major advantage of making a budget is that it enabled a family to take an over view of its money.

Budgeting is an example of multi trap thinking because at the same time the family must balance present against future needs and establish a balance among:

1. Expenditure for current consumption
• eg: Food and Clothing for rapidly growing teenagers and operating expenses of the family car.
2. Current provision for future consumption, such as setting aside money for children’s education.
3. General plan for future expenditure including some which have been postponed or new ones which need to be anticipated.

The budgeting is also significant for the family life because it serves as an approach to other problems. Family budget is a guide to realistic spending which is aimed at avoiding over expenditure. The success of family budget depends upon its being realistic, flexible and suitable to a family or an individual for when it is planned.