how did guido make his family life beautiful despite of the hardships

Guido creates a magical world for the people he loves. His wife is a "princess," he makes the concentration camp a game to soothe and distract his son. His stories and make believe allow moments of escape from an incontrollable world; they enable Guido to cope under insurmountable conditions. He is a knight in shining armor, whisking his wife from danger on horseback, and although his actions might sometimes be perceived as manipulation, his deceptions are meant to help those on the receiving end, and to make their lives easier........... more beautiful if you prefer.

Guido also cultivates a series of coincidences so that he can appear to have manipulated fate or performed magic. Though he knows that he is simply manipulating someone else, he is not reveling in the deception; he is interested in creating another world for someone else. This underscores the idea that a person's perception is intrinsic to his reality. Guido changes the way those around him perceive the world with his manipulations, and thus he affects how they deal with the rest of the world. When Guido rides up on a horse to rescue Dora, he is entertaining the fantasy of the knight rescuing the damsel in distress. However, he actually is rescuing her from her surroundings and actually is whisking her away on a horse. Similarly, when he tells Giosue that everything in the concentration camp is a game, he is creating a fiction to keep Giosue's spirits up. However, at the end of the film, Giosue has survived the concentration camp with perseverance and bravery, and his life and the lessons he has learned are very real. In Life is Beautiful, it appears, fantasy can become reality.

Added Source