When your kids start getting an allowance is when they should start to budget. Break the cycle while they are young and you may be setting them up for life with good money habits.
We learn from a young age that money is something best used by spending it on some cool toy we always wanted. Many of us follow that same path into adulthood. It’s no wonder that it’s so hard to resist the latest model iPhone even though we may still have a fully-functioning earlier model.
So what to do? The solution is as simple as jars. Four of them. Jars are a tangible and immediate way for your kids to see where their money is going and to start them on a better path to managing their own money – before they learn it’s something that easily slips through their fingers.
First, start by ensuring they are clear on their allowance. It could be $2 a week when they are young, and increasing to $30 a month or more when they hit their teens. And sure, tie in their allowance to jobs around the house, it helps them learn that money doesn’t grow on trees.
Jar 1 – Pocket money
This is the portion that they can spend. Whether it be a trip to the movies with their friends or an ice cream from the school canteen, they can choose what to do with it. Any left over cash can be moved to another jar at the end of the week or month for even faster saving.
Jar 2 – Short-term savings
This jar helps them to pay for purchases that require more outlay than the first jar allows, but doesn’t keep money locked away so long that it feels like forever. Put a three-month time limit on the jar and anything left over can move to the next jar.
Jar 3 – Medium-term savings
This jar is for medium-term savings, and for your child this could be six months up to a year. They can save for pricier items in this jar, then any cash remaining after the set time period can be moved into a bank account to earn interest. Just don’t get them an ATM access card that could undo all the good work.
Jar 4 – Giving
Altruism is a worthy trait. Whether you teach them to give to charity or you use this jar to purchase items that can be used to make things that you then give as gifts, it teaches your kids to think of others.
A money diary
For some, it may be enough to simply use the jars, but for others it helps to see written down where their money has been spent. So get them to use a notebook, or even a simple spreadsheet, to track where their money is going and identify where .
Start now
This method is sure to teach them to take responsibility for where they put their money before it disappears – and it gives them control. If they follow through on its lessons, there is every likelihood they will develop good money habits as they get older and break the cycle of living from paycheck to paycheck, and even entering a black hole of debt.
Moneylogue 