Teaching Toddler Thrift
Most adults rank the word “budget” right up there with dental work and cleaning the oven as most unfavorite task. Like trying to stay on a diet, almost every adult has struggled at one time or another to live within a budget. As the economy continues to spiral downward, budgeting will become an ever-essential skill. I like to think of a budget not as an instrument of torture, but as a kind of road map, an organizing plan that gets you from here to your financial goal down the road.
I tell my children that "a good budget enables you to pay for what you need and save up for what you want." As a parent, I feel that budgeting strongly encourages a youngster of any age to face the consequences of spending money, and to discipline the urge we all have for instant gratification. Spending usually comes more naturally to most children than saving. Saving money is a habit that youngsters must be taught -- just like brushing their teeth or doing their homework.
The 4-Jar System
Pay your child an allowance in units of change - coins and bills - so the total can be divided easily. The next thing you'll need is 4 plastic jars or clear plastic pouches for each child, plus labels. Children like to see and count their money. Label each jar so your children can easily tell where to put their money.
Charity Jar
The first jar is the Charity Jar. Count out 10% of your child's allowance and have the child put this into the Charity Jar. Charitable giving is a subject close to my heart and something I have emphasized to my children since they were young. It is also a cornerstone of Minyanville. It is a lesson with great impact on a child or young adult. And, again, it is an opportunity for you to impart your personal values to your youngster. We are part of a greater community and it is our responsibility to help people who are not as fortunate. Charitable donations can be made in many ways, from giving to a homeless person on the street (a powerful visual lesson to a child, seeing that there are those obviously less fortunate), to giving to a specific charity that you help your child to pick out. This topic of giving is very important and "giving" is not just monetary. Later, you will teach your child the joy of volunteerism and giving themselves.
Quick Cash Jar
The second jar is Quick Cash. Count out 30% of your child’s allowance. For young ones, this is a great “counting lesson”! The child has worked hard for their money and deserves some instant gratification. This is the jar or pouch that the money can be taken out of at any time to spend on whatever the child wants. When it's gone, it's gone and there won't be any more until next week. The rules here are that you can't criticize what the child spends their own money on. It's theirs and they earned it. You can have family rules, of course. You set the overall parameters: if it's no sugar, no chocolate, no automatic weapons, then, so be it, those are your rules. But beyond that they are on their own. This is an absolute hands-off rule. It's one of the hardest for a parent to adhere to, and it's one of the most important. It is the bedrock foundation of teaching your child the first lesson of empowerment, self-confidence, and responsibility for their own choices. "Money" is about choices, and learning the consequences of those choices. By the way, haven't you ever bought anything that "Olympic Buying Judges" might consider a "stupid purchase"? I get all "10's" (even from the U.S. and former Soviet judges) on the attractive multicolor serape I bought in Mexico. I'm still waiting for "Serape Day" at work, and not to worry, I'll be prepared. (Halloween’s coming up- convince your child to wear the serape- good luck!) The point is, we've all learned from our poorly thought out purchases and we don’t want any "Olympic Buying Judges" telling us what a smart or dumb purchase is. If your child wants to spend their hard-earned dollars on what you consider a worthless piece of junk, you have to let them. If it breaks in five minutes after they bought it.... Well, it's not the last dollar they'll ever make. Making a foolish purchase with a dollar of their own will reinforce the lessons for your child even more strongly. You're undermining the whole process if you step in and prevent them from making their own mistakes - and you're undermining it just as much if you step in and buy something new after the junky toy breaks. (Grandma, are you listening?)
Medium-Term Savings Jar
The third jar is for Medium-Term Savings. Another 30% goes into this jar or pouch. This is the jar in which your child saves money for a larger purchase than they can buy with the Quick Cash. This is a real learning process for your little ones. Saving is not going to be a natural instinct for them. Deferred gratification is not one of life's pleasures that they'll arrive at without guidance. But it remains one of the most important life skills - a cornerstone for character building that's necessary to any teaching of values. The Medium-Term Savings Jar is dedicated to buying something that your child really wants and that is within his ability - in terms of earning power and willpower - to save for and wait for. In the case of a 3-year-old, entering the glorious experience of their first savings venture means a very short exercise in pushing off instant gratification. Two weeks is about right. Here, you'll need to give some guidance to your toddler. Go to the store with them, and talk about what you can buy if you save for two weeks. How much money will you have? What can you buy for $2? Make sure they understand they can't buy the 5-foot stuffed Big Bird. But they can buy the Big Bird stickers. Together, pick out something that represents a realistic goal. Either draw a picture or cut out a picture of it to remind your child what it is they are saving for. I remember bringing my daughter, Kyle, into the store to visit My Little Pony, "Just stay here for one more week," she'd coo, "then you're going to come home with me." By doing this, you keep your child's interest up, and maybe they’ll even remember why they are saving their money. As soon as the child has saved and bought a couple of things, they’ll be much more involved. In about a year your child should be a skilled saver and able to defer gratification for 4 or 5 weeks or more. You can help incent your children to save for what they want - a bike, or roller blades, or iPod - without forcing them to wait until their 42nd birthday to achieve the goal. If your youngster is saving for a large purchase, set up the “401(k) Matching Plan.” Explain that for every dollar they save, you will match it with a dollar.
Long-Term Savings Jar
The fourth jar is the Long-Term Savings Jar. Another 30% goes into this jar or pouch. Yes, this means your 3-year-old is starting to save for college. Premature? No way. This is all about habit building and starting those habits early. Does a 3-year-old child understand the concept of long-term saving? Absolutely not! Does a 10-year-old understand the concept of long-term saving? Absolutely not! Do the adults in America understand the concept of long-term savings? Absolutely not! So, here is a chance for us to instill these values in our young children. Saving has to become a habit, like taking a vitamin pill. In fact, sometimes making sure your kids start saving as 3-year-olds and keeping them at it, can have unexpected side benefits. I can't tell you how many parents have come up to me and tell me, "I drilled saving into my kids long enough that finally it started to rub off on me." As a parent, keep in mind there are few joys in life more satisfying than earning your own money and then buying something you really want with it. Remember the satisfaction you enjoyed when you bought your first stereo or car or house? Parents can show their children this joy at a very young age, and it will become a gift their kids will benefit from all their lives.
Neale S Godfrey at http://www.minyanville.com/articles/Budget-spending-kids-family-allowance-saving/index/a/19490
I tell my children that "a good budget enables you to pay for what you need and save up for what you want." As a parent, I feel that budgeting strongly encourages a youngster of any age to face the consequences of spending money, and to discipline the urge we all have for instant gratification. Spending usually comes more naturally to most children than saving. Saving money is a habit that youngsters must be taught -- just like brushing their teeth or doing their homework.
The 4-Jar System
Pay your child an allowance in units of change - coins and bills - so the total can be divided easily. The next thing you'll need is 4 plastic jars or clear plastic pouches for each child, plus labels. Children like to see and count their money. Label each jar so your children can easily tell where to put their money.
Charity Jar
The first jar is the Charity Jar. Count out 10% of your child's allowance and have the child put this into the Charity Jar. Charitable giving is a subject close to my heart and something I have emphasized to my children since they were young. It is also a cornerstone of Minyanville. It is a lesson with great impact on a child or young adult. And, again, it is an opportunity for you to impart your personal values to your youngster. We are part of a greater community and it is our responsibility to help people who are not as fortunate. Charitable donations can be made in many ways, from giving to a homeless person on the street (a powerful visual lesson to a child, seeing that there are those obviously less fortunate), to giving to a specific charity that you help your child to pick out. This topic of giving is very important and "giving" is not just monetary. Later, you will teach your child the joy of volunteerism and giving themselves.
Quick Cash Jar
The second jar is Quick Cash. Count out 30% of your child’s allowance. For young ones, this is a great “counting lesson”! The child has worked hard for their money and deserves some instant gratification. This is the jar or pouch that the money can be taken out of at any time to spend on whatever the child wants. When it's gone, it's gone and there won't be any more until next week. The rules here are that you can't criticize what the child spends their own money on. It's theirs and they earned it. You can have family rules, of course. You set the overall parameters: if it's no sugar, no chocolate, no automatic weapons, then, so be it, those are your rules. But beyond that they are on their own. This is an absolute hands-off rule. It's one of the hardest for a parent to adhere to, and it's one of the most important. It is the bedrock foundation of teaching your child the first lesson of empowerment, self-confidence, and responsibility for their own choices. "Money" is about choices, and learning the consequences of those choices. By the way, haven't you ever bought anything that "Olympic Buying Judges" might consider a "stupid purchase"? I get all "10's" (even from the U.S. and former Soviet judges) on the attractive multicolor serape I bought in Mexico. I'm still waiting for "Serape Day" at work, and not to worry, I'll be prepared. (Halloween’s coming up- convince your child to wear the serape- good luck!) The point is, we've all learned from our poorly thought out purchases and we don’t want any "Olympic Buying Judges" telling us what a smart or dumb purchase is. If your child wants to spend their hard-earned dollars on what you consider a worthless piece of junk, you have to let them. If it breaks in five minutes after they bought it.... Well, it's not the last dollar they'll ever make. Making a foolish purchase with a dollar of their own will reinforce the lessons for your child even more strongly. You're undermining the whole process if you step in and prevent them from making their own mistakes - and you're undermining it just as much if you step in and buy something new after the junky toy breaks. (Grandma, are you listening?)
Medium-Term Savings Jar
The third jar is for Medium-Term Savings. Another 30% goes into this jar or pouch. This is the jar in which your child saves money for a larger purchase than they can buy with the Quick Cash. This is a real learning process for your little ones. Saving is not going to be a natural instinct for them. Deferred gratification is not one of life's pleasures that they'll arrive at without guidance. But it remains one of the most important life skills - a cornerstone for character building that's necessary to any teaching of values. The Medium-Term Savings Jar is dedicated to buying something that your child really wants and that is within his ability - in terms of earning power and willpower - to save for and wait for. In the case of a 3-year-old, entering the glorious experience of their first savings venture means a very short exercise in pushing off instant gratification. Two weeks is about right. Here, you'll need to give some guidance to your toddler. Go to the store with them, and talk about what you can buy if you save for two weeks. How much money will you have? What can you buy for $2? Make sure they understand they can't buy the 5-foot stuffed Big Bird. But they can buy the Big Bird stickers. Together, pick out something that represents a realistic goal. Either draw a picture or cut out a picture of it to remind your child what it is they are saving for. I remember bringing my daughter, Kyle, into the store to visit My Little Pony, "Just stay here for one more week," she'd coo, "then you're going to come home with me." By doing this, you keep your child's interest up, and maybe they’ll even remember why they are saving their money. As soon as the child has saved and bought a couple of things, they’ll be much more involved. In about a year your child should be a skilled saver and able to defer gratification for 4 or 5 weeks or more. You can help incent your children to save for what they want - a bike, or roller blades, or iPod - without forcing them to wait until their 42nd birthday to achieve the goal. If your youngster is saving for a large purchase, set up the “401(k) Matching Plan.” Explain that for every dollar they save, you will match it with a dollar.
Long-Term Savings Jar
The fourth jar is the Long-Term Savings Jar. Another 30% goes into this jar or pouch. Yes, this means your 3-year-old is starting to save for college. Premature? No way. This is all about habit building and starting those habits early. Does a 3-year-old child understand the concept of long-term saving? Absolutely not! Does a 10-year-old understand the concept of long-term saving? Absolutely not! Do the adults in America understand the concept of long-term savings? Absolutely not! So, here is a chance for us to instill these values in our young children. Saving has to become a habit, like taking a vitamin pill. In fact, sometimes making sure your kids start saving as 3-year-olds and keeping them at it, can have unexpected side benefits. I can't tell you how many parents have come up to me and tell me, "I drilled saving into my kids long enough that finally it started to rub off on me." As a parent, keep in mind there are few joys in life more satisfying than earning your own money and then buying something you really want with it. Remember the satisfaction you enjoyed when you bought your first stereo or car or house? Parents can show their children this joy at a very young age, and it will become a gift their kids will benefit from all their lives.
Neale S Godfrey at http://www.minyanville.com/articles/Budget-spending-kids-family-allowance-saving/index/a/19490