Here is an easy-to-manage tool to help your children learn about money? Each time they receive money from chores, holidays or gifts, they should break up the money by percentage and place the amounts into envelops. Here’s how to do it:
Purchase 6” x 9” yellow mailing envelopes and place them in a 2 or 3-ring binder. Soft plastic zip-up pencil cases that are made to go into a binder also work well. The exact size doesn’t really matter, as long as they are big and strong enough to contain notes and coins.
The first envelope should be titled TITHING or DONATIONS and should have 10% written on it. Making this the first envelope will teach your child that giving money away to others in need comes before satisfying personal desires. Any nonprofit organization could qualify to be the recipient of this money and it works best if your child can make that choice (with your guidance of course). Allow them to decorate this envelope with images that represent the organization that will receive the money.
The second envelope should be titled SPENDING or MAD MONEY and should be marked with 20%. Money in this envelope could be designated to be used anytime that the child wants to spend money, for example, when going on shopping trips with an adult or when the ice cream truck is in the neighborhood.
The third envelope should be titled SHORT TERM SAVINGS and should be marked with 40%. Money placed into this envelope can be designated for more expensive items the child would like to purchase within a year or two. Examples might be: a new toy, a game cartridge, a bicycle or even set aside as money to be spent on a school trip. Allow your child to draw or cut out a picture of the item he or she is saving for and put the price of this item on the envelope to act as the target amount.
The fourth and final envelope should be titled LONG TERM SAVINGS and have 30% written on it. Money saved in this envelope should be removed and banked on a monthly or quarterly basis. I suggest there be no target for this except to save and record the deposits as they are made. You may even want to make a rule that this money can only be withdrawn with the parent’s permission. It also works best to allow your child to physically make the deposits at the bank with your help.
Implementing and maintaining the process needed to manage this new savings book can be a fun and rewarding experience for both the parent and the child. Every time the child receives money, it should be broken down by the percentages and deposited into the four envelopes. At the very start, you’ll want to build a cash box and store it away, ready for making change for the child each time he or she receives money. The parent should be responsible for keeping the book at all times.