teaching kids to budget their money"I don’t know how to say ‘no’ to him,” a friend of mine confided to me. Though he could afford to get virtually anything his son might request, I suggested he make a change before his son’s perceived world became one of limitless stuff. His son needed to learn the value of a dollar. I suggested he say the family hadn’t budgeted for the item, which he could then use as a teaching moment to begin an allowance. 

A three-jar system, in which your child sets aside money for sharing, saving, and spending, is a terrific framework for teaching your child how to make smart choices with his money. Rather than plopping money into an opaque bank, your child is compelled to examine and touch cash and coins and to choose into which jars, or “buckets,” he will place the money. Piggy banks worked in a world in which money was a taboo subject and was to be hidden from view. The new paradigm is one in which we want to raise kids to be “money-comfortable.” 

Setting up the terms of how the allowance is distributed is extremely important. Will you mandate that your child save 10 percent each week in the “Share” jar? 25 percent? How about the “Save” jar? Will you “match” the money he puts in it? (For what it’s worth, we match a quarter for every dollar with our own kids.) Strongly consider mandating “exaggerated” options when your kids are young to help solidify positive habits. 

While we are told that saving 10% of our income is a noble goal (and it is), in order to teach your children how to achieve that on their own one day, it’s not a bad idea to have them place higher percentages into the “Save” and “Share” jars. Of the $7 our 7-year-old receives every week, we require that $2 goes into the “Save” jar and $1 into the “Share” jar. Our daughter then has discretion to put the $4 left into her “Spend Smart,” “Share,” or “Save” jars. (Incidentally, $1 per age of the child is an easy rule of thumb for setting a weekly allowance.) $7 may seem like a lot, but consider that we rarely purchase items on inpulse for our kids; they have to use their own money. In the long run, we spend less on them.

Children should visualize their goals through pictures they keep on their jars. —>

Illustration by Nicole Wilkinson.


David Owen, in his book First National Bank of Dad, explains the concept of exaggerated interest to impart the power of saving. According to Owen, the small percent of interest that traditional institutions pay on the relatively small amounts the kids save would have minimal, if any, impact on his children. Instead, he provided a much higher rate of interest to emphasize the value of saving.

Have your child set goals by pasting pictures on the jars so they can visualize their goals. In addition, make sure the “Share” jar doesn’t get lost in the process. Talk to your child about what’s important to him and find a charity that might support that interest. Just as you do with the “Save” jar, print out and paste a goal picture (for example, a pet for adoption at the local shelter or food for a food bank) to remind your child why he is depositing money into that jar come allowance time. Help him set a goal to save a certain amount and then help make sure the money ultimately gets to that charity.

Setting up this three-jar system can help you as a parent change the conversation from “We can’t afford this” to “Have you saved the money for this?”

John Lanza is the author of the recently–published  book Joe the Monkey Learns to Share. Lanza also blogs, tweets, and writes about youth financial literacy.


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