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This week I’d like to discuss savings and there’s nothing like the old-fashioned piggy bank labelled savings, with a perhaps a second one labelled "spending money". Some would suggest a third labelled "donations".
Initially, consider setting the minimum amount that goes into each, which gives your youngsters the flexibility to add more to savings from their spending money if they wish.
You’d need to think about the donations. If you do go down this path, it needs to fit with how you think your youngster can handle and understand it. They could, for example, contribute to a cause the family supports but also should be allowed to decide each time how much to give from their fund.
The savings piggy bank will be particularly important until they’re old enough to understand how an account with a bank works and that their money isn’t being taken from them. Once they begin to use a bank, they should always take part in the process and have free access to their bank statements. This gives some sense of control over their savings. You may find that you have to explain the statements to them several times before they fully understand that, although there are no notes or coins, they still have the money.
Make an effort to be consistent about when you pay the allowance. You’d be complaining if your employer forgot payday. You might feel the need to deduct an amount from the allowance for lack of contribution to Team Family. Think carefully before doing this as the whole thing could deteriorate into a punishment system of fines.
To encourage those early savings, you might agree to match dollar for dollar the amount saved each week or add your own 5% or 10% interest to whatever is in the piggy bank at the end of each month.
Decisions will need to be made early on about how money given for birthdays, for example, will be dealt with; the same division as for the allowance, all for savings, or as the child decides? I recommend the latter.
The savings component will need further consideration. What is it for? Who determines what’s appropriate to save for? Do you want to put restrictions on this money and until what age?
Once the amounts and methods have been determined, they should be free to spend their spending money wisely or unwisely. Trial and error, disappointment and your sympathetic ear will teach them a lot; so long as there are no bail-outs. When their money has gone, it’s gone.
Next time, how to help the kids manage this.