Financial Planning for Kids
The Envelope Project
Wow! Having kids is expensive. I know. You knew that. What you may not have realized is there is a way to control this expense. The answer seems odd but it is to let them control the expense. What am I talking about? I am talking about a method I recently tested and am still using. I have a budget like many of you mine may be smaller or it may be larger but it is dependent upon me sticking to it.
I can’t spend hundreds when I only have a hundred and I don’t want to disappoint my kids by not allowing them to do things. We all know we can’t afford anything and everything. We can however afford what we can afford. I recently had my children home with me for spring break. I work from the house so I knew I would have to adjust my hours to suit my children. I figured out if I was going to pay for child care it would be around $60 a day for three children. We currently pay about that for schooling. I looked at my budget and decided that was $300 for the week. I am planning for a large trip this summer so I decided to cut my budget by 50%. I was going to give each child $40 for the week. The other $30 would go to pay for gas for the car to get us places. I had one large work trip planned which involved going to an indoor waterpark so the tickets were free the rest was left up to my children to decided.
The Envelope Project
You will need:
calculator (younger kids)
pen or pencil to record amount spent and amount left
I gave my children the items above with two twenty dollar bills in their envelopes. We took out the calendar and looked at the days. We began to plan our spring break. We thought about free activities in the area like the library was offering a free lego party. That was a big hit and I had time to catch up on a book while they were playing. Then we looked at what we were already paying for the gym membership so they decided on a pool day. That was included. We talked about what was my responsibility to pay for and what was theirs. I told them food that was in the house and gas for the car. I figured they could pack snacks or lunch for anywhere we wanted to go. I made sure to have plenty of easy to make and easy to get to food choices. I wanted the children to think about their needs and do some planning. I have a cooler in my trunk and I would pay for the ice if needed. Then we were on our way to see who could save the most and what choices they would make over the course of the week. I was really surprised with the outcome.
I have three kids the youngest is in preschool, middle in first grade and my oldest is in fifth grade. This project works with young kids as well you will just have to do more explaining.
The oldest has left $8.00
The middle has left $4.00
The youngest has left $21.00
This is what they figured out if you pool your resources you can get more. If you use what you have you can spend less. If you learn to share you will save more. You need to decide what you need and what you want. You can buy a splurge item after you have planned out your schedule and made sure there wasn’t anything you needed. You should put what you have leftover in the bank. “You do not need to spend it all, there isn’t a prize for that. Plus when you need money you will not have any if you just spend a lot.” I am paraphrasing what my kids have said over the week that we tried this experiment. I intend to implement it over the summer especially since we will be traveling a lot and going to a bunch of money draining places like theme parks, the beach, and movies.
The truth is this process worked. The children will be given weekly amounts this summer so I can control what we spend and they can have some control over their choices. I can’t say yes to everything but I can say yes to teaching them financial planning. I know some people disagree with my method but I believe teaching children how to be responsible with money is part of my job as a parent. The children will not do without, in fact we are headed to Disney because we paid off all of their college funds this year and then we saved enough to go to Disney. I wish I could buy them everything but instead I will teach them to value what they can buy.
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