A SIMPLE VARIATION of the jar money management system introduced in the last article can be useful in cultivating sound money habits in children. Specifically, children need to learn to save and to donate money right from the start.
For this approach, you need to provide the child with three different piggy banks or reasonably sized containers. Let the child do the work of labelling each piggy bank in the best creative way he or she would like. Each piggy bank would have a one-word label: Save; Spend; Give.
For example, the child may choose to draw and colour the word placed on each piggy bank along with some relevant pictures clipped from old magazines. Alternately, jars wrapped in bright cellophane paper may be great signals for the young minds – red paper for stopping to Save, green paper for going ahead and Spending, and blue paper for remembering to Give to charitable causes.
Children may get money as gifts/rewards, possibly as an allowance, for doing work/chores or even win or find it. Each time the child receives money thereafter, you, the adult, should invite them to consider how that money will be allocated between the containers. Let the child explain his/her planned allocation of the funds and after, you discuss and guide.
Eventually, let the child place the funds into any one or more of the containers. The final decision must be the child’s. Your job as the adult is to point out continuously the merits of saving and donating, commending reasonable efforts to save and/or donate duly. Should there be more than one child being trained, friendly competition may be encouraged.
When at least a dollar, preferably five dollars, has been saved, a big production should be mounted in taking the funds to be deposited at the bank or the credit union. This is also a time to explain the deposit transaction, the receipt and the statement of the account activity.
Similarly, when a reasonable sum has accumulated in the Give container, let your child consider how these funds will be donated. The child may research an area of interest or respond to a known need, like giving at church or to a current public appeal.
This is where there can be some interesting conversations with your child about need and poverty in the world. It is important to stress that although the amount which the child may be giving is relatively small, it is the spirit of the gesture and the relative proportion to the overall sum in all the containers.
Each container represents a special purpose. The child learns over time to consider always how money which comes under his/her control will be disposed.
Consider the typical alternatives. As parents we either give money to our children which they normally spend with glee at their earliest opportunity, or we open a bank or credit union account for the child and save for them. We undertake a worthy responsibility in providing for the future of our children.
Yet, any parent can leave a vast inheritance to a child – say, over millions of dollars – and that amount of money can be spent in short order and be totally consumed. Without appreciating basic money management skills, your child, on becoming an adult, may just see sums received as available for prompt spending like during their childhood.
From early, teach your children to save, spend and give money, rewarding their thought process and the width of their understanding of the basic principles. In due course, they will be sure to ask you about the next more complicated decision aspect: how, when and where to invest.
• Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.
This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.
