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If your kids save money...


skeeterbug
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When are they allowed to use it?

 

Is it long-term savings that they can't touch until they are a certain age?

 

Is it short-term savings that they can use when they've reached a certain goal? Or is short-term savings up to them, if they can manage to save their spending money?

 

Do you pay interest on amounts they save? Short-term or long-term?

 

Just debating how best to categorise allowance. Say a percentage for give, save, spend- but does save mean they are saving for a specific item/event, or does save mean you don't get to touch it? If the latter, then you would need to save a portion of your spend amount to reach a specific goal. Which is basically adding another category...give, long-term save, short-term save, spend. Or in this case would you just not require them to have a short-term savings, their spend money is just their spend money? Our problem is that we end up with all these cheap junk toys if we don't make them save up for a particular item.

 

I'm overthinking all this, right? Help!

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Yes, yes, and yes.

 

We started the oldest years ago with a Money Savvy Pig. It has 4 compartments: save, spend, invest, and donate. We decided then that

Save = save for something big, a specific goal.

Spend = daily/weekly small things. Pocket money.

Invest = invest in his future. Long term savings account to touch when he's 18.

Donate = to give at any time.

 

We paid interest on the Save and Invest, since we didn't put the latter into his real account until it reached $20 each time. Over the years we required him to keep ledgers for each "account" so he could see where his money went and when it came in, and we never demanded a percentage in each. We figured that we wanted his rules to reflect what we wanted for him as an adult, and adults fluctuate based on their needs and wants. We required SOME in each category each week, but never a set amount. The most important thing, I think, was being open with our own finances and goals. We talk about retirement savings (our Invest), our emergency fund and other little funds (Savings), what is allotted for daily Spending, research charities yearly for our Donate. We kept him in the loop when we were getting out of debt and talked about why it was important to us as a family. Money talk and goals are a common topic and our budget is always available on the computer, right behind the open internet page.

 

He's 13 now and we've slowly changed the game over the years to reflect his maturity and growing needs. He is doing the 52 weeks project currently and to encourage it, we're matching the funds in the kids' actual bank accounts. So for every dollar he saves he's matched a dollar. He stops and we continue to add to the 3yo's account.

 

 

Sit down with your husband and decide what lessons you want your kids to learn and then tailor that to what they're capable of right now. They will change as they get older and grasp the concept of finances more.

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Our kids have had bank savings accounts since they were born. At first we mainly put money into their accounts that their grandparents or others gave them for birthdays and Christmas. As they got older and started getting an allowance they both voluntarily chose to save a good portion of that. We've always left it up to them how much to put in the bank and how much to keep in their wallets for easy access (oldest now has a checking account with debit card, so that's no longer much of an issue for him). We've also told them that the money in the bank is theirs to spend as they wish. We've never instituted rules on what they had to do with their money. After all, nobody tells an adult what they have to do with their "fun" money. I will add that both boys tend to be savers, so it's just never been a big issue. Oldest even opened his own TDAmeritrade account when he was about 13, and we've given him free rein with that, too. He hasn't set any records, but he has made money over time.

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Our kids have bank accounts they will have use of when they go to college though if something came up before that where they needed the money, I might allow them to use it. With any money they make 80% goes into the account and they get 20% to use as they wish. Sometimes they blow it as they get it and sometimes they save up for something big.

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OUr kids save what money they want and spend what they want. As children, all spending is approved by a parent. My two older made money. Oldest spent his when he got unemployed and middle spent her mostly in college for expenses but hasn't been able to renew due to health currently. Youngest hasn't got her act together enough to earn more the piddling money. That may be changing soon since she finally seems to be getting goals. (Let's just say, depression s*cks).

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I let them use it in whatever way they wish. There are a couple of things they have to pay for (like birthday presents for friends, pet care), but other than that, they can buy anything that does not violate our morals. I do not make them save-give-spend percentages, but there are times I encourage them to contribute to a cause, such as Operation Christmas Child; they can choose things for the children from their own money.

 

I don't give extremely generous allowances, though, and I give them out monthly.

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I guess it depends on your philosophy about what allowance is for. In our family, it's spending money so we aren't nickle and dimed for lots of little things. The funny thing is that once they got their own money, they learned to spend it more wisely. We have savings accounts set up for them and DH transfers their allowance into their accounts on every payday. They are allowed to use any amount of their own money at any time they choose. They just don't have much they want to buy so their money accumulates. I guess we are also considered generous in their allowance amounts. When we first set them up, it was cheaper than us buying lots of things for them.

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For allowance, they must put $1 out of every $5 in their bank accounts, but they have the option of saving more and they sometimes do. They must also save a percentage of gift money. Purchases under $50 they have to save up their allowance for. Big purchases over $50 they have the option of using money from their account, but there is a two week waiting period for them to consider if they really want it if they already have enough in the savings account. (We sometimes make exceptions if the adults think it is a smart purchase and the item is on sale. We discuss it with the kids thoroughly first, though.) Both my kids tend to save for big things. DS12 decided last summer that he is saving for a car when he is 16, and DS7 is saving for a radio telescope.

 

Although parents have veto power on any of their regular spending, it's rarely enforced so they can learn from their spending mistakes. My older son tends to spend the allowance he keeps weekly, but he also deposits a greater amount than required by his own choice. Younger DS tends to hold on to his for bigger purchases, perhaps spending a dollar here or there at the thrift store or at a garage sale. We had the junk toy issue at one point, so we helped both boys come up with a goal list of things they really wanted. We hung it next to their chore boards and reminded them of their goals each time we paid them or when they were about to make a junk toy purchase. Eventually the problem solved itself.

 

We don't dictate giving money. Both kids put in volunteer time which in many ways is more valuable than money.

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Our kids have college accounts that we control and they don't hardly know about.

 

When they were little, we began the Family Bank. They deposited any excess money in there, in a log book kept in a box that was also full of some cash. Technically they could take money out whenever they wished, so long as for a parent approved purchase. (Junk toys were discouraged but not prohibited. Spending big $$ on candy or other unapproved items like prohibitied video games, etc, was not allowed. If it was a substantial purchase, we would generally require the child to want it for say a couple weeks. . . . Tell me you want it today, then think about it . . . If you still want it in two weeks, then fine, we will order it. The idea was to teach thoughtful spending.) The kicker was that the family bank paid 1% interest every month. This really startd to be noticeable and appreciated when balances were a few hundred dollars! They saw that "just for nothing" they got a few dollars interest each month! Compounded!

 

When each child hit $1000 balance in the family bank, we went ahead and opened real savings accounts which obviously pay less interest, but they are now in the habit of savings, so that didn't discourage them.

 

Each child followed their own path to responsible savings. Our oldest has always been a saver. Our ds13 would spend everything on Legos right away for years, until about age 10, when he saved up for two years to buy an iPod, which he took great care of and still has! Now he saves most of it long term, but spends maybe a third of it on air soft and stuff like that not total junk, but not stuff I'd want him to have particularly.

 

Dd10 is still under the $1000 threshold, and does not have the paying jobs the older kids have, so doesn't have as many spending or savings opportunities, but she is learning by example and is saving diligently.

 

So, anyway, that is how we do it. It isn't very formal, but even so, I think the kids have learned to save well. The interest baring bank, along with gentle encouragement to think before spending, has been the key, I think.

 

Eta: I forgot that the one thing we now have them use savings for is to contribute to major extracurricular activities. For instance, for expensive music camps, we have them pay half the tuition from their savings/earnings or any scholarships they earn. This makes sure that they are really serious about the opportunity, and it makes it easier for me to swallow the major $$$$ investment knowing they really want it. When ds13 had a good bit less $$ saved, for good reason as he earns much less than his older sister, we just asked him for 1/4 or 1/3 of the tuition. We have used this shared expense approach for similar other activities just mainly to ensure that the kids are really valuing them, so we feel better about the investment. I also pretty much avoid shelling out $$$ for electronics for the kids, as they seem to take MUCH better care of them if they pay for them. So, iPods, phones, laptops, etc are another major goal for their savings, and it is remarkable how satisfied they are with old and cheap electronics when the alternative is dipping into their hard won savings!

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We have our children tithe 10% then save half of the remainder. They are allowed to spend what is left. We encourage smart purchases, but rarely do we veto a purchase. If they wanted to buy $50 worth of candy, for instance, we would show them other items they had mentioned or suggest pooling $ with a sibling for more options. If they are adamant we might let them get it but then be the ones to choose when to dole it out. Our children generally make good choices. Our 9 year old used her birthday $ to purchase Christmas presents for all of her siblings. We offered to pay, but she wanted to. My oldest bought an iPod a couple of years ago, and my oldest four pooled their $ for tennis camp last summer.

 

I disagree with letting them spend with no direction. I had a generous relative when I was a child. All of that $ was wasted and I have nothing to show for it. I did not learn any lessons from it. In fact, I learned not to value $. It took some hard lessons later to realize using $ wisely is a much better choice. If I had any direction the lesson would have been a much easier one to learn. Just because it needs to be learned does not mean that it has to be learned the hard way.

 

 

Eta: I reread the original post and realized I did not answer the questions you asked. Generally the savings my children acquire are off limits. They end up with enough fun money that they don't even ask about their savings. If they want to utilize their savings, they need to have a pretty good reason. We did allow my dd to purchase an iPod from her savings, but as a rule savings are to save. When they are older and making all of their own money and money making decisions then their savings are fair game, until then it has to be run by us and be a legitimate reason. No pulling out savings for $30 worth of dollar tree toys. :)

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We're pretty loosy-goosy about it.

 

DS has a savings account; he knows that we will match any deposit he chooses to make, but other than that, it has been maddeningly difficult to illustrate the value of a savings account when his interest rate is .01% (seriously!). So far, he has not been allowed to make a withdrawal, although we haven't set firm rules about that.

 

Otherwise, purchases must be approved, but we can be pretty easy-going with that because he realized quickly that he didn't want to blow $5 of his hard-earned money on some goofy plastic thing (which is not to say that he didn't ask us to buy it for him first - just that when we said "you can buy it with your money" it suddenly wasn't so desirable anymore).

 

Charitable donations are up to him, although I will admit to guilt-tripping him more than once; that's not how I want him to feel about it, though, so I have changed the way I address it. Now I might alert him to an opportunity but the decision he makes about it is his.

 

Lastly, there have been times when I've required him to replace something he broke or lost, such as school supplies that he mistreated. It does seem to help him understand the importance of taking care of one's things.

 

ETA: Two more tidbits. He spent his own money on Christmas presents this year, of his own volition; and as for withdrawing from savings, whenever he has asked about it I remind him that he wants to be able to drive in about 5 years, and to do that he will have to have insurance and gas, etc. blah blah blah, and that seems to get his mind off buying more Legos with it.

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Guest inoubliable

We haven't been able to be consistent with allowances, but are fixing that this year. We're sticking to the plan we've always used whenever they get money.

30% goes to their Kiva lending accounts

30% goes to an ING savings account for long-term stuff (college, first car, elopement...)

40% spending money

 

ING pays them interest.

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Both boys have savings accounts.

50% of allowance and christmas money goes into the account. This is long-term savings. I won't say I won't *ever* let them withdraw money from the account, but it would have to be for an important reason. And, no, the new Pokemon game is not a good reason. :)

The other 50% and all of their birthday money is theirs to spend as they wish. I make no limitations on what they can buy, but do encourage and guide them to make good decisions, comparison shop for big items, etc.

Right now the accounts are with our credit union, but I'm thinking of switching over to ING because the rates are better.

 

When asked what they are saving for, ds9 says "a car". Ds12 says, "Retirement." How I wish I had started saving for retirement at (then) 10~!

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We also have the money savvy pig with the 4compartments. They need to put something in each one, but I don't dictate an amount or %. Its completely up to them. Their long term save goes in the bank periodically; they know it's for college. Charity goes to an organization of their choice each year; they put quite a bit in here. Spend and save are pretty much the same so far. They choose how to spend their money, but pets and pet care must come out of it ( if they choose to have a pet). Also, if they break or lose something, they pay to replace it. if they want a toy and it's not their birthday or Christmas, they may use their money, whether I agree with it being a good toy or not. I will try to guide them with questions so they can see why they want it (or don't want it), and whether its a good value, and are they trying to save for something else (and therefore this would set them back?) but it's their choice. Mine actually tend to save and buy more expensive keepsakes or souvenirs than junk. They've got good taste, especially for 8yo. The boys more so than my dd.

 

I do not pay interest. They are allowed to take out loans, either from me or one another, for something important, and if they are usually good with their money. They may not borrow for junk; they would just need to wait til next payday. Loans are handled by ious, and loans must be paid first, with any incoming money,before they can buy anything else.

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