Advice for Kids with Some Cash

Updated on September 15, 2009
J.B. asks from Santa Clara, CA
7 answers

My 7 year old has the opportunity to earn some pretty big money as in $3,000, working for one week "modeling" for an ad. This is just one possible opportunity and if we're lucky there will be more where that came from. He spouts off the different video game systems that he'd buy, which I know he wouldn't even use. I've seen somewhere before about teaching kids using a certain ratio of how much to spend, how much to save and how much to donate. I've tried searching online with no luck. Can anyone help out? What's your advice?

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answers from San Francisco on

Hi J., good for you for wanting to teach your son now about good money management!!!

We had a 50/40/10 rule with my son. Half went to savings, 40% was his to spend however he wanted, and 10% went to charity. This applied to all the money he ever received -- birthday money, Christmas money, tooth fairy money, money from mowing lawns & raking leaves and eventually from part-time jobs when he was a teenager.

My son was very conservative in his spending, and about 1/3 of the time he would put more than the required half into savings. He understood that once it went into savings, it did not come out until he graduated high school.

He just started college and has over $9,000 in his savings account. At first it was difficult to be strict about the rule, and I am sure there were a few times when we let it slide, but for the most part it became a habit, like going to bed at a decent hour.

The trick is to be pretty consistant and once there are a few hundred dollars in the savings account, kids start getting excited about adding to the account. Good luck and again, hooray for being such a responsible parent!



answers from San Francisco on

There is an online company called Moonjar that says it teaches kids to spend, save and "share" but they don't put it up on the site, it looks like you have to buy their book.
Many credit unions have sites dedicated to teaching kids to save...I found one that says "from every dollar save a dime".
You could just visit a bookstore and look for a book about this---I'm sure it exists. If you don't want to buy, you could just note the recommended percentages.



answers from San Francisco on

HI, J..

What we started with our daughter was this. She gets $3 a week for allowance, but then it's spread three ways. One dollar goes into her "spending money" jar, one dollar goes into her "savings" jar, and the third goes into her "gift" jar. Spend is obvious...she can do what she wants with it. The savings one we wait until there's about $20 in there and then we go the bank to deposit it (she loves to see the receipt with the total). The third is for gifts that she'd buy her mom or dad (we do supplement this). This way she feels more responsible when she's buying a gift. A friend does the same thing except she takes $5 and splits it 5 ways. The two additional ways are a dollar to given to a charity of their choice and the other dollar goes into the household "fun" money. This way everyone (she has a son too) feels they have contributed to the family fun.

Hope this helps.


answers from San Francisco on

A good rule of thumb is 10-10-8o for adults. 10 to savings, 10 for giving and 80 for spending. I have seen 20-20-60 for kids. Also have him spend slowly. If he spends all at once then he will not appriciate what he is buying.



answers from San Francisco on

You might be thinking of "Share Save Spend."
Here's the link

I can't recall the exact ratio, but the idea is kids get a weekly allowance that matches their age. 50% to spend; 25% share (charity/donation); and 25% save. The save portion is for a long-term period of time (i.e., college, life savings). The idea is to start early with the habits of saving ... not just for a special toy (that can be from the spend money) ... but as a lifelong practice.



answers from San Francisco on

Hi J.,
I would recommend against forced saving, as it may make your child resent it-- isntead, I'd recommend holding your child's savings and offering a 'matching' program-- 5-10%. that way he will see, right off the bat, why he should save. Also, talk to him about what he wants to save for (that you approve of more than a video game) and help him save for that. If he's stuck on the video game, though, I'd say let him buy it-- kids learn about money fastest when they're given control of it, and he will be the one to think, 'Bummer! I could have bought XYZ and now all I have is this vidoe game I don't use!' I foung _The First National Bank of Dad_ full of useful suggestions (sorry, I forget the author).

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