Need some guideance (kids savings)
In the chapter regarding YNAB for kids, Jesse mentions 10% for giving, 50% of the remainder, and 50% for whatever the kids want to do with it.
So here's my question. If a kid is getting a $5 allowance then $.50 to giving, $2.25 to savings, then $2.25 for whatever they want (according to the book). If a kid is saving for Toy X, do they allocate the $2.25 from savings to Toy X or the other $2.25? If it's the other $2.25, then what do they do with 'savings', just earmark it 'savings' in YNAB? And if so, when do they get to spend that? It's an odd question I know because ultimately it's our decision. I'm curious as to what Jesse does or recommends.
I'm not Jesse, nor have I read the book yet. However, this is very similar to a Larry Burkett principle for children's savings. We used this for our children long ago. It was all in real money and piggy banks. One bank for giving t 10%, one for immediate spending at 40%, and one at long term savings at 50% (it works out about the same). Those were just guidelines for the children written on the outside of the banks, but the children still had the option to put the money in whatever bank. If they spent it all immediately, then not having money for Toy X in 2 weeks is the lesson. If they put it all in savings and wanted candy from the store that night, again, lesson learned. We let them move money around, but not often, but children will surprise you. I seem to recall a toy drive going on and they used all their money to buy toys for the drive, not themselves.
I have the same question. I struggled to explain savings to my 6-year-old. She asked what the savings should be for, and when could she spend it? For now we let her spend her allowance however she wants - she can save it all for something bigger or spend it now. It's only $2 per week so not big money. But in a few years, I want to get more into the idea of savings but wasn't sure what kinds of guidance to give. Should it be savings for a big goal, eg bike? Or for something 'serious' like university? I'm curious what others do.
Hi Cadet Blue Admiral !
Jesse talks more about budgeting with kids in this blog post, and Whiteboard Wednesday episode.
That breakdown is: Give 10 percent. And of the remaining 90 percent, save half and spend half. He walks through some tips on how to talk to your kids about what they want to spend those dollars on, so they can prioritize!
We give our kids $1 per year per week. So at age 10, the child will receive $10 a week. We make our kids save half their allowance; specifically it's added to what we send to each of their college savings accounts. We're American so this money goes into each child's 529 account in addition to the money we put in for each kid every month. For the ten year old, this breaks down to $21.67 of their $43.33 allowance per month. We just started YNAB but we're going to set up the kids with their own budgets, we discussed this last night in fact. We'll ask them to save minimum 10% for giving, be that gifts for others or charity. Then we'll have them prioritize according to their wants. One child will likely want to budget most towards electronics and then a lesser amount to toys and souvenirs. The others will probably want split their allowances between toys, junk food, and souvenirs.
This is my son's budget. They get $1 per year of age per week that I expense out of my budget as my "teaching them about money and budgeting" cost. This is not tied to chores in any way. There are chores they have to do because they are part of the family and chores they can do to earn extra money.
Giving, they get to pick any charity/charities they want at the end of the year and donate.
Savings, this is LONG TERM - like college or a car - they don't get to touch it.
Spending - all the "stuff" they want that I don't want to buy. I put it on my CC for cash back and then reimburse myself out of their account.