Savings in a kids budget; used for..?
I don't really get it, is it long term saving for an expensive thing, or is it a forever-amd-ever savings category to watch the money grow?
If it's the first; how do you distinguish the spending and saving categories? When is it 'savings' and when is it 'spending'? If they save up for something thats costs 5 dollar, for example, they still need to save for it on a 4 dollar allowance, right..
if giving to charity is a must (again, I prefer an actual experience of helping someone out instead of giving small amounts of money).
They can do both. My kids get the experiences through school, girl scouts and religious institution. In fact the experiences also guided them on where they chose to ultimately make their donations.
We struggle with setting clear guidelines for savings with our 11 and 10 year old kids. Occasionally, they will purposefully save up for a big ticket item, with the money coming from their "savings" category. More often, though, they are not working towards a goal, but just accumulating money in a generic savings bucket. I wish they would do more goal-oriented saving but most of the time they seem content just to track the growing balance in their generic savings buckets. That said, recently, one of them accidentally smashed her iPad beyond repair. Rather than wait for her birthday or Christmas to come around so she could ask for a replacement as a gift she opted to tap her savings to pay for a replacement. In that case, her savings operated as an emergency fund for an unexpected expense. At this age, all the money the kids receive, outside of the portion they hold for giving, is essentially there for them to satisfy their wants. As they get a little older, I think we will shift some true expenses\immediate obligation-type expenses to them (e.g. cell phone, clothing, entertainment) so they can get a better feel for managing their limited resources between true expenses and quality of life/fun money wants. Their allowances are small enough now that it almost seems futile to try and have them start saving for large, long-term, goals, like a first car, college, and so on. I would like them to start thinking about it and eventually take on some responsibility for working that into their budgets, though. Would love to hear more from others on how they handle budgeting with their kids.
I just started using YNAB at the beginning of this month. What I have done with my 8 and 6 yrs old is to set up a budget Similar to this: (though Spending categories are different per kid)
Spending: The Rest
They get a $5 a week allowance if they do a set list of chores. What they don't know is that I have been putting $25 a week into an actual savings account for them for when they get older or for emergencies. Also they each have a CD with $1000 that was left to them when their great grandmother passed. I sit them down with me on Friday and we add their allowance to their budget. they don't actually get any cash and I'm just using $5 of the $25 that gets deposited from my payroll. They get to pick what categories they put the remainder in and can move it around or spend as they wish. The "Savings: Can't touch" is so they see what it is like to have money and not spend it at all, to see it grow and learn self control. These are things I have always struggled with. The money that I put in the savings accounts that they don't know about, they didn't "earn" so I feel I can control it. I plan to have it as an emergency fund for them when they are older and to show them that they need a buffer. The money in there Don't touch budget can be spent when they get older on a car or college if they choose to as this is money that they have "earned" and saved for the future. At 8 and 6 they don't need to have access to large amounts of money. Just enough to understand the concepts of saving and planning and the value of a dollar. My hope is that they learn to be financially more responsible than I have been.
I have a 6 and 4-year-old. Since they were born Husband and I have been putting $25 in each of their savings accounts (off and on) and typically using it to pay for things they need/want. Usually, it was clothes or a birthday toy, glasses, etc. Since finding YNAB, in early March) we decided that we want them to be more involved in managing money. I want them to learn from mistakes and start early. So I made a separate budget for each of them that is specifically associated with their savings accounts. Every paycheck, which is bi-weekly $25 is automatically deposited into their accounts and we sit down and reconcile/budget what they want to do with their money. I set forth a minimum of two categories that they need to have: Savings for Furthering Education (College, Vocational School) and spending money.
At this point in time, my 4-year-old doesn't care and is satisfied with those categories because he doesn't "want" anything so 80% Education/20% spending money. My 6-year-old, however, wants to save for specific items and when we did this for the first time he wanted to go to a community class during spring break that wasn't in the Family Budget. And so I helped him break it down into 40% Education/40% Long-term goal/20% spending money. And he just so happened to have enough in his Long-term goal to pay for that class during Spring Break ($225). Now he is currently saving for a Lego Knighton Castle ($130) for his birthday in September. So the bi-weekly $25 for him is broken down into $10/$10/$5. When my youngest becomes more cognizant of having to save for the things that he wants we will most likely break it down in this manner as well.
For the College/Vocational category in their budgets, I did calculate what the cost is to go to an in-state college for 4 years ($30,000)and made that a "Goal" amount for their HS Graduation year so that as they get older they are aware of how close, or how far away they are from being able to afford that lofty goal and we can start discussing what needs to be done to either accomplish that goal or re-address it to fit their life as an adult.
I want to start mine early with learning about money and also make those beginning mistakes when they are young enough to recuperate and gain an understanding of financial consequences.