Spend, Save, Give, Invest: Jars For Financial Freedom

The spend, save, give jars concept is a popular system for teaching young children money management skills. This method involves giving your child three clear jars, each representing a different fund type: spending, saving, and giving. The child then divides their money into the jars, learning to play an active role in their current and future money decisions. This system is based on the Jewish system of money management, which includes a jar for tithing and investing. The three-jar method is a creative way to teach children about budgeting and saving, and it can be adapted for different age groups.

How to allocate money across the jars

The amount of money that goes into each jar will depend on how much your child earns, and how big their savings goals are. It is recommended that the largest amount is allocated to the "Spend" jar, as this is something that cannot be avoided in everyday life.

For younger children, a simple method is to divide their earnings by three and put the same amount in each jar. For example, if they earn $9 a week, put $3 in each jar. If they earn in multiples of $5, a good option is to divide the money as follows: 40% in the "Spend" jar, 30% in the "Save" jar, and 30% in the "Give" jar.

Older children can start their own budget plan to keep track of their allocations. This is an advanced technique and is better suited for children aged 10 and above.

It is important to note that there is no single "right" percentage, and it is up to the parent and child to decide what is most suitable within their financial situation.

The importance of saving for long-term goals

Saving for long-term goals is an important step toward becoming financially secure. If you don't have a clear idea of what you're working towards, you're likely to spend more than you should and will come up short when you need money for unexpected expenses or when you retire.

Long-term financial goals are generally those that take five or more years to achieve and apply to major life events, such as buying a home, retiring, or saving for a child's education. These goals are important because they bring awareness to events that may be decades away and help ensure you're prepared when they arrive.

• Start early: The earlier you start saving for retirement, the easier it will be to reach your goals. Consider opening a retirement account, such as an IRA or 401(k), and aim to save 10-15% of your pre-tax income each year.
• Create a budget: Figure out how much you need to save and create a realistic plan to achieve that goal. This may involve cutting back on expenses or finding ways to increase your income.
• Automate your savings: Set up automatic transfers to your savings account so that a portion of your income is saved each month without you having to remember to do it manually.
• Consider separate accounts: Keeping your short-term and long-term savings in separate accounts can help you keep track of your progress towards long-term goals.
• Regularly review your goals: Long-term goals should be consistently reevaluated, especially as life changes occur, such as getting a new job or starting a family.
• Explore passive income opportunities: Consider ways to build your wealth beyond your regular income, such as investing in dividend stocks or creating a bond ladder.
• Focus on your career: Establishing and advancing in your career can increase your earning potential and help you achieve your long-term financial goals.

Remember, saving for long-term goals is about making small sacrifices now to feel more fulfilled in the future. It's important to find a balance between saving for the future and enjoying your money in the present.

How to teach children about money management

Teaching children about money management is an important life skill that will benefit them as they grow older. Here are some ways to teach children about money using the "Spend, Save, Give" jars method:

Introducing the Concept of Money Management

Start by explaining the basics of money management to your children. This includes understanding the value of money, the difference between saving and spending, and the importance of financial responsibility. You can initiate conversations about money during everyday teachable moments, such as grocery shopping or identifying different coins and bills. Financial experts suggest that children as young as three can grasp concepts such as saving and spending, and their money habits are often formed by age seven.

Implementing the "Spend, Save, Give" Jars

The "Spend, Save, Give" jars method is a popular approach to teaching children about budgeting. Provide your child with three clear jars labelled "Spend," "Save," and "Give." Each jar represents a different fund type:

• The "Spend" jar is for small purchases, such as candy, stickers, or other treats.
• The "Save" jar is for saving towards more expensive items or long-term goals.
• The "Give" jar is for donating to charities, buying gifts for others, or supporting organizations or causes they care about.

Allocating Allowance or Earnings

When your child receives an allowance or earns money through small jobs, help them divide their money equally among the three jars. For example, if your child is five years old, you can give them a weekly allowance of $5 (adjusting the amount based on their age). This activity teaches them to allocate their money across different categories and saves it for different purposes.

Encouraging Delayed Gratification

Teach your child about delayed gratification by explaining the concept of saving for a specific goal. Encourage them to set short-term and long-term savings goals and explain how saving can help them achieve those goals. For example, they might save for a new toy, a family holiday, or a desired item. This helps them understand the value of waiting and the satisfaction of achieving their financial goals.

Tracking Income and Expenses

To make money management more engaging for your child, create a simple worksheet or budget plan to track their income and expenses. Record each time they receive their allowance, take money out of the jars, and spend it. At the end of the month, review their financial activity to help them visualize their spending and saving habits. This practice will also help them develop basic financial literacy skills.

Prioritizing and Setting Wishes

Involve your child in creating a wish list of things they want to buy or achieve with their money. Discuss and prioritize the items on the list, teaching them about setting goals and making informed decisions about their spending. This activity will help them understand the concept of prioritizing their finances and making trade-offs, which are essential skills for financial success.

The benefits of teaching children about money from a young age

Teaching children about money from a young age has many benefits, and one of the most effective methods is using "spend, save, and give" jars. Here are some advantages of educating children about money:

Understanding Monetary Value

Playing with physical money helps children grasp the value of money and how costs vary depending on an item's worth. This awareness will enable them to make more informed choices when spending.

Role-playing Scenarios

Through role-playing, children can learn about real-life situations involving money. For instance, playing shopping-themed games will teach them how to ask for items in a shop and make purchases.

Improving Math Skills

Calculating the cost of an item or the change owed, and then collecting the correct amount of coins, enhances children's addition and subtraction abilities.

Developing Good Saving Habits

Research indicates that children who regularly interact with money in their daily lives tend to develop better saving habits as they grow older. Introducing the concept of saving through "spend, save, and give" jars can foster this habit early on.

Understanding Different Currencies

Playing board games that use international currencies helps children recognize that different countries have different forms of money. This knowledge will be especially useful when they travel to other countries.

Building a Foundation for Financial Management

Teaching children about money early on establishes a foundation for them to manage their finances effectively as adults. It imparts essential skills, such as saving, budgeting, and making informed spending decisions.

How to create the spend, save, give jars system

The spend, save, give jars system is a creative way to teach children about budgeting and saving. Here is a step-by-step guide on how to create this system:

Step 1: Provide an allowance

Start by giving your child a weekly allowance. This can be a fixed amount or based on their age, such as $1 per year of age. For example, if your child is 5 years old, give them $5 per week. This will be the money they will divide between the three jars.

Step 2: Get three jars

Get three clear jars, preferably 16oz wide-mouth or larger. You can also use piggy banks or money boxes, but ensure they are see-through so that your child can visualize their savings. Label each jar with one word: "save," "spend," and "give."

Step 3: Explain the purpose of each jar

Explain to your child that the "spend" jar is for small purchases, like candy or stickers. The "save" jar is for saving up for more expensive items. And the "give" jar is for donating to charity, the church, or buying gifts for others.

Step 4: Divide the allowance

Help your child divide their allowance equally between the three jars. For example, if their allowance is $5, they will put $1.65-1.70 in each jar.

Step 5: Set savings goals

Encourage your child to set savings goals for the "save" jar. This could be for a new toy, a family holiday, or any other item they wish to purchase. Explain the concept of delayed gratification and how saving up for something can make achieving the goal more satisfying.

Step 6: Track progress

To keep your child engaged, help them track their progress. You can use a simple worksheet or a printable from online resources. Record each time your child receives their allowance, takes money out, and what they spend it on. At the end of the month, they can review their activity and see how their savings are growing.

Step 7: Discuss spending and giving

Talk to your child about wise spending. Explain the difference between needs and wants, and why people prioritize certain purchases over others. Also, encourage them to think about others with the "give" jar. Involve them in supporting organizations or charities that are important to your family.

Remember, this system is meant to be flexible and adapted to your family's financial situation. You can also add a fourth jar for "invest" if you wish to include that aspect of financial education. The most important part is that your child understands the value of money and how to manage it effectively.

Frequently asked questions