I’ve written in the past about the importance of having a separate savings account for your kids – and also about how to provide guidance when your kids start to bring in income from odd jobs. We’ve started something new with our kids that utilizes both of these strategies to create a “stealth” savings plan for them.
Starting at age 10-12, most kids will have the opportunity to do babysitting jobs, or yard work, or washing cars – for neighbors, uncles, etc. These are great opportunities to help them learn the value of work, and to see the reward that comes with it. It’s a delicate balancing act though – allow them to spend the money, or have them save it? They should understand that with work, they have more opportunities, but at the same time, they should be encouraged to save.
Here’s our approach: Every time they earn money from their odd jobs, they get to add a portion of that to their budget – wherever they want. The remainder goes to savings. At first, we were letting them put the first $10 into their budget, with the rest into savings. As they get older, and their list of wants grows, it’s looking like a 50/50 split is more appropriate.
The twist? Whenever they’re paid by check, we’ve always just cashed it for them out of our on-hand cash, then we’d take it to the bank later. Now, we’ll convert their checks to cash in-house, then later when we take the check to the bank, we’ll deposit it into their savings account. It’s another way to teach kids about money because it helps them to see their savings grow.
Sure, this does cost us more – but we’re aware that their budget needs are growing as well. This provides some incentive for them to find those odd jobs to fund their growing budget, while at the same time putting some more money into savings for their inevitable larger needs in their later teen years.
What do you think?