The sooner you teach your children the basics about budgeting, the better, and the 3 jar money system is a great way to get started.
To learn how to manage money in the 3 jar system, kids need some money to manage. How they get that money can vary. Some children earn cash by doing small jobs for friends or neighbors. Others start a career as an entrepreneur by opening their own lemonade stand or starting a window-washing business. Still others are given regular amounts of money from their parents as an allowance. However your child earns or receives money, remember to use it as a teaching tool. Done correctly, money can help a child learn to create a spending plan and live by it.
The 3 Jar Money System
The 3 jar system is a popular way to begin teaching children how to budget. With this system, you give your child three clear jars, each representing a different fund: spending, saving, and sharing. The child will then divide their money into the jars with your guidance. Budgeting their money in this way teaches children to actively plan for their current and future wants. Encourage your child to stick to their budget. If they fall short in one category, the goal is to help the child modify their behavior or budget instead of pulling from another jar. For example, if your child would like to spend more money than they have in the spending jar, they should re-prioritize their wants, earn more money, or rethink their budget instead of pulling from the saving or sharing jars.
The Saving Jar
The saving jar teaches kids to set and work toward goals. This shouldn’t be money put away for a nebulous purpose. It should be specific. Does your child want to save up for a new game? Or perhaps a certain toy? Help your child determine what they want and then, every time they go to separate their money into their jars, remind them that the more money they’re willing to give up now, the sooner they can reach this goal.
It could help to create a general “rule” with your child, like 30% of their money should always go to saving or for every $2 in the spending jar, one should go to saving—however you and your child decide to prioritize and divide the money is fine. The goal is to impart the importance of saving and begin building the habit.
The Spending Jar
The spending jar is all about what kids want to buy now. This is how they finance little things like candy bars or trinkets at the grocery store. This budget can also include budgeting for bigger things like clothing, school supplies, or even food if you decide you want your child to pay for some of those things themself. Just remember that you need to give them an avenue to earn the money to cover whatever you expect them to pay for.
The Sharing Jar
The sharing jar encourages children to think about others. Help them choose a cause that’s important to them, perhaps a charity that supports an animal they like or a Secret Santa fund for a family in your community. The sharing jar can also go toward gifts for other people—a birthday gift for a friend, a thank you present for a teacher, etc. When it comes time to donate the money they’ve saved, do your best to find a way to show them the impact of their generosity. Even a little goes a long way, and this is a great way to teach that principle.
Once your child gets the hang of the 3 jar money system and begins to master general budgeting concepts, the next step will be to bring them, and their jars, into a local financial institution to open their first account. This will give you the chance to teach them about interest and how storing their money at a bank or credit union will keep it safe.
Noble Credit Union, a Forbes Best-in-State Credit Union, has been treating each member with kindness, dignity, and honor while helping members make sound financial decisions for 80 years. The Credit Union offers members full access to a wide range of financial education and services, including low-rate auto loans, MyRewards Visa credit card, mortgage and equity loans, online and mobile banking, and more. For more information about membership at Noble Credit Union, call (559) 252-5000 or visit NobleCU.com.