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Teaching Youth to Save by Making Lessons Tangible
Thursday, September 29, 2016 6:25 AM

Money Jar

Vickey Morris, SCMS, CCUE, CUDE, VP Marketing, Cornerstone Credit Union League

When they're little, most children have a poor grasp on the concept of money. But financial habits are learned at a very young age. While many parents these days are increasingly forced to pay greater attention to personal finance and seeking more information to better their own financial situation, they often forget or are not confident enough to pass on the lessons they are learning.

Current studies show that children of wealthy parents are more financially savvy later in life, but they indicate this may be due to confidence on the part of parents. Educating yourself, along with your children, is essential for financial fitness and security later in life. Parents in lower-income families can also be confident about their financial situations and pass that onto their kids through open conversations and planning.

Children understand concepts best when they're dealing with tangible things. As adults, we often deal with money in an abstract way. We pay for products using a debit or credit card. We have online statements and mobile banking. This abstract way of dealing with money works for us, but children aren't prepared to handle that level of abstractness. Instead, teach children about money in a direct and physical way.

I recently read an article by Trent Hamm who used “The Jar System” to teach his children about money. If you're a parent trying to teach your kids lessons about saving and spending, you might want to follow his simple steps. 

Here is the concept in Hamm's words:

Step 1: Introduce a jar system.

In my family, we've had success teaching our children about money through an allowance and a jar system. Here's how it works: We have four jars for each of our children, labeled with their name and the words "spend," "save," "give," and "invest."

  • Spend: money can be spent however they choose
  • Save: money they're saving for a specific item
  • Give: money to give to a charity of their choice
  • Invest: money used to teach about investing


Step 2: Give an allowance.

Once a week, our children each receive an allowance of 50 cents per year of their age. So, my daughter receives $3. This money is given to them in quarters. When they receive their allowance, they put an equal number of quarters in each of the jars. This is a rudimentary budget. It's done with tangible elements that they can see and hold in their hands and understand.

Step 3: Take the "spend" jar to the store.

When we go to the store with our children, we allow them to bring along whatever amount they wish from their "spend" jar, and they pick out an item they're interested in buying. 

We then point out the actual price of an item and round it to the nearest dollar to make the conversation easy. Then we count the money they have to see if they have enough to buy it. We'll literally sit down in the middle of the store and do this.

Almost always, they don't have enough money for it. If that's the case, we talk about which item they want the most, and they set that as a "save" goal.

Step 4: Let them decide to buy or save.

If they find a small item they can afford, they are free to buy it. However, we tell them if they go home without buying anything, they'll get the item they really want much faster. None of our children have had temper tantrums with this approach. If we stick to this type of tangible discussion about money, they understand why they can't have the item they want and see a route to acquiring it that makes sense to them.

Step 5: Set an example.

We often try to use cash to pay for items. We'll make sure the children see us giving cash to the cashier and receiving change in return. We'll also explain that Mommy and Daddy work hard to earn that money, which we use for food, clothes, and other things our family needs. When the kids see actual money changing hands, the lesson sticks.

The real key to all of this is to make money lessons tangible. Don't just talk about money. Show your children how money is used in a physical way. Make a habit of saving with your child each week. Take them to the credit union and set up an account, then make regular trips to deposit their allowance.

Set a goal. Make a plan. Save automatically—with your children.