Being a parent comes with a lot of responsibility. These responsibilities run the gamut from making sure your kids are fed and clothed to teaching them how to be good people. One important responsibility that you may not think about is how to teach your kids about money. There are many ideas and tips when it comes to teaching children about money. No doubt many of them work extremely well and should be considered.
I wish when I was growing up I had learned more about how money works and saving money.
Unfortunately, I didn’t and I learned the hard way. I went off to college and had to pay bills and budget for the first time and I made a big mess.
Don’t even get me started on credit cards. I couldn’t have been more ignorant about how things worked.
And guess what, I wasn’t alone.
While trying to get myself right financially I read anything I could get my hands on to help.
And they did help.
But the main thing that these books and blogs did for me was to change the way I thought about money.
I learned that I needed to empower my money to be a benefit for me. This isn’t some new idea that I just came up with.
Obviously, the old saying about making your money work for you has been around a long time and I’m sure everyone has heard of it. We’re not reinventing the wheel here.
And I’m certainly not going to be confused with Dave Ramsey or Suze Orman or anyone with a background in finance for that matter.
I’m just a dad who’s trying his best.
I’m only going to offer up my strategy for teaching my kids about money.
Hopefully, these ideas can set up a good foundation for them as they get older.
It’s called the 4 Buckets Method, it’s pretty self-explanatory. I borrowed the idea of using envelopes for budgeting.
I hope I can teach them this method to help them learn the true value of money.
Spending Bucket 20%
This is plain and simple spending money.
Everything they get from birthday money to eventually money for chores they get to spend 20% of it however they please.
With, of course, some parental overview.
The main point of this is to show them that money doesn’t grow on trees and if they decide they want something they need to weigh the pros and cons of buying it.
They don’t have a host of responsibilities while they’re under my roof so 20% seems like a good start. We can adjust if we need to as they get older.
Short-Term Savings Bucket 35%
My idea behind a short-term saving is that it will work the same as a savings account.
Basically, it’s there if they need it,
It’s their introduction to emergency savings.
If they do, we will sit down together to hear out their case for moving money out of there.
This isn’t always going to be a yes, go ahead and use it.
Instead, we will work to explain to them what this money is there for and why we may or may not think it’s a good idea to use it.
Long-Term Savings Bucket 35%
This money is never touched. It’s there to be added to and left alone.
This is our money tree.
Water it every year and let it grow.
When I was thinking about how to teach my kids about money and settling on the 4 Buckets Method I wanted my kids to be able to experience a couple of different feelings.
The first was to show them that if you want something you have to work for it. Once you’ve done the work then you get the payoff. That’s why I think the spending bucket is important.
Secondly, I wanted them to feel the power of compound interest.
Hopefully, if we’ve done this correctly then by the time they are ready to move out they have a nice little nest egg started.
Down the line, we may talk to them about using this money to open some investments up for them.
Everyone always wishes they had started saving money earlier. Well, my kids are 3. They won’t have those issues.
Charity Bucket 10%
The world is full of a lot of big problems. However, I always felt that there are a lot of little things everyone can do to make the world a better place. And it’s in this bucket that we hope to find out what’s important to our kids, what issues they want to help and help them cultivate these interests.
Obviously, as three-year-olds, they don’t have much of a concept of the outside world, much less the issues that we as a society face.
That’s fine. I don’t need to scare them. Let them be kids for as long as they can.
But one of these days, something will register with them and they’ll start asking questions. That’s when we’ll start answering them and find out if they want to help and if there’s a way to go about it.
And can they do that with money or time or both?
We want our kids to know that they are powerful people. And if they don’t like something they have the power to fix it.
Why I Like The 4 Bucket Method
- It puts an emphasis on saving.
- It makes them think about money in different ways instead of one lump sum.
- It’s easily controlled.
- The ability to change the percentages in each bucket easily.
- It will allow us to teach them about investing as they get older and let them have some skin in the game.
- It will serve to make them more aware of issues that are around them and then allow them to do something about it through giving.
Ultimately, we hope that through this process, our kids become more intelligent about money matters and understand how to use their money for a better life.
As a parent, you hope to teach your kids lessons that stick with them so they don’t make the same mistakes you do.
The last thing we want is for them to end up like the statistics above.
Hopefully, when you’re deciding how to teach your kids about money you ‘ll consider the 4 Buckets Method.