There are two financial tools used during the children’s schooling to teach them to handle money from a young age.
FINANCIAL TOOL 1 – ‘FOUR JAR’ (OR MONEY BANK) SYSTEM
When my older daughter was in Primary school, my husband and I started her on the ‘Four Jar ‘ or ‘Four Money Banks’ system. She was able to buy a whole series of Winx Club magazines from her savings. She still has it – her money accomplishment and joy (from two years of persistent saving) – and refuses to let me ‘donate’ it to charity.
This is a financial tool I had learnt and adapted from a book written by Neale S. Godfrey “Money Doesn’t Grow On Trees – a Parent’s Guide to Raising Financially Responsible Children” . It is a useful book that can be borrowed from our local library and the content is highly digestible ; it offers many practical tips to educate your child about the world of money.
WHAT ARE THE ‘FOUR MONEY BANKS’ FOR?
They will be labelled as given below and an example or two of their functions is given as follows:
Spending – your child uses this to buy food during recess
Savings ( medium term) – your child’s savings goals , achieved within a month or two
Savings (long term) – for expenses incurred during his or her course studies at University
Giving – money put aside for birthday gifts for family, friends or for religion offerings
I used money banks which could be locked but you can use bottles or see-through ‘piggy banks’ (particularly if you are starting them younger at Kindergarten at age 5).
WEEKLY ALLOWANCE BREAKDOWN
You can use your children’s *age as a guide of how much allowance to give weekly. See the the table below as an illustration.
Weekly Allowance Breakdown
|TOTAL WEEKLY ALLOWANCE||SPENDING
|SAVINGS (MEDIUM TERM)||SAVINGS(LONG TERM)||GIVING
|Pr.1 ($7)||$5 ($1 spent daily)||$0.50||$1.00||$0.50|
|$7.50 ($1.50 spent daily)||$0.50||$1.00||$0.50|
|$10 ($2.00 spent daily)||$0.50||$1.00||$0.50|
HOW THE ALLOWANCE SYSTEM COULD WORK
I will cite my situation as an example. Assuming my child (in Primary 6) had her eye on a magazine, and she would have to save part of her allowance to buy it. Over the course of a month (assuming 4 weeks), she would have saved (in medium-term savings) $2.00 ( $0.50 x 4).
And, if she wants to to achieve her goal earlier, and is willing to do additional chores, she is paid $1 for a chore she has to do weekly; that would be an additional $1 earned a week (my daughter had to bring our pet dog downstairs for its toileting every morning and night from Monday to Friday).
Therefore, in total, over the course of one month, she would have saved $6 and be able to achieve her money goals ( buy her magazine).
She would also have learnt deferred gratification.
CAN THE ‘FOUR MONEY BANK’ SYSTEM STILL BE USED IN SECONDARY SCHOOL?
Yes, it can, but it must be tweaked.
The first difference to note is the canteen food prices which can be threefold that to primary school.
The second is there are more breaks in a secondary school than in primary school – in my older child’s school there are two breaks now – a mid-morning and another lunch break.
So how does that affect the allowance amount?
In Secondary 1 and 2, we gave our daughter $30 weekly (that’s double the *age guide for weekly allowance I mentioned earlier ) but that is just a GUIDE – it really depends on the canteen food prices of your child’s new school and how hearty your child’s appetite is 🙂
And it is no longer ‘ FOUR ‘ MONEY BANKS’; ‘categories’ for the money banks changed after she went to Secondary school ( do note the new amount allotted for each category)
The Spending, Long Term Savings, and the Giving category remain unchanged. However, the Medium Term Savings category has been replaced by Personal Outings and Telecommunications.
These two categories feature very prominently in a teenager’s life – and my child knows that. By then, being quite independent and having experienced the fruits of a savings habit cultivated over time, she decided she had to have these two areas saved for as she knew her parents would not be handing out extra money to her in these areas.
So she saved $5 every week for telecommunications so that she could afford the phone card which cost $18 per card from 7-Eleven every month and the savings for the personal outings went into paying for her movies whenever she went out with her friends which sometimes included lunch money.
FINANCIAL TOOL 2 – EXPENSES RECORDING
Tips to carry this out:
1. Let your child record all their daily expenses in a book. You can use any notebook. My children have been using the same notebook to record their daily expenses for the last three years.
2. Entering daily expenditures can be very tedious. I knew the advantages outweighed the disadvantages. So I pressed on. Despite the tantrums and ‘forgetfulness’, I only gave my children their following week’s allowance AFTER they had recorded the week’s expenses*
3. At the end of the year, I use their record books to establish an annual budget for their expenses for the following year. I do so by add all the expenses recorded by them and then forming broad categories. For example, if they had spent x amount on tuition and x amount on school outings, I would be aware and include this amount in setting a budget for their next year’s expenses.
(*It is difficult to get your children to record their expenses judiciously. But like everything else, it takes time to cultivate a habit and one has to start somewhere. It is most difficult at the beginning and you can understand why I would not give them their weekly allowance till they did their expenses recording. However, after a month or so, once the ‘action’ became second nature to the children, the behavior becomes ‘automatic’ and your child would have cultivated a good ‘habit’. As a parent, don’t give up!)
ADVANTAGES OF RECORDING EXPENSES
On top of giving the child a heightened self-awareness of their spending habits (and when to ‘cut back’ on ‘unnecessaries’ – like” I am spending too much money on sweets”) , expenses recording enables a parent to prepare a budget for the child the following year – it sets out how much money the child can spend on toiletries, clothing and school-related expenses.
In fact, if one keeps at this for three years and then averages the three years’ outgoing expenses in those large expense groups, the fiscal knowledge will come in very handy when it is time to ‘Hand Over’ the clothing or toiletries spending to your older teenager (Upper Secondary ).
This budget given to toiletries and clothing is kept in the bank and your teenager can only spend according to the amount of money he or she has in the bank. And if your child is ready, they can have their own ATM card to manage their funds.
This would also be a suitable time to educate them on various banking accounts and associated banking services.
Money skills is a critical skill to learn and very enjoyable to mentor and teach. Most of the time, the child ‘picks up’ a parent’s attitudes towards money but the skills will have to be coached.
Every child’s personality and capacity for learning is different. It needs to be noted that the most lasting lessons are still those that are child-directed.