For simple finances with small
amounts of money, the cookie jar system is brilliant in its
simplicity and effectiveness. Put your income in the jar. Take out
money to pay for things. When there's no money left, you stop
spending. Since cookie jars don't offer loans, children using them learn to
live within their means.
The Blues expanded this system with
their children by using multiple "cookie jars" -
letter-sized envelopes labeled with categories. Families, businesses
and governments must have both a plan for spending and a system
of controls. The envelope system has both. It teaches
delayed gratification through long-range planning and sound money
management. Here's how it works.
When a child turns eight, she
receives a recipe file box with five envelopes, labeled:
- Save (To go into a savings
account at interest. Can be used to save for big-ticket items.)
- Spend (To be spent any way
- Clothes (To be used for all
Ron and Judy set the amounts
annually, to be given to the children as a monthly allowance.
Yet, they are flexible, reviewing each child's amounts regularly.
Circumstances do change over time.
In the children's early years,
they're required to put 10% in the "tithe" envelope and
10% in the "save" envelope. In later years, they choose
how much to put in each category.
Simple enough. But what happens when
a child spends all her clothes money and then finds herself without
enough to pay for a needed winter coat? There are several
1) Don't make that child responsible
2) Let her go without (in the South, I assume!)
3) Wear last winter's coat.
4) Let her earn money for the coat.
5) Allow her to borrow from any of the envelopes except
"Tithe" or "Save."
In the teen years, they may add more
envelopes, but Ron and Judy prefer that they not have more than six
or seven prior to college.
- Don't withhold allowance for
- Don't base it on the performance
- Don't change it once you've agreed
upon an amount for the year.
Chores are of two types. First, those
that are expected for no pay because of living in a family. These
may include cleaning their room, doing dishes and carrying out the
trash. Second are those optional, paid chores, such as mowing the
lawn or baby-sitting.
critical issue regarding the envelope system is that children must
have goal ownership. In other words, it must be their
system rather than your system imposed upon them. Help them set up
the system and understand that they can learn it. Then allow them to
have control of the money and freedom to work within the
system." (p. 75)
a. "...effective communication
is consistent and repetitive." (p. 118)
b. The balance of teaching kids the
power of compounding interest:
After Ron reinforced his lesson on
the power of compound interest over time, his daughter Karen
asked, "Daddy, how much is no fun compounded over forty years
at 10 percent?" (p. 120)
They all had a great laugh, but got
her point. The goal isn't to live a lifeless, Spartan life in
order to accumulate a huge chunk of money to be paid out to a
nursing home in your later days. Keep balanced!
c. "Delayed gratification is the
key to financial maturity." (p. 121)
d. Take each child out for a meal
once a year for his birthday. Review his financial goals from the
past year and help him set goals for the next year.
e. If you forget everything else:
"I believe that everything I
know regarding financial success can be summed up this way: 'Spend
less than you earn, and do it for a long time.'" (p. 120)
Coming from a man who's spent a
lifetime reading, writing and advising about personal finances,
I'd say that statement's worth copying and sticking to the
refrigerator for the children. I think I'll do it now!