Yesterday we addressed how to help your young child learn to handle money.  Today we will look at how to teach your tween to budget.  As a reminder, there are no set rules about these ages. These ages are only guidelines, a starting place as you plan. You know your child best and when to make the various transitions.

At age 10 there is little a child needs, although they may debate that.  However, they likely have a growing want list.  The beauty of teaching a 10-year-old to budget is that they grow to have ownership over their money and can see the process of saving for a purchase.  A 10-year-old can also begin to look ahead and say, “Yeah, I want a car one day,” and understand that if they want to purchase a car in a few years, they will need to begin saving now.  They can understand that money is finite and they will need to make decisions and choices over how to use their limited resources.  They will begin to see the effects of those decisions as $5 spent on candy or baseball cards means they don’t have that $5 for something else.

The same jar system applies to this age range, but now we don’t count how many bills, rather we calculate what percentage.

These percentages can be tweaked for what you deem best, but remembering that a 10-year-old general has few needs that are not already met my mom and dad, and that the majority of their spending will be in the future, these are once again recommended guidelines.

GIVING:  10% or 20%
SAVING: 20% – 50% (remember, this is long term saving/investing money.  This is for a future house purchase or business investment; items that will be a greater benefit to your child in the future than the dollar amount s/he is putting aside now.
SPENDING: 30% – 70% (spending money is anything your child plans to purchase, including that car when they are driving age.  While they may be saving money to buy that car for a few years, ultimately it is in the spending category because a car is not a future investment, it is a purchase.

Why do I give you ranges and not just a formula?  Because you need to do what is best for your family based on your values, priorities and preferences.  In my house, with my 10-year-old, her budget looks like this:

GIVING: 20%
SAVING: 30%
SPENDING: 50%

Whether she keeps this same breakdown as she enters her adult years, time will tell.  But as a 10-year-old, she can go heavier on saving, which will benefit her far more in the future than if she spent that money now.

(At this stage, a fourth jar may go into effect as your child divides spending into different categories.  Future spending on that car, or any larger purchase that requires putting aside money over a length of time, and smaller, more frequent spending, like a weekly pack of gum or an occasional snack purchase at school.  Another option is to put the day to day spending money in a wallet with the future spending money tucked away in the spending jar).

From here the system is the same.  When birthday money comes in it is counted, and the percentages are calculated (they are doing math — BONUS!)

Calculations do not need to occur the very day the money is received.  It might make more sense to tabulate on a weekly or even monthly basis.  But once the calculations are done, they come to the Bank of Mom and Dad to exchange their larger bills for singles, and then distribute the money into each of the jars.

(We will get to what their spending may look like down the road.  For now, let’s get a handle on what we do with incoming money.  Next time we explore how this may look for your teenagers.)