Buying a car involves a large amount of money, but spending habits start with much smaller purchases. Let's say there's a $30 Lego set that you want, but Mom says you have to buy it yourself. That may seem impossible when your allowance is $5 a week.
Godfrey says that the Lego set is a reachable goal even for kids who are tempted to spend money as soon as they get it. The key is setting up a system. Her system has four jars into which you put all the money you receive. (You can ask your parents to save empty jam jars.)
— Jar 1: Charity — food bank, cancer organization, etc.
— Jar 2: Quick cash — apps or ice cream.
— Jar 3: Medium-term savings — toy, gifts for friends and relatives, video game.
— Jar 4: Long-term savings — computer, college, car.
She suggests putting 10 percent of your money in the first jar, then splitting the rest evenly among the others. Under this system, you would divide your $5 allowance by putting 50 cents in the charity jar and $1.50 in jars 2, 3 and 4. Money for toys comes out of Jar 3, so if you put in $1.50 every week, the Lego set will be yours in 20 weeks. It's easy to keep track of if you create a monthly chart of the things you need to buy — a birthday gift for Dad, maybe — and the things you want to buy. And don't sneak money out of long-term savings!
Your long-term savings shouldn't just sit in a jar, Godfrey says. It belongs in a bank, where it can earn interest (the small amount of money the bank pays you for keeping it in a savings account). Ask your parents to open an account for you at their bank or see if your school has an in-school bank branch. For example, at Glen Haven Elementary School in Silver Spring, Md., any student with $5 can open an account.
"We've had deposits from two cents to $200," said Yvette Reynolds, a teacher who coordinates the Educational Systems Credit Union branch.
Reynolds said the accounts have helped students think beyond the latest toy or game they see advertised on television.
"Everything is buy, buy, buy," she said. Having the bank at school sends a different message. "They learn the importance of savings," Reynold said.