It is never too early or too late for parents to start educating their children when it comes to finance, and teaching kids and teenagers about money doesn’t need to be boring or challenging. Helping them earn their own money, setting expectations and guiding them on real life decisions on how to manage their budget can be fun and very educational.
The three-jar method is an easy-to-understand way to begin teaching our kids important lessons around spending responsibly, setting goals and saving for the things or experiences they want, as well as giving to others and contributing with charities.
To start, we recommend explaining what money is, how we use it and why it is important to manage it well. Here you can show your children the different forms of money such as coins, notes, and electronic payment methods such as debit cards and mobile wallets and show them things you have bought with money at home or even photos of a holiday you took together. This could also be a chance to explore how money is earned and explain that no matter how much money you have, it still important to spend, save and share.
How to use the three jars
There are multiple jar methods out there and some of them encourage children to have multiple jars, one for each goal. We recommend keeping things simple with only three jars labelled as per below:
Spend – New toys, movie tickets, or sweets. This jar is for short-term wants and needs, and to help children manage their own budget. It helps emphasise money as something real, and not a bottomless pit.
A good way to support your child when using this jar is to recommend they always ask themselves how happy the purchase will make them feel, or how much they really want something. The goal is not to refrain them from acting but to encourage reflection before spending.
Save – To be deposited into your child’s savings account, like our Little Star Saver. This jar is a conversation starter to discuss the concept of compound interest as an incentive for long term saving. This jar shows the benefit of saving for larger items and discourages the uptake of credit cards or buy now pay later options in teen years/adulthood.
To help your children better understand the benefits of long-term savings, you could take them to your closest Financial Service Centre and show them their account balance before and after they make their deposit, and help them monitor its monthly growth using your mobile app.
Share – Whether it’s buying a present for a teacher, a friend, perhaps a donation to animal welfare or an environmental cause – this jar builds a sense of belonging in the community. It helps children to understand charity, sharing resources and prepares children for paying tax as they move into their working years.
After the Share jar is full, you can help your child search online for charities that are aligned to your family purposes and – if locally – take them for a visit so they can see how their contribution is having a positive impact in their community.
The jars are teaching tools which surpass the traditional piggy bank method by bringing meaning to money. This fosters financial literacy, a vital life skill which could make a big difference in how children will manage their money in the years to come. By using this system, we help children understand the importance of managing their budget in a more visual and age-appropriate way.
To learn more about our dedicated savings account for children, click here: Little Star Saver.
“This is general advice only and may not be right for you. Please read the Financial Services Guide and Terms and Conditions before making decisions on which best suits your needs. A copy can be obtained online, from one of our Financial Services Centre, or by calling us on 1300 360 744”.
Southern Cross Credit Union Ltd 82 087 650 682 AFSL 241000.