Putting away money little by little can make the impossible possible. Why not start 2021 by challenging yourself and your children to save what may seem like an insignificant amount each month. Say $100 for the first month, and then see if you can save a bit more each month. Involve your children in the challenge to develop financial habits that will serve them well as they grow up. At the same time, a saving goal will encourage discipline and forward-thinking.
Importantly, if you use your debit or credit cards instead of cash, it might be a good idea to go the cash way for a few months. Overspending happens easier with money that you can’t see!
Make saving challenges achievable
It is as challenging to learn new habits as it is to break old habits. If the goal seems too difficult to reach, enthusiasm may lack. However, seeing results from the outset will boost enthusiasm and encourage persistence. Making small sacrifices will prevent the feeling that the challenge is punishment. Saving just one to five dollars per day could make the $100 per month achievable.
Display the evidence of saving money
One method that works is the piggy bank-method. Use clear glass jars with your goal written on masking tape labels. Display the jars where all the participants in the saving challenge can see how the money “grows.” No need for spreadsheets or apps, just good old fashioned saving coins or bills.
Saving for specific monthly expenses
If you struggle to cope with monthly expenses, it is a good idea to keep track of where your money goes. You might find that things like skincare or gym fees cause you to be short on essentials like utilities and fuel for your car. This is where the back-to-basics money envelope system works well. Allocate different envelopes marked for various expenses, and put the cash for each purpose in them. You could have a fun money envelope for the children.
Essentially, the rule here is that if an envelope is empty, too bad. No more spending from that envelope until next month. Seeing how the money from each envelope dwindles is the best way to teach new budgeters to avoid unnecessary spending.
Commit to saving $5 bills
Make a decision never to spend $5 bills. Instead, put them in one of those glass Jars. Similarly, you could drop all your coins in a jar. In fact, you could choose any amount, but $5 bills are small enough not to affect your budget while growing your savings.
The no-spend challenge
Although spending no money is a guaranteed way to save, it is also unrealistic. However, you could choose specific expenses for no-spend challenges. Choose something that you typically spend money on each month. Not eating at restaurants for a month is more achievable, and so is not buying new shoes — if that is one of your weaknesses. You will be surprised at the impact this could have on your savings. If you want to involve your children in this challenge, choose something that they could do without for a month, such as new video games.
Teach your child about debt
While you’re at it, you can teach your children some lessons about debt. If they want something that costs more than their pocket money, offer to buy it for them. However, make it clear that they will owe you. You could even have them sign a document to admit to owing the money and set a monthly installment amount. Then, insist on a monthly payment before they spend money on anything else.
Most importantly, don’t subtract the installment before giving them their pocket money. Essentially, the kids must feel the pain of holding the money and then paying off debt. Suppose you withhold the installment amount from their pocket money. In that case, they will soon get used to “earning” less instead of learning an important lesson.
Depending on their age, you could use this opportunity to teach them about interest.
Suppose you and the kids manage to save $5 per day to reach a goal of $100 for the month. Your total savings for the month would exceed your goal. We all know the value of rewarding good performance. Schedule a meeting of all the “shareholders” and decide what to do with the excess. You can use it for movie tickets, treats or anything else shared by all. You could also collect all the excesses over months until there is enough for a trip to an amusement park.
Learning to handle money responsibly from an early age could be one of the most valuable gifts to give your children.