Teach good money habits with the Spend Save Share plan

Mother and toddler playing with toy elephants on floor.
OCCU  -  09.17.2017

Did you know our money habits were already established by the time we turned 7? Those habits can be hard to break. That’s why it’s so important to teach kids how to save at an early age.

There’s a wonderfully simple formula financial experts recommend as a way to help kids develop good saving habits. It’s called the Spend Save Share plan, and it’s a helpful tool for teaching kids the fundamentals of finance, including:

  • The value of money
  • The importance of saving for the future
  • The joy of sharing

All you have to do help your child divide their income into three buckets—one for spending, one for saving, and for giving away to others. Then decide what percentage of each dollar earned you want to put into each bucket.

By the time kids reach adulthood, they should be in the habit of regularly saving a portion of their income. Financially healthy adults typically save 20 to 25 percent, spend around 70 percent, and give the rest to charity. Since kids don’t have bills to pay, they can afford to save a little more—you could start them out spending half, saving 30 percent, and sharing the remainder. Or make it an even 40/40 split between the spending and saving buckets.

What makes the Spend Save Share plan such a great learning tool for kids? For starters, it’s something they can use their entire lives. As they grow older and their income grows along with them, they can easily adapt the formula to suit their needs. Dollar amounts may fluctuate over time, but a percentage-based budget can always stay the same. Plus, it teaches them how to live within their means no matter how much money they make.

Spend—50 percent

Spending is a mindset. If kids get used to blowing every penny of their earnings right away, there’s a good chance they’ll carry this habit into adulthood. The Spend Share Save plan helps get them acclimated to the idea of spending only a portion of each dollar. That’s a financially healthy mindset that will serve them well throughout their lives.

Save—30 percent

Kids learn a lot from the act of saving money. Not only will they come to appreciate the sense of security that comes from always having some financial reserves on hand, but saving up for their goals teaches them powerful lessons about delayed gratification. With your guidance, kids can learn to make smart decisions about when and how they use their savings.

Share—20 percent

Sharing is all about the feels. When your child’s compassion gets triggered by someone in need, their share bucket empowers them to lend a hand and do some good in the world. Kids naturally love helping others. Having the means to give helps instill a sense of efficacy and confidence in their ability to make a difference.

The Spend Save Share plan is a simple and powerful way to help your kids develop good money habits. By teaching them to divide their earnings into these three buckets, you can lay the foundation for a financially healthy future.