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How to teach children the basics of budgeting

Piggy banks can be useful tools to help teach a child the basics of spending and saving. Here’s how to instill responsible money habits and foster a charitable spirit at the same time.

Give your child three banks

Explain that each one is earmarked for spending, saving and sharing of any money received. Together, decide on what percentage of funds received will be allocated to each container.

Spending

The bank holds money that a child can spend on fun, minor purchases such as snacks, small toys or inexpensive apps for a parent’s tablet or phone.

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Allocation guidance

Contribute 50 to 80 percent of money received to this bank.

Tips:

  • Don’t vary the percentages you decide upon. Stick with those allocations.
  • If you give an allowance, do so in small bills and coins so it’s easier to divide. A good rule of thumb is to give young children 50 cents to a $1 per week for every year of their age.

Saving

This bank funds bigger-ticket purchases, such as a deluxe Lego set, a scooter, or video games.

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Allocation guidance

Contribute 10 to 25 percent of money received to this bank.

Tips:

  • Keep a picture or written reminder of the desired item near the bank.
  • To help a child learn about the benefits of saving versus spending, some parents provide interest for this fund, for instance, matching a child’s contributions with 5 percent of their own money.

Sharing

This bank’s funds help others and can be used for charitable efforts such as supporting an animal shelter or providing books for school children.

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Allocation guidance

Contribute 10 to 25 percent of money received to this bank.

Tips:

  • Parents should help a child select who receives the money and explain how the donation process works.
  • Parents and children can find, and vet, potential causes through Charity Navigator’s assessment tool.
  • DonorsChoose.org lists classroom projects to fund, while the World Wildlife Fund lets kids symbolically “adopt” a wild animal.

Interested in teaching your child the basics of banking? Check out Bank of America’s interest-earning savings accounts for kids.

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The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

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