Three Jars - A Simple Way to Teach Your Children Life Lessons About Money
My wife and I have two incredible and very energetic young boys. They are two years apart in age but very different in their personalities. Our oldest loves to entertain others through dancing, telling jokes and just being a funny little dude. Our youngest is going to be an attorney or tough negotiator. I lose negotiations to him multiple times a week with piggy-back rides and extra ice cream. One thing they have in common is their understanding of the importance of money. We owe this to the power of The Three Jars.
Our boys are ages 8 & 6 and we have used The Three Jars with them for the past two years after I read an article about it. We have tweaked the rules over the years with experience. I’ll lay out the rules first and then highlight the benefits and life lessons we have been able to teach them.
- Find three jars (glass or plastic) per child.
- Each jar is labeled as “Spend”, “Save” or “Give”. Here is a link with pre-made labels.
- Every week each boy receives three one-dollar bills. We do not tie the weekly payments to chores or use it as a disciplinary tool. The reason for this is the money lessons cannot be taught unless they receive the payments.
- One dollar is always put in each jar every week.
- At the beginning of each month, each child decides how much money he wants to put in the “Spend” jar and how much money will stay in the “Save” jar.
- At the end of each month, the “Save” jar will receive 5% interest for the month. We started off paying 10% monthly interest but realized that was too generous. They count the money and calculate the interest. You would be amazed how fast they will learn when they know they are the ones receiving the money. We double-check their math.
- If a boy spends more money than what is available in his “Spend” jar for the month, they are penalized and do not receive interest for that month.
- Each Sunday we hold “payday” with the three dollars. The boys are very focused before they get paid so we added a little twist before their payment. We use this opportunity to ask them three questions. The questions are random and cover anything from, “What is mom’s cell phone number?” to, “How do you escape the house in a fire?” (They like to show us how they would crawl out of their bedroom and down the steps). Even if they get the answers wrong, they still get the three dollars.
- In December, the boys decide which non-profit they want to support with their “Give” jar money. We live in Colorado, so we now do this on CO Gives Day. It is an easy way for them to look at the various non-profits, also institutions may match your donation to increase the impact. They have given to Smile Train, Chihuahua & Small Dog Rescue, Hire Heroes USA and school initiatives to help lower-income families with school supplies.
The Benefits & Lessons Learned
When my wife and I started The Three Jars with our boys, we thought it would help us in teaching them basic lessons about money. The Jars have done this and much more, here are some of the main lessons and benefits:
- The habit of splitting your paycheck into various accounts before you spend it! Imagine if all of us learned the valuable lesson of paying yourself (savings) and supporting your passion (giving) first. We are all creatures of habit, whether your 6 years old or 30 years old, if you pay yourself first, you will adapt to your cash flow and be able to build up your investment accounts to reach your goals.
- Goal setting. When the kids see a commercial or go to the store with us, they are easy marketing targets. They want everything. It used to be frustrating to take them to the store because every aisle was a battle. We were saying “No” to things they wanted us to buy them and they did their best to wear us down with whining. Now the conversation has flipped into a learning opportunity. We will now let them know they can buy the item they want but it will come out of their money. We talk about the consequences. If they spend more than what is in the “Spend” Jar for the month then they will lose interest for the month. We also remind them of the previous goals they set for themselves and how this impulse purchase will make it take even longer before they can reach their goal. Their current goals are an electric ATV and a hover board! It is amazing how they stop asking for that candy bar in the check-out lane when they know it would come from their money.
- Math and counting money. After the boys realized the money in the jars is their money, they became very focused on counting it correctly. They even like to pull out the jars from time to time to count the money again. We were amazed at how quickly they understood the concept of interest and how to calculate it. Our 6-year-old correctly calculated 5% interest on his $230 savings this past Sunday.
- The other lessons you can teach them on payday. We ask them three questions before they get paid. This happened organically and has been a surprising benefit of The Three Jars. The boys are very focused on the questions because they want to get paid! For example, our oldest son kept forgetting his birthdate. He is a very smart kid, not sure why he kept struggling with his birthday. We added this simple question to his three questions to answer for a couple weeks in a row, poof, like magic he started nailing his birthday because he was focused.
- Family time! Time is such a valuable commodity nowadays with work, school, Cub Scouts and soccer pulling us in different directions. It is nice to sit down with the entire family on Sunday to play The Three Jars. The Q&A before we pay them and the paying/counting of the money leads to great discussions and learning opportunities with the whole family. In our busy worlds it’s nice to get everyone together and focused for 30 minutes.
The Three Jars has helped us develop a weekly system to talk to our children about the value of money, spending, saving, giving and incorporating family time as well. We hope The Three Jars will do the same for your family, it is a great tool to have more money and life conversations with your children.
Scott Arnold, CFP®, has been in the financial services industry since 1998. He is a co-founder of IMPACTfolio, a wealth management firm that specializes in IMPACT investing and holistic financial planning for one flat-fee.