When my kids were younger we taught them to save money by using three envelopes: One to save money for charity, another for short-term spending, and the last one for longer-term savings (deposited into a bank account). For example, if they received a $25 gift for their birthday then the money needed to be split as evenly as possible among those three envelopes. This approach was a very useful way for my wife and me to help our young children understand the importance of saving for different purposes and timeframes.
Although the concept of disciplined spending and saving based on different purposes is foundational, I believe
the level of sophistication around spending and saving must evolve as children move from teenagers to young adults. In my new book Following Your Money, I present three new envelopes (shown as jars -see image) to help the Millennial generation determine the optimal amount of spending and savings.
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