CEE Standard: Buying Goods and Services
The skill of budgeting is very important when it comes to money management. Teach your students how to use the envelope system so they can be purposeful with their money.
Whenever I earn any money or am given the awesome gift of cash, I keep it safe and secure in an envelope.
You read that right: an envelope. The “envelope system” is a way I keep track of where my money goes, and it even works as a savings account. The envelope system works great for teens because it’s a straightforward way to manage cash. Here’s how I use the envelope system, and how you can get started with your own version:
When I was younger, my parents used to give me a small, $5-a-week allowance in one-dollar bills. They would then give me special envelopes where I could choose how to distribute the money (as long as I put at least $1 in each envelope).
My choices were “spending,” “saving,” and “giving.” As the envelopes grew fatter with each passing week, I started to see how quickly my money could be saved up. And when I chose to dip into the envelope, I also saw just how fast it could disappear!
The envelope system showed me just how to manage my money, even if I didn’t have much to begin with. Even as a teen, I still use a more expanded version of the envelope system to keep track of how much I have saved and where my money goes.
All you need is your cash divided into small amounts (no big bills like 50s or 100s, because, to be honest, I never have bills that large); a few envelopes; a pen or marker to label your envelopes; and a secure place to keep your envelopes. It might be a good idea to keep them in a safe that you can lock or in a good hiding place.
The first step is to look at where your money usually goes, and then make categories like my “savings,” “spending,” and “giving.” Now that I’m working and have a steady income, I receive money every two weeks to put into my envelopes.
When I was younger, that wasn’t true. Usually, I would have $15 to $25 to put in my envelopes at any given time. Here are examples of how I mark my envelopes today:
This is my fun envelope where I save for clothing and personal items, like a new dress or piece of jewelry to little things like Chapstick and gum, or going out with friends.
I don’t necessarily love to shop but my friends and I enjoy seeing a movie occasionally or having a quick bite before we head home. I use this envelope whenever I want to buy an album on iTunes or to do something fun.
If you’re on the road, you probably already know that driving is expensive. There’s gas, insurance, maintenance, and more. This is one of the biggest expenses a teen can have. It is such a relief to me to have an envelope dedicated just to the expenses I expect to have for my car. I started saving for a car two years before I even had one!
My two biggest specialty savings categories are my college fund and retirement. I have a goal to graduate college without debt. That means starting to save today. As far as retirement goes, it’s never too soon to start saving. Ensuring financial comfort a long way into the future is worth a tiny bit of pain every month. As a side note, I typically put this savings into an account at my credit union so I can earn interest on the money as it grows over the years.
From a very early age, my parents taught me how fortunate I was to live the life I have.
Because of that — and because I am a person of faith — I choose to give back some of my earnings each month to my church. Others prefer to donate to a local animal shelter, a school, or an overseas charity. Wherever you choose to give your money, make sure it is an organization or cause you feel passionate about.
There are times when you need an envelope for something temporary because it won’t be an expense that lasts forever. My brother is getting married in a few months, and I’m a bridesmaid. I’m so excited! Of course, there are a lot of things to purchase, so I started an envelope as soon as they asked me. I have to get a dress, shoes, and have my hair done. Plus, I want to splurge and get a manicure and pedicure. Everything is going to add up, but I’m ready because I started saving months ago. Once the wedding is over, I will throw away this envelope and move any leftover money to one of my other envelopes.
Order of Priority
Just because I have all these envelopes doesn’t mean I put money into them equally. I prioritize what bills need to be paid before putting away money in my “fun” categories. I start with my “car,” “giving,” and “savings” envelopes. Whatever is left over goes into my temporary “wedding” envelope, then into “fun.”