Money Jar

“Daddy! I want to buy the Thomas and Friend train!” My son looked at me and gave me the sweetest and most loving look in the world. What will you do?

What I usually do is this, I will look at the price tag and explain, “This is a nice toy. It costs $14.95. Here is 50 cents, just go back and put in your piggybank. I am going to give you 50 cents everyday, and then you can bring your own money to buy whichever toy your want. Do you want to hold the 50 cents or do you want Daddy to hold for you until we reach home?” (Tip – direct your children’s focus to 50 cents and give them a ‘choice’ so they have to decide and they feel respected when you let them decide.)

This always works… when it works. Most of the time, my son(s) will happily take the 50 cents and struggle to put it into the pocket. he may glaze at the toy again and I will remind him how happy he will be when he comes for the toy when he saved enough.

By the way, that is not the end of the story. When my son reach home, I will convert the 50 cents into pieces of 10 cents and 20 cents and then the work began. My son has 3 piggy banks. One for tithing, one for saving up for toys and one for saving up to buy presents for Mummy, Daddy and brother.

This system is a system that I adopt to apportion my money. It was introduced to me as the Money Jar and is similiar to most “budgeting” systems, set a budget for how you will spend your money, then stick to the budget.

What i like about the money jar system is that it suggests how to allocate and apportion your income. I am going to give a reccommendation of the percentage and you can customize it to fit your situation, BUT you should invest no less that 10%, unless you are not really serious….

1) 10% Giving/ Tithing

2) 10%: Financial Freedom Jar

3) 10% Education Jar

4) 10% Long Term Savings for Spending

5) 10% Leisure and Fun

6) 50% Neccessity

1) Giving/ Tithing

This is an essential part of finances. It is also one of the greatest ‘secret’ to becoming wealthy.

Proverbs 3:9-10 (NIV)
Honor the LORD with your wealth, with the firstfruits of all your crops; then your barns will be filled to overflowing, and your vats will brim over with new wine.

2) Financial Freedom Jar

This is the jar you set 10% aside to invest. But before you even start investing, i will suggest you keep accumulating money either from this jar or start another jar to save up for about 6 months of emergency funds. This should in fact be the level you need to aim for: Have funds that is worth 6 months of your income. This is for a rainy day, e.g. losing your job etc. Having this fund will help you tide over tough times. So this should be your first milestone towards financial freedom.

After you accumulate the 6 months worth of funds, the next is start accumulating money and make this pool of money work for you. We will discuss about that soon.

1 Corinthians 16:2
On the first day of every week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come.

3) Education Jar

This is an amount you set aside and save up to buy books, attend courses etc etc. You need to continue to invest in yourself.

Proverbs 19:2
Also it is not good for a person to be without knowledge, and he who hurries his footsteps errs.

Long Term Savings for Spending

If you want to buy a new car. new house, go on a holiday, this is the jar that helps you do it. Allocate about 10% of your income into this jar for longer term spending

Leisure and Fun

What i like best about the money jar system is  to set aside money to have fun! But is the point of being rich and be miserable while doing it right. Get real! Enjoy yourself now so that you will enjoy the things money can bring. I have heard many stories of people being so frugal that they forget how to enjoy spending. We want to be in balance!

Neccessity

Lastly, work your neccessity around what is left! Personally, i changed my car, and changed my insurance from Investment Linked to Term Policies in order to shrink my expenses. And in that process, my route to Financial Stability and Freedom becomes much shorter.

Conclusion

Start Allocating every amount that comes into your life, be it youy monthly income, your bonuses, your lottery etc etc. And as you apportion, you find that you have joy in doing it. Do keep strictly to your plan of percentages and whenever you “borrow” money from one jar to pay for soem other activity, make very sure you pay it back – with interest preferbly!

E.g. You have to attend some functions and need to borrow $100 from your Education jar to top up your Leisure Jar, make sure you return that $100 back the next month when your income comes in. If you are constantly borrowing from one jar to another, i strongly suggest you re-allocate so that you can stick to your plan! But don’t show me a plan where your Finanicial Freedom Jar is less than 10%!

Step 1: Identify  how much net income do you make a month (this is done in the last post)

Step 2: Plan and allocate your income. Start shifting some items so that you have at least 10% to invest.

Step 3: Start Accumulating fund to cover 6 months of expenses.

Keep Smiling, Keep Shining for Christ,

Sean Seah