Sep 3, 2010

The 10/50/40 System (Merrick)

As long as we're talking about teaching finances to your children, let me tell you a little about what my parents taught me. From several of your comments, it sounds like your parents taught you similarly.

We did the 10/50/40 system:

10% to church tithing
50% into savings
40% for personal spending

Every dollar from babysitting, working at Dad's office, and lemonade stands was divvied up this way.

It's not quite as cut and dry anymore, but as adults, we still try to think in the same way. For us, 10% tithing always comes first, and after that we pay all our bills. Once that is done, I have budgets for groceries and gas, and then try to save 100% of the remaining money. Obviously that doesn't always happen, but that's the goal.

Although I no longer follow the 10/50/40 system meticulously, I fully intend to pass along this system to my children. I think it's a great and very simple way to help your children understand the importance of saving. Especially because that college savings fund could easily be blown on candy if you don't teach them how to save.

What are your saving/spending systems, and what you do currently (or plan to) teach your children?


Packrat said...

When I was in high school, 60 percent of all money received (including gifts) went into savings. Forty percent was ours. Of the 40 percent, we paid our church pledges and paid for anything that was different than what our parents decided we needed and purchased such as a different soap, shampoo, deodorant, any makeup, pantie hose instead of tights or socks, buying lunch at school instead taking one from home, riding the city bus instead of walking, etc. Very little was actually left over for fun, but I still managed to go bowling or see a movie once in a while.

We each had several daily and weekly chores. We did not receive an allowance, but as long as we did what we were supposed to, stayed out of trouble, and kept our grades up, we were generously rewarded.

With my children most of their money went straight into savings. When we had a chance to shop, we would discuss how much money could be spent.

De Anne said...

We have a similar plan, but we also add philanthropy into the mix. Our kids pay 10/5/50/35.

10% tithing
5% philanthropy
50% savings
35% spend any way they want

The 5% philanthropy can be given to any charitable organization that the kids choose. Currently my kids choose to give it to our church's missionary fund. At one point, one of my daughters gave hers to the animal shelter. Another daughter donated to the Red Cross after the earthquakes in Haiti.

I think it's important to teach kids to give back. My husband and I follow this plan almost to a T. We donate slightly more than 5% each month and our 50% savings is split between short term savings, long term savings, and retirement. We have learned to live on 35% of our take home. There is security in knowing that you can do this and there is joy in knowing you are giving back to others.

Gary Arnold said...

I think what you are doing is great. Of course not everyone can give 10% to the church and then have enough left to live on. But if you can, that is good as long as you are doing it because that is what YOU want to do, not because you feel it is Biblical.

Proverbs 3:9 (KJV) “Honour the LORD with thy substance, and with the firstfruits of all thine increase:”

2 Timothy 2:6 (KJV) “The husbandman that laboureth must be first partaker of the fruits.”

When was the last time you heard a pastor say that you should spend the FIRST part of your income on yourself and your family?

1 Timothy 5:8 (KJV) “But if any provide not for his own, and specially for those of his own house, he hath denied the faith, and is worse than an infidel.”

The New Testament makes it clear that we are to use the FIRST of our income to take care of ourselves and our family. We are talking about needs, here, not just anything we want. Then we should give generously from what is left. If we have enough left to take care of our family, then it doesn't matter if we give first.