I’ve been generally keeping an eye on what my son spends his money on, as I can see his account details when I log into my bank’s online portal. The agreement was that he could spend his first two paychecks as he wished. After that, he must transfer $150 of each paycheck into his savings account.
Transferring the funds to his savings account on payday is a great way to teach the concept of pay yourself first.
We haven’t made it to the bank yet to open his savings account. But, I’ve been keeping track of how much of his checking account balance is owed to savings once we get there. We’ve both mentioned it a couple of times, but between our work schedules, him hanging out with friends, and every other excuse you can think of, we just haven’t physically made it to the bank to open the account.
He spends his money on normal teenager stuff including movies, online games, and food when he’s on break at work. Every now and then buys something more expensive, like a new microphone or gaming mouse for his computer. I mention to him that I saw the purchase, but I don’t say much else as long as the account stays above what needs to be transferred to his savings.
Last week he informed me he had ordered a new (faster) hard drive for his computer. It was just what he was looking for, and it was on sale for a total of $190 with tax and shipping. I checked his account balance and noticed that the purchase had brought his balance below what needed to go to his savings account.
When I mentioned he had overspent, he disagreed with me.
The good news is that he had thought about fact that there is an amount of money that needs to go into his savings account. The bad news is he had calculated incorrectly. I showed him his account history, reminded him that the first two paychecks were all his, and then added up the amount of deposits since then and multiplied by $150.
Overspending is too easy when you do not pay yourself first.
I’ve been in similar situations, where for one reason or another I don’t make that transfer into savings a priority.
- I feel entitled to spend it : I look at the balance over and over. I tell myself that I earned that money, I should be able to use it. When the money is in my main spending account, I feel entitled to spend it.
- I forget that that I need to transfer to savings : Just as what happened to my son, I may forget that I haven’t transferred the funds to my savings. I then spend the funds, and realize later that my savings account isn’t growing as fast as it should.
I take some of the blame for my son’s overspending. Action by myself is required to get his savings account opened up, as my bank requires an adult present to open any teen account. I should have made the time to do it. I also could have reminded him periodically how much of his balance was owed to savings so we were on the same page. After all, he’s a teenager in the midst of learning how to handle his funds and will require assistance.
That being said, this is a great example of what happens when we do not make savings a priority. Making that transfer to the saving account an automatic action, something that is just done out of habit, will prevent overspending and help us all meet our savings goals.
Do you pay yourself first? If you don’t, do you find it easy to overspend?