Can you please explain more about the envelope system?

Hello. My name is Ron Blue, and last week I talked to you about what is the most important thing to teach your children. And, I mentioned that we used the envelope system to teach our children.

Well, the envelope system is just basically like a budget, if you will, and you can have as many envelopes as there are categories that you want to allow your children to spend. For example, when our children were a little bit older -- 8, 9, 10 and then on through their teens, we gave them a clothes envelope because this was the biggest budget item that we had other than school tuition for our children.

We knew what we were going to spend for our children on clothes, and so we would give them an envelope called "clothes." And, every month, we would put in there one-twelfth of what the budget was for the year.

We also had a "gifts" envelope. This is an area where, as children go to school and they have family members, that they buy gifts. Well, where do they get the money to buy gifts? And we found that's a fairly frequent use of money, so we had a gifts envelope, and once again we had a budget. We said, well, you've got Christmas gifts, you've got birthday gifts, and you’ve got friends' gifts for whatever reason. What is the budget? What is the amount that you're willing to spend -- and just divided that by twelve and then the child had the responsibility of managing that over the twelve months.

We had an envelope for "spending.” That's just going to the movie or eating out or going to Disney World or whatever it may be -- the spending category. And once again we had a (yearly) budget for that amount and we put in one-twelfth every month. So, you take those three envelopes: the clothes envelope, the gifts envelope, and the spending envelope. If you total them up, then what we did is, we took 10% of that total and we put that into a "tithe" envelope for the children. And then we had a "save" envelope of an equal amount. So we were trying to teach them to tithe and to save, and what's left you have to spend, and here are the categories that you can spend it on.

Now, you might start the envelope system when the child is 5 or 6 or so, and maybe you have only two or three envelopes. And as time goes on, you may change those envelopes. I found as a dad, for example, that one of the major categories of spending was "make-up" when you had girls. Well, I never had a budget for make-up; I just never anticipated that was a need. So where do you include that? There needs to be great variability.

And, also, each of the children is unique, and their needs are going to be unique. So, the envelope system is a way to teach your children to tithe first, save second, spend what's left if you want to, and then when the envelope's empty, you're done spending. That is a unique, wonderful, important thing to teach your children.

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