- The Envelope Budget System -
A Personal Money Management System
for People of All Ages

The envelope budget system is a great personal money management system. The home made envelope money management system can be used by people of all ages. It is even a good way of teaching money management skills to children.

If your money is in control of you instead of the other way around...

You Need a Budget!

Teaching Money Management Using Envelopes

This money management system keeps the money visible and real instead of just figures on a page. The money has to be physically put into the envelopes and then taken out when needed.

Since we live in a card swiping culture it is difficult for children (and many adults) to understand money as a physical entity because they never see it.

Implementing the Envelope Budget System

• Set up categories that are meaningful to the child. These can be described as the jobs that the money is to perform this week.
• Help your child determine how much money is necessary for each envelope.
• Every time the child gets paid, some money has to go into each envelope.
• The child then takes the money out of the envelope when it is going to perform the job that the child has assigned to it.

One envelope should be for "savings" and that money could go into a bank account on a regular basis.

Advantages:

• Child can see the money accumulate or dwindle as it is used.
• Child learns to make the money work, not to work for the money.
• Teaches mindful spending because there is a direct visible consequence when the money is spent.

Rules:

Every money management system has to have rules and guidelines to make it work so here they are:

• when it is gone it is gone - that is it. There is no more money for that category until more money is received. This is a good way to teach children about delaying gratification.
• no pilfering from other envelopes. It is tempting but this money management system will not work unless the money dedicated to a specific category stays in that category.

Personal Money Management System for Adults

The adult version of the envelope budget system would require that you take out cash from the bank enough for the week and leave enough money in the bank to cover those automatic payments for your mortgage and other loan payments. Of course you will have different categories which might look like:

If your money is in control of you instead of the other way around...

You Need a Budget!

• week day food and eating out (including coffee and muffins)
• groceries
• clothing
• household expenses
• entertainment including alcohol

Each envelope gets only enough cash for the week (or you might choose to go for two weeks if you get paid biweekly).

This simple system can really help you to track your spending and control it if you think you need to.

The same rules for the envelope budget system apply even if you are a grown up!

You can only spend what is in the envelope and when it is gone its gone.

And one extra rule for adults.

When it's gone it's gone!

Find out More about this
Personal Budget Software

Here are all the pages on money management for organized living (including this one) offered on this website

Personal Money Management Skills - organized living is not possible without competence in personal money management. The Absolute Basics of Money Management for an organized life. Money Management Advice for Organized Living - Are you in the black or in the red? If you do not know the amounts to enter into each category when sorting your money you need a money management worksheet. Money Management Tips for Organized Living - Minimum requirements for understanding your money and tips to help you control it. Ideas for teaching money management skills to your kids. Family Money Management Advice - ideas to help you gain better control of family money management issues like borrowing and lending to family members. A description of the Envelope Budget System.

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