Mryntu

I am about to begin receiving a weekly allowance from my dad. As I am not great at controlling my "buy buy buy now" impulses, could you guys help me put together a savings plan for my allowance, given that I want to save a lot, but not all, of my money for college and beyond. A plan from you guys would really help me control my spending on video games and the like. I am currently entering middle school, if that helps at all.

This is a great question. Kudos to you for recognizing that you want to make a change.

The secret to saving is to have a goal in mind. Saving money for the future is great, but unless you have a goal or purpose for that money that is accumulating, it is too easy to raid it when the next game comes out.

College is a very worthwhile goal, however, there are a couple of issues that make it a challenging goal. First, it is a relatively long ways off, as you won’t be in college for another 4-5 years. Second, you most likely don’t know how much college is going to cost, so it is hard to put a number on that goal. Still, it is an important goal, so we don’t want to forget it altogether.

Here is what I recommend: when you get your allowance, divide it up into three categories: Giving, Saving, and Spending. The money you allocate for Giving is for you to give away to someone or something you care about. You might give it to your church, a charity you care about, or someone you run across who is in need. Don’t skip this. Giving is an important habit to learn early in life. It will make you feel good and will help curb the impulses that are causing you to “buy buy buy now.”

The Saving portion is the money you are setting aside for the future (college). I recommend that you open a bank or credit union account and deposit this money there every week. By doing this, you’ll get that money out of the house, making it a little harder to raid if you have a weak moment when the next Pokémon game arrives.

Finally, the remaining portion of your allowance will be designated as “Spending.” This is for you to spend however you want! This is an important part, too. The money here will allow you to buy things you want without raiding the money earmarked for your college savings. You can do whatever you want with it: spend it on snacks, a gift for a friend, a new shirt, etc. However, if you spend this money too quickly, you may not have enough cash when Super Mario Maker 2 hits the shelves in June. So you may want to split this category up further. Set aside some cash in an envelope each week for the next game you are looking forward to, and put the rest in your wallet for spending cash.

The amounts that you put into the three categories are up to you. As a starting point, I recommend 10% into Giving, 50% into Saving, and 40% into Spending. By doing this now, you will get in the habit of budgeting your income, which will serve you well as you get older and both your income and your expenses increase.

Learn how to use spreadsheet programs.

Numbers are hard to think about. If you can visualize them, or see the effects of your plan without having to think, it's easier to make good decisions.

For example, let's assume: You're making $100/month. A high-value video game costs about $60. A mediocre Steam game costs $10. So let's spitball an initial plan and say you want to save half your allowance, and you're okay buying a new "good" game every 2 months. A simple version of your spreadsheet might look like this (though you can definitely get fancier):

And with this plan you could save up $600/year. Are you happy with that number? If not, you can look at the other columns to figure out how to change that. Maybe after a month, you realize that you can get by with less spending money than you thought. Maybe it's a bad year for games and you'd be okay with only getting 4 of the good ones. You can make these changes in your spreadsheet and immediately see the change in your total savings.

You're the only who can decide the best way to spend your money, but a budget like this can help you think about what you really value and see if what you do aligns with what you really want.

As others have said, make sure your savings goes into someplace hard to access if you're having trouble saving it. A savings account is good. Once you've saved enough, maybe you can buy a CD, which earns you a bit more interest.

Congratulations on being this foresighted.

Being that you're in middle school, your allowance won't be that high.

Thus, I suggest that you ask a parent to help you open a fee-free "kids checking account" at their bank, and an online savings account at a bank like Ally (which pays a noticeable interest rate). You'll be able to see your money grow.

This way, you can ask your parent to give you a portion (half sounds good) of your allowance in cash, and automatically transfer the rest into your new savings account.

You'll have a debit card and the ability to transfer money between accounts, but the effort will be enough to hopefully make you think first and act second.

These are only aids, though. The bottom line is that you must WANT to control your "buy buy buy now" impulses. This isn't an "I want a cookie" want, but a deep desire want.

HTH