Thursday, November 20, 2014

Saving For Those Milestone Purchases

In my kids early years, I find that milestones creep up often and quickly! As soon as all the nursery items have been purchased, they are needing a new big kid bed complete with doona, bed sheets and mattress, and then barely a year or two later you are purchasing their first uniform and school bag bundle! Blink and High School is letting you know they need an iPad, and your teen is hinting they would like help buying a car.
While none of these expenses are massive on their own, (um, except the car and iPad), they can exceed our disposable income for one or more pay cycles, making it a challenge when more than one come up at once!

So that we don't get caught out unawares for these major purchases, we transfer $5 every pay to a bank account for each child. This money is earmarked for the bigger items for our kids and means that as one of those milestones start to creep up, I can take advantage of a sale at a moments notice and not end up paying full price at the last minute, or worse, not being able to buy it for the kids when I need to.

Birthday, Christmas, and Ramadan gifts go into these accounts too, although I usually try to buy them something little with the cash before I bank the bulk of it. When I'm spending the money on them later, I feel justified in getting them something a little more expensive because it's partly gifted money. So I might buy the Mermaid quilt Lorelei wants instead of the pretty unlicensed version I would have gone for.

13 year old Madeleine is the exception. Just before she started High School, we opened a second bank account for her to have an ATM card attached to. This is the account that her pocket money goes into, that she can decide whether to spend or save in. She buys all her clothes from her pocket money, so has had to learn to budget to make sure she can buy new things as the season changes and she grows out of things. She is getting very good at letting her money accumulate for longer periods of time so that she can buy bigger ticket items now.

Her savings accumulate for longer periods now, but when she needs something it tends to cost more than when she was little! We know we have some household bed changes on the horizon, Lorelei is ready to upgrade from her toddler bed to a big girls single bed, Seb is showing signs that he should be moving to the toddler bed, and Madeleine has been complaining that her feet touch the bars at the end of her single bed. It looks pretty simple! Everyone will hand down their bed to the next sibling, and we will dip into Madeleine's savings account for either a double or a king single bed.

This system works well for us, but when opening account for children under 16, just remember they can only earn a maximum of $419 interest each year before you need to declare their tax file number to the bank.

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