The Envelope System is a popular method of budgeting, and for good reason. The process is dead-simple. Create one envelope for each major category of spending, fill each envelop up with the budgeted amount of cash at the beginning of the month, and when the money is gone, it's gone. No more spending is allowed in that category until the next month.
One variation on the "fill-er-up" part of the process is to allocate a portion of your paycheck to each envelope each time you are paid. Keep one envelope for long term savings and allocate perhaps 10% of your paycheck to it, and you'll quickly fill up that rainy day fund for inevitable unforeseen emergencies.
This method works to eliminate debt and improve savings because you make your spending decisions ahead of time and you spend less than you make. By setting aside money before you spend, you are better able to plan, and look to the future. It's simple, but the key to make it happen is discipline and habit.
With FamilyMint's Savings Plan feature, your kids can start forming this simple habit from day one. In a nutshell, each goal account acts as an envelope, and each deposit made through the Savings Plan will automatically flow into the pre-selected goals. Then, each time your child spends money, he or she deducts it from the appropriate goal account. When it's gone, it's gone!
Savings Plan is just like the old envelope system, but it's automatic and it's visual. Savings Plan turns FamilyMint into spending management system for kids.
What's your experience? Have you tried the envelope system? What do you think of the Savings Plan?