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This cash-envelope budgeting system turns back-to-school shopping into a money lesson

One mom uses the new school year as a learning opportunity for her kids (and saves some money) with this budgeting trick.
Two girls with shopping list looking for 'back to school' stationery in a store
With the envelope system, each child gets a budgeted amount of cash and a list of the items they need and is left to make their own spending decisions in the store.Elva Etienne / Getty Images

Depending on where you live, back to school is either right around the corner or has already kicked off. Your kid wants to walk into the classroom with a new pair of sneakers — the cool, expensive brand. But you want him to get what’s best for your bank account. Instead of arguing with him, empower him to make his own decisions, says Jordan Page, a mother of six and founder of the popular personal finance blog FunCheaporFree.

Page, 33, who lives in Utah, says she developed a cash envelope budgeting system for her kids’ back-to-school needs. She sets a budget for each kid, puts the cash amount in envelopes, writes down what they need and how much they can spend on each category on the front, and lets them determine what they’re going to buy.

Page says the system transfers the pressure away from her onto her kids, and teaches them how to be wise with money.

“It is so important to give them the skills now when they’re young, and the mistakes are minor and the money is minor, rather than making them in your 20s, 30s, 40s, and 50s,” Page tells NBC News BETTER.

Here’s how it works.

Jordan Page with her husband and six children.
Jordan Page with her husband and six children.Lizzy Williams

She creates an inventory based on each child’s needs

Page has three school-age children: a son in the fourth grade, a daughter in second grade, and a son in the first grade. She also has two preschoolers.

Before she creates her kids’ budgets, she has them go through their clothing and school supplies from last year to see what really needs to be replaced. Then she creates a list of items that each child needs. If her children want something new that doesn’t need to be replaced, they have to pay for it with their allowance.

"My son, for example, his backpack was in mint condition,” says Page. “It was perfectly suitable, perfectly good, and so I said, okay, we’re going to use your same backpack from last year, or you are welcome to buy a backpack if you use your own money, because we just don’t need it in the budget this year.”

She creates a budget for each kid

Page determines each child’s budget based on what they need, not what they want.

“You say, if they need five pairs of pants, a backpack, five shirts, how much does that cost on average? And you set the budget.”

She adds: “My budget is based on what we can afford and what we feel is reasonable, and then the kids have to work within that, not the other way around.”

She gives her kids cash envelopes

Page withdraws cash based on each kid’s budget, then puts the cash into envelopes, which they can take with them to the store. She recommends each child gets two separate envelopes: one for clothing and one for school supplies.

On the front of each envelope, she writes down a list of what they need and how much they can spend in each category. If a child wants something outside the budget, they have to figure out how to compensate for the additional cost — either by using money from their allowance or by subtracting money from a different category.

For example, if her son’s budget for a backpack is $20 and he wants a backpack that costs $25, he can pay the $5 difference with his allowance, or he can subtract $5 from something else from his clothing budget, like shoes.

It’s visual and it’s representative, and that’s really how kids learn.

Cash envelopes are an easy way for kids to break down the math, she says. “You only have $5 bills left in this envelope, and that thing you want is $8, so how are you going to get $3 back in this envelope? How are you going to make up the difference?”

“It’s really helpful because it’s visual and it’s representative, and that’s really how kids learn,” Page says.

She gives guidance when it’s necessary

Kids who are older than 10 should be able to make spending decisions without much guidance, says Page.

“Of course, you can guide them,” she says, “but you really don’t need to be telling them what to pick. You can be walking around and finding the things that fit them best, helping them do some math, but really by that point, they should be making those life decisions.”

If your kid makes some impractical spending decisions, let it be a learning opportunity, says Page. She says she learned the hard way when her own mother gave her money for school shopping in the eighth grade.

“I didn’t get myself anything practical for the winter,” she recalls. “I didn’t have a new sweatshirt, so I was asking for that stuff for Christmas, or I was digging through my own pile of clothes from the year before, and it was a real lesson.”

Kids who are younger will need more guidance. She says her daughter, Priya, who will be entering second grade this year, is still too young to grasp budgeting on her own, but can understand some concepts.

“What I do with her is I pick one item at a time,” says Page. “So instead of giving her a huge budget of $100 and saying ‘Hey, you have $100 to spend on clothes’ — her brain couldn’t quite grasp that concept, it’s too big of a number, too many decisions — we take it one item at a time. I’ll say, alright, you’ve got $20 with the backpack, let’s go find a backpack. She picks her backpack and makes a decision. Then I’ll say, okay, we have $20 or $40 for shoes, let’s see how many shoes we can get for $40, and I break it down item by item for her.”

For her preschoolers, she says it’s just a matter of determining what’s affordable within the budget and giving them some options.

“I find two pairs of shoes that are in the budget that fit them, that are practical, but then beyond that, they make the decision, so they feel like they have some ownership of the shopping and I’m teaching them ‘either or,’ not ‘and,’” she says.

It’s less about the control that us parents feel like we should have over our kids shopping, and it’s more about giving them the chance to make mistakes.

She’s prepared to say ‘no’

If your kid is insistent on getting something outside their budget, Page says it’s important to stick to the plan.

"As a parent, my advice would be to set the budget, make the inventory with your child, then drop any form of association with guilt with the word ‘no,’” says Page. “And what you can do instead is you just transfer the pressure and you say: You know what? It looks like your budget is out. You just spent your budget here. We decided that you only need three pairs of pants, so if you want extra, then that’s great, it’s not coming from my pocket, but you’re more than welcome to come up with the money on your own.”

This transfers the pressure onto your child to make their own choices, she says.

“I just really think it’s less about the control that us parents feel like we should have over our kids shopping, and it’s more about giving them the chance to make mistakes,” Page says.


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