The Envelope System

A passion of mine is teaching individuals about finances. Not just because I’m a math brain, but because empowering people to make wise financial decisions is an awesome job! I especially love teaching my kids about all things financial so that they can make informed choices and goals financially. My wife and I started their financial lessons at a young age. There were lessons on budgeting, long term goals vs short term, generosity and perseverance. Of course when they were 5 years old we didn’t sit them down to have a lengthy discussion on health insurance and RRSPs. We did however, incorporate simple lessons into their day to day. 

When my eldest kids were about 10 and 12, we introduced them to the Envelope System. (I learned about the Envelope System from Dave Ramsey.) For my family, the Envelope System is when you divide all of the money you have and make into three envelopes. Each envelope is labeled. The first one being Savings, the second, Tithe (charity) and the third one, Spending. At that point in time, most of the money they made was from family members on birthdays, babysitting jobs and our little chicken egg and honey business, which we created in large part, so that we had the opportunity to teach about finances. Even with their amount of money being small, we saw the value in introducing these responsible habits before they had significant amounts of money. 

Savings Envelope

With the Savings envelope, we encouraged our kids to pick a percentage that they figured they could stick to. Whether it was 20% or 60%, it didn’t matter as long as they stuck with what they decided. We discouraged changing their mind after the fact, when they would want to pull from the savings before their savings goal was reached. That was the other main idea of the savings envelope, there needed to be a goal. Whether it was a pricy toy (obviously lego) or thinking into their future with a vehicle in mind, there needed to be something to look forward to. 

Tithe Envelope

The Tithe envelope was 10%. Whether you are religious or not, teaching kids about giving back what you earn is vital in creating thoughtful and generous behavior. This also gave our kids a sense of responsibility as we were able to explain how their giving was directly helping in specific situations. Immersive examples of these were Operations Christmas Child Shoe Boxes or supporting overseas missionaries. 

Spending Envelope

The Spending envelope was the fun one, they took whatever percentage was leftover from the other two envelopes. There weren’t any rules on spending the money in this envelope. 


Obviously the envelope system needs to be altered as the kids grow up. It has to include an Expenses envelope (rent, gas, insurance…) and the other envelope percentages are shrunk to accommodate the adjustment. This organizational system also doesn’t need to be envelopes. Jars, buckets, wallets and bank accounts all work too. The lesson here is that the money you earn, requires thought, sacrifice and intentionality to reach your goals. 

Do you have a strategy for budgeting? What works for you? Have you passed that knowledge onto your kids, and how did it go?

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